Car Insurance Types: Choosing What’s Right for You

March 1st, 2024
Car Insurance Types: Choosing What’s Right for You

Car insurance is an essential aspect of responsible car ownership. It not only protects you and your vehicle but also provides coverage for potential damages and injuries caused to others. With numerous car insurance options available, it can be challenging to determine which type of coverage is right for you. In this article, we will explore the various types of car insurance policies and help you understand which one suits your needs the best.

Why do we need car insurance?

  • Financial Protection: Car accidents can result in significant financial implications including medical expenses and legal costs. Car insurance helps mitigate these costs by providing coverage for repairs, medical bills and legal liabilities, depending on the policy.
  • Legal Requirement: In the UK, having car insurance is a legal requirement. Driving without insurance can lead to fines, license suspension or even legal consequences.
  • Protection for Your Vehicle: Car insurance can cover repairs or replacement costs if your vehicle is damaged due to accidents, theft, vandalism, or natural disasters. This can save you from incurring substantial expenses in repairing or replacing your vehicle.
  • Peace of Mind: Having car insurance provides peace of mind while driving. It allows you to focus on the road without constantly worrying about potential financial repercussions in case of an accident or damage to your vehicle.

In the UK, it is a legal requirement for all vehicles to be either insured or declared as off the road (SORN – Statutory Off Road Notification) [1]. The Continuous Insurance Enforcement (CIE) [2] regulations were introduced to tackle uninsured driving. It means that your vehicle must be insured at all times, even if it’s not being used. If your vehicle is not insured or declared off the road, you could face a fixed penalty of £100, fines of up to £1000 or even have your vehicle clamped, seized or destroyed.

The minimum legal requirement for car insurance in the UK is Third-party only insurance. This covers your liability for injury to others (including passengers) and damage to their property resulting from an accident caused by you. It does not cover any damage to your own vehicle.

What are the three main types of car insurance?

The three main types of car insurance are third party insurance, third-party fire and theft and fully comprehensive car insurance. Read on for more details about each type.

What does third-party only insurance cover?

Third-party only insurance covers damages caused to other people’s cars or property or injuries they sustain in an accident caused by your vehicle. The benefits of third-party only insurance are that it provides legal compliance with UK car insurance laws and allows you to drive on public roads.

However, it does not cover the cost of repairing or replacing your own vehicle if you’re at fault in an accident or the financial liabilities of any injuries you may sustain. You will also have to cover the cost of replacing your car if it is stolen and then damaged in an accident or fire.

Even though it is the most basic cover available, it is also often not a cheap car insurance option as providers see it as riskier.

What does third-party, fire and theft insurance cover?

Third-party, fire and theft insurance is a step up from the basic third-party only policy as it provides coverage for damages caused to other people’s cars or property and injuries they sustain and it also protects your vehicle against fire damage or theft. If your car is stolen, or damaged due to a fire, you can file a claim for its repair or replacement (after any excess is paid).

However, the main problem with third-party, fire and theft insurance is that it won’t cover your vehicle if you have an accident where you are at fault.

What is comprehensive insurance?

Comprehensive insurance is the most extensive and popular type of car insurance in the UK. It offers the broadest coverage including all the benefits of third-party, fire and theft insurance as well as covering the cost of repairing or replacing your own vehicle if it gets damaged in an accident, regardless of fault. Comprehensive insurance usually includes:

  • Injury to others caused by an accident in your car
  • Damage caused by your car to another vehicle or property
  • Injury to your passengers if you have an accident
  • Theft and any damage to your vehicle caused by attempted theft
  • Damage by fire (subject to excess)
  • Scratches and chips (subject to excess)
  • Vandalism (subject to excess)
  • Damages caused to your car by an accident (subject to excess)

It is always important to check your comprehensive insurance policy as it may not cover every eventuality such as the theft of valuables from your car or the provision of a courtesy car after an accident. These kinds of extras can be added to your policy at an additional cost.

Does fully comprehensive cover driving other cars?

Possibly not. At one point, fully comprehensive insurance did cover the ability to drive other cars so it is important to check car insurance to make sure. In recent years, this has changed and now you are only insured to drive your own vehicle.

What other types of car insurance are available in the UK?

  • Black box insurance – This is a popular insurance option for younger drivers as your car will be fitted with a black box to monitor the safety, speed and breaking habits of your driving. If the results show that your driving is safe, you may be able to access cheaper insurance policies.
  • Car insurance for classic cars – If you own a much-loved classic car, you may need a specialist insurance policy. Classic car insurers are experts in vintage vehicles and can offer you specially-tailored insurance which meets your needs.
  • Car insurance for driving in Europe – If you’re off on holiday, remember to make sure to have the correct car insurance for your destination, especially after the implications of Brexit [3]
  • Temporary car insurance – It is possible to get temporary car insurance for short periods which is handy if you need to borrow or rent a car.

Car insurance extras to consider

For an additional fee, there are other elements you can add to your car insurance policy to enhance your protection:

  • Courtesy car – This will provide you with a car whilst you are waiting for your vehicle to be repaired after an accident.
  • Breakdown cover – This is a great option to add to your insurance as it means you won’t be left stranded by the side of the road if your car breaks down.
  • Windscreen cover – Getting a chip in your windscreen is a fairly common occurrence which can be expensive to fix. Making sure you have windscreen cover included in your insurance could save you money.
  • Personal accident cover – This cover will pay out a level of compensation if you or someone else is seriously hurt or killed in a car accident. It is frequently included in fully comprehensive insurance packages.
  • Legal protection – If you need legal advice or if you want to take legal action after an accident, adding legal protection to your insurance could save you money.

What factors influence the cost of car insurance?

There are a number of factors which influence the cost of car insurance, and it is important to consider what factors may affect you before getting a car insurance quote:

  • Age and driving experience: Younger and inexperienced drivers tend to have higher insurance rates because they are statistically more likely to be involved in accidents.
  • Driving record: A clean driving record with no or few accidents or claims can lead to lower premiums. A history of accidents can also increase the cost of insurance.
  • Type of vehicle: The make, model, and age of the car you drive can affect the insurance cost. Expensive cars, high-performance vehicles, or cars with a higher likelihood of theft or extensive damage may result in higher premiums.
  • Location: Insurance companies consider where you live and park your car. Areas with high rates of accidents, vehicle theft or vandalism may result in higher premiums.
  • Annual mileage: The number of miles you drive annually is a factor that insurers consider. If you have a long commute or frequently drive long distances, it may increase your insurance premium.
  • Credit history: Some insurance companies consider credit history as a factor. A good credit score may result in lower insurance rates as it is seen as an indicator of responsible behaviour. If you are having any trouble getting car insurance, Citizens Advice Bureau can offer you help and advice:
  • Gender and marital status: Statistically, young male drivers tend to have higher insurance rates compared to their female counterparts. Additionally, married people may receive lower premiums as they are perceived as more responsible.
  • Claims history: Your past insurance claims and history play a role in determining the cost of insurance. If you have a record of multiple claims or frequently switch insurance providers, it can lead to higher premiums.

What is a no-claims discount?

A no-claims discount, also known as a no-claims bonus, is a discount offered by insurance companies to policyholders who have not made any claims during a specific period of their insurance cover. It is a reward for being a safe and responsible driver and the more years of accident-free driving you can accumulate, the cheaper your insurance costs will be.

How does excess work?

Car insurance excess is the amount of money you agree to pay out of your own pocket when making an insurance claim before your insurance cover begins. There are two types of car insurance excess:

  • Compulsory Excess: Car insurance policies often have a compulsory excess, which is a fixed amount set by the insurer. This amount is non-negotiable and must be paid by the policyholder in the event of a claim.
  • Voluntary Excess: In addition to the compulsory excess, you may have the option to choose a voluntary excess. This is an additional amount that you agree to pay towards a claim on top of the compulsory excess. Opting for a higher voluntary excess can help lower your insurance premium as it demonstrates that you are willing to take on more financial responsibility in the event of a claim.

I’m learning to drive, can I get insurance?

Yes. If you’ve got a provisional license, many insurance providers offer policies designed especially for learner drivers. However, as a learner driver, you must always drive under the supervision of a driver who is over 21, is qualified to drive the car you are learning in and has held their license for more than 3 years. Also, once you have passed your test, you must remember to inform your insurers so that they can change your policy accordingly.

Would a multi-car insurance policy work for my family?

A multi-car insurance policy allows you to insure multiple vehicles under a single policy. This kind of car insurance policy works for families with multiple drivers and vehicles who all live in the same household. There are a few caveats to a policy like this – there must be a main policyholder and the insurance premiums consider the driving history and experience of each individual driver. However, using a car insurance comparison site, multi-car insurance could end up being a cheaper way to insure your vehicles rather than having three or four separate policies.

What car insurance policy is right for me?

Determining the right car insurance policy for you depends on various factors including your specific needs, budget, driving habits and tolerance to risk. On Free Price Compare, we can help you compare car insurance deals and car insurance quotes to help you find a policy to suit you.

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