Car insurance explained


Motor insurance protects motorists against liability in the event of accidents they may cause. The Road Traffic Act requires all motorists to be insured against their liability for injuries to others (including passengers) and for damage to other people's property resulting from use of a vehicle on a road or other public place. It is an offence to drive your car or allow others to drive it without insurance.

When Buying Car Insurance

Policy Limits and/or Excesses: Make sure you are aware of any applicable excess and/or cover limits your policy may include. An excess is the first portion of a claim you will be responsible for paying and the insurer will only pay out on the amount above the excess. There may be a number of different excesses in one policy.

For example, different excesses might apply depending on whether a claim is for accidental damage or theft. There is usually a separate excess for windscreen replacement claims. Most insurance policies also have maximum limits the insurer will pay out in a claim.

You need to check you would be able to afford the excess in the event of a claim, and that the maximum insured would be sufficient to cover your loss.

Insured Drivers: The policy might only cover driving by yourself or specified people, or it might allow driving by any qualified person with your permission, possibly over a certain age limit. Your insurers will want to know about anyone who is likely to drive - particularly their age, experience, claims and driving record and occupation.

Vehicle use: Your policy and certificate set out the uses for which your car is insured. For example, if you or any authorised driver want to use your car in connection with work, make sure that your policy covers this.

No Claims Discount: Policyholders with a claim free record normally qualify for a premium discount. Scales vary from one motor insurer to another but can range from 30% for one claim free year up to 60% or more after four or five years. Even if you have made a claim you don't necessarily lose your No Claims Discount. For every fault claim you would usually lose two years discount. Therefore, should you have three years No Claims Discount you would be left with one year following a fault claim.

Protected No Claims Discount: Policyholders who have a good claims record are often able to protect their No Claims Discount. For an additional premium a number of claims are allowed without affecting this discount, typically two fault claims are allowed in a three to five year period. Even though your discount is protected your premium and/or your excess maybe affected should you build up a poor claims or conviction record.

Guaranteed Asset Protection (GAP) insurance: gives you added protection if your car is written off. If you have used a finance agreement to buy your car, GAP insurance pays out the difference between the car's pre-accident value and your outstanding loan.

Some products may also pay for the cost of replacing your car with the current equivalent or provide a deposit to help you buy a new one. And, even if you haven't taken out a loan, other types of GAP insurance pay out the difference between original purchase price and the car's pre-accident value.

Common exclusions to be aware of

Theft by deception: If you are selling your car make sure you receive proper payment before parting with it. Your insurance policy will usually not cover your loss if your car is taken from you by deception.

Driving Other Cars: Many policies cover the policyholder while driving a car which belongs to someone else. However, cover will be limited toThird Party Only, even if you have a Comprehensive policy for your own car. Accidental damage to the borrowed car will not be covered by your insurance.

Make sure that you have the car owner's permission to drive the vehicle and that the owner has arranged Comprehensive insurance (e.g. by adding you as a driver under their policy) if they wish to do so. (If they do this, then claims involving their car, while you are driving, will be met by their policy.)

Similarly, before letting someone else drive your car think about the insurance implications of doing so, and ensure that you are comfortable with these.