It has been a legal requirement to be insured while driving on public roads since 1930. But it’s become a lot more complex in that time. So, which type of policy is right for you?
How do I choose the right policy?
We’ve outlined the different types of insurance policy below, but it's important to remember when selecting to do some research first, because the policies from different insurers can vary quite considerably.
You’ll need to know your car (or the car you're about to buy), because not only are the make and model important factors, but increasingly the equipment fitted to the car can have an effect on premiums. Safety equipment such as autonomous emergency braking (AEB) systems can save you money on your policy, as can security features such as alarms.
What is third party insurance?
Third party insurance is the minimum cover that you need if you’re driving in the UK.
As it's the most basic form of insurance, the cover it offers is also the most basic. Assuming the incident is found to be your fault, it would pay for any damage you cause to someone else’s property and for any compensation or costs connected to any injuries sustained as a result of your actions. Third party insurance would also cover the costs of any injuries to any passengers in your own car.
In other words, everyone is covered – apart from you.
This means that any damage to your car isn't covered. So, if you’re involved in a collision, you'd have to pay for any repairs to the car yourself – which could prove very expensive.
The other drawback with third party cover is that if your vehicle is stolen or damaged by fire, you would have to pay for any repairs yourself. If the stolen car isn’t recovered, you’d have to replace it yourself. If you’d borrowed money to buy it, you’d also still have to pay that back.
If your car isn’t worth much and there’s no outstanding finance on it, third party cover might work for you, as you don’t have much to lose.
Traditionally, third party insurance was the cheapest type of policy you could get, because it offered the fewest benefits. It was a good way to save money on insurance, which meant that it was well suited to new drivers, whose premiums are highest (because they’re statistically the riskiest drivers on the road).
However, over the years, as the number of claims by these drivers increased, premiums started to increase – to such an extent that it became the most expensive type of cover, on average.
What is third party, fire and theft insurance?
This is the next step up the insurance cover ladder. As the name suggests, third party, fire and theft offers all the cover from a third-party policy, but with the added protection against loss or damage if your car is damaged by fire or stolen.
This used to be another good policy for owners of cars that weren’t very valuable, but recently premiums have increased so much that on average the costs of this type of policy is higher than those of fully comprehensive policies.
What is fully comprehensive insurance?
Fully comprehensive policies offer the highest level of cover of any car insurance.
Your policy will cover damage to your own vehicle and any to any others, as a result of a collision, fire and theft.
Because of the higher level of cover, fully comprehensive policies historically cost more than those for third party or third party, fire and theft. However, as insurance costs have risen to prohibitive levels in recent years for young drivers, they have turned to third party cover. The volume of claims that accompany novice drivers then drove up premiums for this type of cover, with the result that fully comprehensive premiums are, on average, less than half the cost of third party.
This is a general rule, though, based on all policies – but not all policies are the same. Some fully comprehensive policies, for example, have all kinds of additional features, such as cover for driving other vehicles or abroad, breakdown cover and legal cover.
Many of these extras add to the cost of your premiums, so make sure that you actually need them before signing up.
What other forms of insurance are there?
In addition to these three basic types of policy, there are other forms of insurance that can offer useful cover.
For example, you can get temporary cover for short-term periods – often up to 28 days. There are also specialist classic car policies that are designed to meet the needs of owners of older cars.
There’s also multicar insurance, which is a useful policy if multiple vehicles are all registered at the same address. The policyholder is offered a discount for ‘bulk-buying’ their insurance.
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