How does car insurance work?

Car Insurance is not only a legal requirement, but also important for financially protecting yourself, your vehicle, and others on the road. In this article, we’ll explore how it works in more detail, including how to purchase and make a claim.

How does car insurance work?

Car insurance provides financial protection for drivers by covering the costs of damages, injuries, and liabilities resulting from accidents or other unforeseen events.

As a UK motorist, you must have car insurance to drive a vehicle. The minimum legal requirement for cover is called third party car insurance. This provides cover for incidents that cause injury or damage to another person, vehicle, or property. However, further options are available to enhance your protection.

What happens if you drive without car insurance?

Driving without car insurance is a criminal offence and could result in fines, points on your licence, or driving bans. If you’d like to read more about why you need car insurance, please visit our article here.

Getting car insurance quotes

When shopping around for car insurance, it can be worth requesting quotes from several providers. This allows you to compare the costs, level of cover, and features on offer.

When getting a car insurance quote, you must provide accurate information about yourself and your vehicle. From your driving history to the car’s security features, there are lots of different details that car insurance companies use to calculate your quote. By giving the correct information, you’ll ensure you pay the right price for the right level of insurance and that this cover remains valid.

In most cases, getting a car insurance quote won’t affect your credit score as companies tend to use a ‘soft search’ to check your credit report.  However, if an insurer intends to delve deeper, it may impact your score. If you’re concerned your credit score may be affected, call the insurance provider to get clarification.

Get a Car Insurance quote through Age Co

Age Co offers Car Insurance, provided by LV=. When you get a quote through us, you’ll find a range of features and benefits:

• Cover up to £500 to continue your journey, or get you back home, after an accident
• A Vandalism Promise that means you keep your NCD (No Claim Discount) should your car be vandalised and you need to make a claim to repair the damage; you’ll just need to pay your excess
• The Uninsured Driver Promise means that if you have an accident that’s not your fault, and the other driver is not insured, as long as you have the details of the other vehicle and driver you can keep your NCD and there's no excess to pay
• Unlimited windscreen cover allows you to make multiple claims without affecting your NCD

Age Co is 100% owned by Age UK and gives its profits to the charity. In the last 5 years, we’ve donated more than £12m to Age UK.

Click here to get a Car Insurance quote through Age Co.

Paying for your car insurance

Once you’ve selected your car insurance, you’ll need to pay a ‘premium’ to the insurance company. It can be paid annually, semi-annually, or monthly, depending on your preference and the insurance company's terms.

The amount you pay can vary from one person and vehicle to the next, due to numerous contributing factors such as:

• Where you live and parking arrangements
• Your driving history
• Any previous car insurance claims
• How often you drive and milage
• The driver’s age
• The vehicle’s insurance group

There are hundreds of factors insurance companies will use to calculate the price you pay.

Renewing your car insurance

Car insurance will be valid for a specified period, usually one year. Before it expires, you may have the option to renew it for another term. This can be done automatically if you opt to auto-renew your insurance. Or you may be contacted towards the end of your insurance term with a new quote from your provider.

To read more about the renewal process, visit our article: When is the best time to renew car insurance?

How do the different types of car insurance work?

There are three core categories of car insurance available.

• Third party only
• Third party, fire and theft
• Comprehensive

By understanding what coverage is typically offered by each, you can decide which one best suits your needs.

How does third party only car insurance work?

Third party only insurance covers damage or injury caused to other people, vehicles, or property in an accident, but not damage to your own vehicle.

How does third party, fire and theft car insurance work?

Third party, fire and theft offers the same protection as third party, plus cover for your own vehicle in the event of fire or theft.

How does comprehensive car insurance work?

Comprehensive car insurance provides the broadest level of protection. It not only covers you for third party damage to another vehicle or person, but also against fire, theft and damage to your car – no matter who is at fault.

How does car insurance excess work?

A car insurance excess is the amount of money you agree to pay towards the repair or replacement of your car if you make a claim. Understanding how excesses work is crucial when selecting car insurance, as they can affect the cost of your insurance and the potential out-of-pocket costs in the event of a claim.

There are two types of car insurance excess:

Compulsory excess

This is a set amount, dictated by your insurance company, that you must pay towards any claim. It's typically a fixed amount determined by factors such as your age, driving experience, and the type of vehicle insured.

For example: someone bumps into your car and the cost of the repairs is £1,000. If your excess is set at £250, you would pay that amount to the assigned repair centre and your insurance would cover the remaining £750.

Voluntary excess

In addition to the compulsory excess set by your insurance provider, you can choose to pay a voluntary excess. This is an optional amount you can pay on top of the compulsory excess. In exchange, you may be able to reduce the overall cost of your car insurance.

For example:  your car is damaged and the cost of the repair is £1,000. If your excess is set at £250 and you have also chosen a voluntary excess of £250. Therefore, you would need to pay £500 to the assigned repair centre. Your insurance would then cover the remaining £500.

When does the excess apply?

Excesses usually apply to most claims, including accidents, theft, and vandalism. However, some policies may have specific exemptions where excess doesn't apply, such as windscreen damage or claims involving an uninsured driver where you're not at fault. You can check these details in your car insurance policy documents or by talking to your provider.

When do I pay an excess?

You typically pay the excess directly to the repairer or service provider handling your claim. In some cases, the insurance company may deduct the excess from the claim payout they provide to you.

How does a car insurance claim work?

Making a car insurance claim is a process that helps you get back on track after an unfortunate event.

Understanding the typical steps involved will help you know what to expect during this time and can even help you navigate the process more effectively. For example, taking photographs of an incident or collating a witness’ contact details can help support your claim. Knowing this before an incident can help you prepare.

Every insurer may offer a slightly different process for how to make an insurance claim, but the typical steps are outlined below.

1. Reporting the incident: if you’re involved in an insurable incident you need to report it to your insurance provider as soon as it’s safe to do so.
2. Providing information: you'll need to provide details about the incident, including the date, time, and location, along with evidence that helps outline what happened.
3. Assessing the claim: your insurance company will assess your claim based on the information you provide.
4. Determining the coverage: your provider will determine whether the incident is covered under your insurance and the extent of coverage provided.
5. Estimating the damage: if the claim involves damage to your vehicle, the insurer may send an adjuster to inspect the damage and provide an estimate of the repair costs. Alternatively, you may be required to obtain repair estimates from approved repairers.
6. Sharing the resolution: if your claim is approved, your insurer will agree to provide compensation, arrange for repairs to be carried out, or reimburse you for any expenses incurred, depending on the nature of the claim and your coverage.
7. Receiving payment: if you are due payment for the claim amount, it will either be made directly to you or a repairer or service provider, depending on the circumstances.
8. Closure: once the claim is resolved and all payments have been made, the claim is considered closed.

Remember, making a car insurance claim is a common occurrence, and your provider is there to support you every step of the way.

Summary

Car insurance can feel complicated, especially when it comes to finding the right cover for you and your car. Next time you need to find protection, keep these key points in mind:

• If you want to drive in the UK, you must take out car insurance. Failure to do so can result in fines, points on your licence, or driving bans.
• Third party only insurance gives basic protection and covers damage or injury caused to others – but won’t cover damage to your vehicle.
• Comprehensive car insurance provides the widest range of cover, including cover for accidents where you are at fault, though this often means it’s the most expensive option.
• If you’re concerned about price, you can choose to increase your voluntary excess. This may lower the cost of your policy but will mean you pay more in the event of a claim.
• When in doubt about car insurance, you can always talk to a provider to get further information or consult your car insurance documents.