Car Insurance – What It Is For & How It Is Calculated

Car Insurance And The Law

It is a legal requirement that you have car insurance if you’re using a vehicle on the road. The minimum level of insurance you can have is third party, which covers any damage or destruction to anyone else’s property (or indeed their person).

Further levels of cover include fire and theft cover. This provides you some insurance coverage for if your vehicle is fire damaged or is stolen from you. However, it will not cover your loss in the event of a collision.

For the most comprehensive form of cover available, you’ll need fully comprehensive insurance. This covers you for most (not all) eventualities and should mean that in the case of an accident you’ll receive cover for the damage done to your vehicle (and yourself potentially if you’re injured).

You’ll note that I mention above that you are not covered for all eventualities. For certain things that aren’t covered (such as loss of earnings potentially) you may seek a legal claim against the person responsible for the road traffic collision (assuming it wasn’t your fault). Legal protection cover affords a means to do this – it covers legal costs to help you recover losses that aren’t covered in your policy.

Lastly, as a side note, if you use your car for work you’ll need to make sure that you get business insurance added to your policy. This will cover you for attending meetings etc and quite a few insurers will add this for free, provided it isn’t adding more miles to your policy or doing something outside the remit of standard insurance.

Car Insurance Groups And Price Premiums

One of the costs of buying and owning a motor vehicle is the cost of car insurance. It’s not just the cost of the car that you’ll be paying for every month, but such things as petrol, servicing and consumables. A large part of the cost also comes from insurance.

Cars fall into different insurance groupings, which range from 1-50 (the maximum rating used to be 20). The objective of the change was to provide a more clear rating for consumers and for companies to provide more accurate quotations.

How Are Car Insurance Groups Calculated?

• Value – The more expensive the car, the more expensive it will be to insure on the road
• Power – Higher performance unfortunately means more risk, which in turn means higher premiums
• Age – If a car is older, the value will be lower, resulting in a lower premium
• Maintenance costs – Motor vehicles that require specialist servicing, costly parts and bespoke work will cost more to insure
• Size – A very large car could be seen as a higher risk due to the potential damage to other vehicles
• Security – The more security your car has, the lower the premium (in particular if you use approved trackers, Thatcham alarms etc)

Of course, it’s also worth noting that the insurance group is not the only impact factor on the cost of a quotation. Your own details are just as significant as the car, including (but not limited to) where you live, how old you are, your driving history, any previous claims, any other policies you have or are on etc et.

How Can I Lower My Insurance Premium?

There are a number of ways in which you can lower your premium so that the price you pay every month (or annually) is the lowest it can be. Here are some of my most recommended tips:

• Shop around – it really does pay. Get a few different quotes and compare not just the basic price but what’s included in the premium. Some will add in things like breakdown cover, which only becomes apparent when they go through every element of the policy. Take off everything you don’t need to lower the cost.
• Use price comparison sites – Granted, they don’t include every insurance broker, but if you’ve followed the tip above you’ll already be on your way to finding a good price.
• Call your insurer from last year – In the face of competition, they’ll frequently be able to price match the offering.
• Show Loyalty – If you get all of your insurance (home, contents, car, motorbike etc) from one place, you can frequently receive quite a hefty discount across the board as you’re giving all your business to one supplier.
• Buy Carefully – If you’re buying a new car, choose the model carefully. Some manufacturers have model ranges that differ significantly from each other depending on the level of trim, performance and engine size.
• Stay Clean – Do not collect any endorsements (penalty points) on your licence. A clean licence is the sign of a less risky driver – less risk means lower premiums.
• No Claims – Do arrange to have protected no claims when you can – you never know when you might just need it and whilst you may pay for it, it will be a godsend should you need to make a claim.
• Tell the Truth – Do not lie to your insurer for any reason at all – you could invalidate your insurance which puts you at risk financially.

I hope that this explanation of insurance has been useful to you all in securing a cheaper quotation and giving an insight into how car insurance works. Look out for a follow up on documentation, what to do in a crash and my own personal experience of insurance companies.