Car Insurance

Car insurance is compulsory In the UK.

Why it costs so much
One reason for rising car insurance premiums is that, as a nation, we have become more litigation conscious (these days, drivers are more likely to make a claim for personal injury, like a serious case of whiplash, and the amounts paid out for injuries are much higher than they used to be).

Another reason is NHS costs. Accident and emergency departments can now claim for cost of treatment from the insurance company.

Then there are uninsured drivers (officially, one in 20 drivers is uninsured, although recent research suggests that this figure is may be more like one in ten!) The Motor Insurers' Bureau estimates that £400 million a year is paid to meet the cost of accidents involving uninsured drivers, which adds more than £30 to the average annual premium.

How is your premium decided?
Many factors affect the cost of your premium. Your age and experience is significant: newly qualified drivers - or drivers under 25 - are statistically more likely to have accidents than older, more experienced drivers. If you live in a city or urban area - especially if you park your car in the street – you are deemed to be higher risk.

Ways to cut the cost?
As a parent, adding teenage drivers to a policy can significantly increase your premium. Only do so if it is absolutely necessary. It’s cheaper to consider adding a teenager on a temporary basis, for example, over the university holidays as opposed to the whole year.

As you continue to insure your car over time, you will build up an increasing ‘no claims discount’ if you can avoid making a claim. After five years, this will amount to a substantial amount (around 65% of the total annual premium), so you should guard it jealously and it may be worth your while paying for minor damages rather than claim on your policy. Alternatively, you may have the option to pay a little extra to ‘protect’ your NCD in the event of a claim (each insurer has different rules as to how they apply NCD protection, so you should check the information given in the Summary of Cover you will receive when you obtain a quotation).

Another way to lower your premium is by accepting an 'excess'. This is the amount of money of any claim you are willing to pay for any claim before the insurance company picks up the tab for the remainder. However, if you are involved in an accident and the other driver is at fault, you should be able to claim back your excess from his/her insurance company (if he is insured that is). The higher the excess you are willing to accept, the lower your premium (although insurance companies usually impose a large excess for young and inexperienced drivers, so any voluntary excess would be applied in addition).

The different types of cover
The minimum cover in the UK is 'third party':
• 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 caravan or trailer while attached to the car
Third party fire and theft cover provides, in addition:
• fire or theft of the vehicle
'Comprehensive' insurance also covers:
• accidental damage to your car up to its market value plus, to a limited extent, personal accident benefit, medical expenses and loss of or damage to personal effects in the car

The small print
Do not always be tempted just to buy from the cheapest provider. Whilst the cheapest possible cover may be the best decision, you should consider how important you value extras such as a courtesy car or overseas cover, and whether you are willing to pay for them. Before you sign up, always read the small print.

Most motorists wrongly believe there is little difference between rival car insurance policies and only one in four motorists actually read their policy. Six out of 10 claim to know what their motor insurance policy covers, but many of them are completely wrong. For example, were you aware that whilst most policies offer a courtesy car, only about one in four policies will do so if your car is stolen or is a total write-off even though you are probably in the same need of a replacement? Do you know if your policy covers motor legal protection or roadside breakdown assistance? Do you need it to?

CHECKLIST
Make sure you have the following information to hand:
1. Car make and model
2. Registration number
3. Full post code
4. Number of years of no claims discount
5. Where the car is normally kept - street, garage, etc.
6. Details of all drivers - name, date of birth, licence type, residency in UK and occupation
7. What the car will be used for - social domestic and pleasure or business use (if you use the car to drive to work, ensure you are covered for ‘commuting’)?
8. Estimated annual mileage
9. Type of cover - comprehensive, third party fire and theft or third party only
10. Full details of claims or convictions in the last three years

Policy conditions
Decide which of the following are most important to you:
1. Is a courtesy car provided as standard? Is it offered if your car is stolen or written-off? Do you have to pay extra to insure the courtesy car?
2. Is motor legal protection included?
3. Does the policy offer roadside breakdown assistance?
4. Do you pay extra for overseas cover?
5. How high is the policy excess? Are there any mandatory excesses for accidental or malicious damage?
6. Does cover include personal injury, personal belongings or replacement locks?
7. Does it offer legal advice and medical counselling telephone lines?
8. Will your insurer immediately authorise repairs from recommended agents?
9. Will your no-claims bonus be affected if the accident wasn't your fault or the cost cannot be recovered?
10. Can you transfer a no-claims bonus built up while driving on somebody else's insurance?
11. Can you transfer your no-claims bonus on to a second car?
12. Can you protect your no-claims bonus? How many claims are you allowed under the scheme before your no-claims bonus is affected?
13. When you make a claim, do you speak to the broker who sold you the policy or the insurer?
14. Will you be charged extra for paying by monthly direct debit?

Your Mortgage Options LLP is authorised and regulated by the Financial Services Authority for regulated mortgage contracts and non-investment insurance contracts.

We offer products from a range of insurers for home insurance, term assurance and critical illness protection. We only offer products from a limited number of insurers for mortgage payment protection insurance. Ask us for a list of the companies and products we offer.

We will advise and make a recommendation for you for life and critical illness insurance after we have assessed your needs. You will not receive advice or a recommendation from us for home insurance or mortgage payment protection. We may ask some questions to narrow down the selection of products that we will provide details on. You will then need to make your own choice about how to proceed.

We do not charge a fee for any non-investment insurance contracts. You will receive a quotation which will tell you about any other fees relating to any particular insurance policy.