Understanding your insurance policy

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Insurance documents are almost universally quite confusing.

There’s a lot of legal jargon, and it can be hard to work out exactly what’s going on.

We’ve designed this quick-read guide to tell you everything you need to know about your car insurance policy.

If you’re in an accident, follow our guide on making an insurance claim!

What does car insurance cover?

Car insurance typically covers your vehicle and the damage that you might cause to other vehicles/property.

Not all car insurance policies are created equal – some insurance can include personal belongings, medical expenses, and even come with breakdown cover.

What types of car insurance are there?

There are three main types of car insurance:

Third-party: covers damage that’s caused by you, or your passengers, to other motorists. It doesn’t cover your car!

Third-party, fire, and theft: Very similar to the above, but it also covers damage by fire, and your insurance company will pay for a replacement car if it’s stolen.

Comprehensive: Includes all of the above and also covers damage to your vehicle.

Unless your car is only worth a couple of hundred quid, you should go for a comprehensive cover. Not having your own vehicle cover is risky!

What is ‘an excess’?

You may notice that your policy has an ‘excess’ on it.

An excess is a sum of money that you will have to pay towards any claim on your insurance policy.

So if you have a claim worth £400, and have £200 excess, you’ll only receive £200 from your provider.

The more your voluntary excess, the lower the premium – but you will have to pay a fortune if you claim on your policy.

We recommend experimenting to find the best risk/reward ratio – go for a higher excess only if it significantly reduces your monthly premium

What is a no-claims bonus?

If you stay claim free for an extended period, you’ll receive a no-claims bonus, meaning that you get a discount on your yearly premium.

If you have a very minor incident, it can be worth just paying up-front for the damage, as the money you’d lose by losing your NCB isn’t worth it!

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