Glossary of Car Insurance Terms
When you are researching your car insurance policy you may find you are overwhelmed by the technical jargon the insurance providers use on their websites and policies. Here you will find definations for common car insurance language to make buying insurance less overwhelming.
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Car insurance types
Car insurance, like any other insurance is there to aid when an accident or damage occurs. In the UK, there are 3 types of car insurance offered by a variety of suppliers. It is helpful to look into the three types available, so that you know you have made the right decision.
Third Party Insurance – This is the minimum legal cover in the UK. Third Party Insurance covers for :
- Liability for injuries to other people, including passengers,
- Liability for damage to other people’s property,
- Liability of passengers for accidents caused by them,
- Liability arising from the use of a caravan or trailer attached to the car. You must tell your insurer if you are going to tow any sort of vehicle or trailer to make sure you are covered.
Third Party Fire and Theft Insurance – Offers the same cover as third party insurance, but also includes fire and theft. However, if the car is not kept off-road, some insurers may not cover for theft or will charge extra for this. Be careful when claiming for a car as insurers will not cover for theft by deception.
Fully Comprehensive Insurance – Offers the same cover as third party fire and theft insurance, plus it includes accidental damage to your own car; excluding any excess, personal accident benefit, medical expenses up to a stated limit and loss or damage to personal effects in the car up to a stated limit.
Bonus and Excess
No Claims Bonus – For every year you drive without claiming on your insurance, you receive a larger discount on your insurance. This discount is called a no claims bonus. The longer you go without claiming on your insurance, the bigger your no claims bonus will become and the larger discount you will receive on your insurance. On average, it means you could pay only 65% of the full insurance policy fee after six years and you can transfer between insurers, should you decide to change.
Protected No Claims Bonus – Some insurers allow you to protect your no claims discount by paying a premium. Protecting your no claims bonus means you can claim on your insurance and still keep your no claims bonus so you still pay the lower insurance policy fee. You can only protect your no claims bonus if you have not claimed on your car insurance for 5 years or more. The risk with protecting your no claims discount is that you may find you never need to claim and you are paying more to protect your no claims discount.
Compulsory Excess – This is the first part of any claim that you must pay yourself. It varies between insurers so make sure you check this when getting a quote.
Voluntary excess – This is an additional excess, on top of the Compulsory excess, that you may to choose to pay in order to reduce your insurance costs. This can mean that although your premium may seem low, you could get stuck with a large bill should you have an accident.
Insurance groups
Insurance Bands or Groups – Insurers will rate cars on a scale of 1 to 20 depending on many factors including how much you paid for the car, how easy it would be to repair, the likelihood of it being stolen, the size of the engine and the cost of parts. For example, a car like a Porsche would be group 20 and something like a Fiat Panda would be in group 1. There is a large difference between bands and this can dramatically affect your premium.