Guide to car insurance- what you need to know

It is by no means cheap to run a car, what with the ever rising price of fuel, MOT and maintenance costs, not to mention tax and insurance! Where we appreciate that these costs can be troublesome and at times can feel unnecessary, car insurance is by no means a waste of money and could, in the case of an accident, save you money. Read Dial Direct’s ‘guide to car insurance’ where we explain the car insurance market and common insurance jargon to allow you to be better informed when buying car insurance.

Why you need car insurance- it is a Legal requirement?

It is against the law to drive any vehicle in the UK without insurance. And if you think that that there isn’t any way of the government knowing whether you have insurance or not; you are wrong. In a bid to crack down on the number of uninsured drivers on the road, in 2011 the government introduced the ‘Continuous Insurance Enforcement’. The legislation denotes that if you own a car, unless it is legally SORN off the road, it must be taxed and insured. Anyone who is caught flouting the rules is breaking the law and will be issued with a fixed penalty fine and could even have their vehicle seized and destroyed.

The Driver and Vehicle Licencing Agency (DVLA) and Motor Insurance Bureau (MIB) work in partnership with the CIE to continuously identify uninsured vehicles. If an uninsured vehicle/driver is identified, initially, the registered keeper of the vehicle will be sent an Insurance Advisory Letter (IAL) advising them that their vehicle is uninsured and that they must take immediate action or they will receive a driving penalty from the DVLA. If, after receiving the IAL, the registered keeper fails to comply, the following can then be issued:

    • A fixed penalty notice of £100

    • Their vehicle being clamped, seized and disposed of

    • A court prosecution and a maximum fine of £1000

The CIE measures and penalties in place are in addition to the power of the police who may set their own additional prosecution terms.

As you can see, there really is nowhere to hide, car insurance is a legal requirement and you will be penalised if you drive without it. It is worth remembering that car insurance is there to protect everyone on the road. What if your car or property was to be hit by an uninsured driver and you have to pay for the damage?

What types of car insurance are available in the UK?

Now that we have established the legal requirement for car insurance, it is worth outlining the three different levels of cover that are available within the UK.

Third party only insurance is the most basic level of cover and the minimum legal requirement that is available within the UK. This level of cover, essentially, pays for any damage that you sustain to another’s vehicle or property. It does not cover the repairs to your vehicle or any medical costs that you may incur as a result of the accident. For example, if you reverse into your neighbour’s garden wall and it falls down; you will be required to pay your excess and your insurer will then cover the cost of repairing your neighbour’s wall, but will not cover the cost of the damage to your car.

Third party fire and theft offers everything that third party only insurance does but with the added benefit of covering your vehicle in the case that it is stolen or damaged by accidental or malicious fire (arson).

Comprehensive insurance is at the top of the tree when it comes to insurance and covers you for all of the above plus cover for you and your car for any injury or damage sustained, even if the accident was your fault.

What car insurance cover should I choose?

Most drivers opt for comprehensive insurance because the additional cover provides them and their vehicle with the protection that they need should they be involved in an accident. That said, dependent upon your circumstance and other factors such as your cars age, third party only insurance might be adequate. Inevitably it is worth doing your research and really thinking about what benefits you want from your car insurance. For example, if you want a courtesy car should yours be damaged then you will probably want fully comprehensive insurance.

How is insurance calculated? - The risk factors

Insurance is all about risk, so the riskier you are, the more your insurance will cost. There are a number of factors that are considered by insurers before a price is returned, the main risk factors for an insurer are:

You’re Age

According to age old research, older motorists have fewer accidents. The higher risk among young drivers is reflected in the higher premiums that insurers set for young drivers.

You’re Occupation

Some occupations can make a difference to your insurance premium. The cost of insurance could be higher or lower dependent upon whether or not you travel for work, you carry expensive equipment in your vehicle and even how far away from the office you live. It’s a basic rule of thumb here, the more time you spend on the road, the greater chance you have of having a road accident.

You’re Postcode

If you live in an area where, statistically, there is a high crime rate (e.g. car theft, arson) then your insurance is inevitably going to be priced higher.

You’re driving history

Previous driving convictions, claims and penalties can affect the cost of your insurance premium.

Your car insurance group

The type of vehicle that you drive can also affect the cost of your premium. Insurers put cars into 50 different car insurance groups, with vehicles in the highest groups being of the highest value and, therefore, attracting the highest premiums.

Applying for car insurance

You can apply for car insurance direct from any known insurer, through an insurance broker or through an insurance comparison site. If you would like to get a car insurance quote with Dial Direct, please click here.

What do I need to get a quote?

When you apply for car insurance you will be asked a number of questions about yourself, your vehicle and you’re driving. Question sets differ from insurer to insurer, but as a basic guide, you may be asked the following:

  • Your full name

  • Your age

  • Your occupation

  • Your postcode/address

  • Any medical conditions

  • Vehicle age

  • Vehicle registration, make and model

  • Predicted annual mileage

  • Any vehicle modifications

  • Where your vehicle will be kept overnight

  • Vehicle usage

  • Any no claims discount you have

Insurance fraud is a criminal offence so it is integral that you answer every question honestly. Incorrect information will void your insurance policy and any claims made will not be paid out for by the insurer.

What is excess on car insurance?

An excess on car insurance is the amount that you will have to pay towards any claim that you make against your insurance. When applying for car insurance you will be advised as to what you’re compulsory excess is and asked if you want to increase this; known as voluntary excess. You will not pay two lots of excess, you either pay compulsory or voluntary dependent upon the amount you agreed in when getting a quote.

Compulsory excess is the amount that the insurer sets. This is the amount that you must pay in the case of making a claim. A typical compulsory excess might be £200, so if you make a claim for £800 and the claim is successful then you will be paid £600 by the insurer.

Voluntary excess is an amount, chosen by you, that can be applied to your insurance premium to bring down the cost of your insurance. The higher the excess the lower the insurance. it is worth noting, however, that you should only set a voluntary excess that you can afford should you be in the unfortunate circumstance where you need to make a claim.

What is no claims discount?

A no claims discount, otherwise referred to as a no claims bonus is a reward that insurers apply to your insurance annually if you haven’t made a claim. For example, if you haven’t made a car insurance claim for five years, you may have five years no claims discount. This reward is a signal to your insurer that you are a safe driver and the higher you’re no claims discount, the bigger discounts you should see in your premium.

Keeping my insurance up to date- what changes do I need to tell my insurer about?

It is your sole responsibility as the registered keeper and main driver to keep your insurer up to date on any changes that have occurred with yourself or a named driver. As a basic rule, you need to notify your insurer should any of the following changes occur:

  • You change your address

  • You are made aware of new medical conditions

  • You change your vehicle

  • Your cars usage changes

  • You modify your vehicle (Basically, anything that alters the value or performance of the car should be noted)

Check your policy documents for a full list of changes that you need to make your insurer aware of.

We hope that our ‘guide to car insurance’ has been useful. If you have any suggestions or would like us to cover any specific topic, please email us at with your request.

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