Everything you need to know about Car Insurance

By Farzana Chaumoo

Anyone who has a car financed is legally obliged to insure it. However, a lot of motorists don’t deem it necessary or think of it as too complex, and so, we decided to take it back to basics and explain everything you need to know about car insurance.

What is car insurance?

Car insurance is a cover that protects you, or any other listed driver/s, while traveling in your vehicle. In case of an accident or collision that resulted in damage, injury or death that was caused by you, car insurance will assist you with the ‘third party’ costs that are involved.

There are policies that will cover costs such as repairs or reimbursement for written-off or stolen vehicles.

Depending on your policy, you may even be covered when driving another person’s vehicle.

What happens if I don’t have car insurance?

With the rising costs of fuel and the cost of living, motorists are seeing car insurance as an unwelcome financial burden, but it is a vital expense. In some countries, like the UK, car insurance is a legal requirement for ALL drivers.

Let’s say you’re driving merrily along your way, alone in your car, uninsured, and you end up in an accident. If you weren’t responsible and the other driver is insured, you can collect money from that driver’s insurance company. If the driver was uninsured, you would likely have to sue for compensation.

However, if the accident was your fault, any and all passengers in the car you hit can claim a compensation from you or go after your assets. Such assets here refer to your savings, a piece of your paycheck or possible something even bigger, depending on what damage was done. You will also be listed as a high-risk person for future insurance which means insurance premiums for you will be significantly higher than a person of your stature with the same car.

So if you still think that cancelling your insurance or not taking out any at all is a simple way to save money, it’s likely it will cost you at some point.

What sort of car insurance do I need?

There are three levels of car insurance available: third party; third party, fire and theft; and comprehensive cover - (the links will take you to videos where we explain each cover further).

What factors affect the cost of car insurance?

It is essential that you shop around and compare policies from various insurance companies to get the best possible deal. Yes, it will take up a little time in doing so, but the benefit is it will save you a considerable amount of money.

Factors that will affect how much you pay include the make and model of your car, the area you live in, how secure are the places you park at (home and work), your demographics and experience behind the wheel, your claims history, and other factors all impact the premium calculated for you. You can also find out here if Speeding tickets will increase your car insurance premium.

What is an excess?

By definition, an excess is the agreed and first amount of money that you are liable to pay towards any insurance claim being settled. It is usually paid to the repairing company responsible for your car after an accident and it is paid to them after the damage has been repaired and before you can drive away with the car.

This amount is paid by you, irrelevant of who caused the damage, and is a process in place to prevent customers from submitting minor and/or fraudulent claims, and it also keeps premiums down.

Advice: when are you are comparing car insurances, choose to pay a higher excess as this will lower your premium. Also, if you are considering making a small claim, it would be better to pay for the repairs yourself in order to benefit from a no claims bonus/ discount.

Why do I have to pay the excess even if the accident wasn’t my fault?

The insurer does not place blame as the criteria for the excess so you will always be liable for the excess on your claim.

Because regardless of who is to blame, the administrative costs with a car insurance claim remains the same. If you were not at fault, you can always claim the excess back from the guilty party, whether or not they are insured, but it can take a long time.

What is a No Claims Bonus/Discount?

A no claims bonus refers to ‘a cash bonus that rewards you for not claiming, after (usually) three consecutive years.’ This means that if you don’t claim within three years, you can get a pre-arranged percentage of your own money back.

If you do claim for an incident then the cycle starts all over again and you have to go another three years without claiming in order to benefit from the no claims bonus.

What is a “listed” driver?

Most insurance companies are mainly interested in who the “regular” driver is. It’s no complex term, it merely just refers to the person who drives the car the most during any monthly period.

Now with some companies, the insurer will also ask for a “listed”, “nominated” or even a “named” driver. All these terms refer to the same thing, which is the person who drives the car the second most (or sometimes) after the regular driver.

It is important to list who the regular driver is, as well as, all the drivers of your car in order to be covered in an unfortunate circumstance. If someone who has not been listed as a driver on a certain vehicle ends up in an accident, the insurance will not pay out the claim. So it’s best to add additional drivers to your insurance.

What happens when I make a claim?

Inform your insurance as soon as you can after an incident. When contacting them have all your policy details on hand, as well as the details of any other parties involved.

The insurance company will then send you a claim form to complete, which you need to send back with supporting evidence and a case number from the police as soon as possible.

It’s good to keep a copy of the claim form and a record of all transactions (calls, texts, emails) that occur in the process. Also, ensure that you get a list of insured repairers from your insurance company before sending your car for repairs, because you may find yourself having to settle the bill if the company was not recognised or listed by the insurers.