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How Does Car Insurance Work?

If you’re going to drive, then you’re going to need car insurance. In fact, that’s the first thing you should know about car insurance: It’s illegal to drive without it.

How Does Car Insurance Work?

Think of it as a safety net. In exchange for a fee (which is known as your premium), your insurer may cover you for certain things, such as theft, collisions, personal injury to third parties, and any damage you might cause to other peoples’ property.

Your car insurance will pay for things like repairs, replacements, compensation and legal fees. So long as you have the right sort of cover, you can rest assured that your insurance will take care of everything.

In this post, we’ll take a closer look at how car insurance works. We’ll also explain some of the key terminology you’ll need to learn to properly understand car insurance.

Key Words and Phrases to Know

  • Policy – Your insurance policy outlines exactly what your insurer will cover you for, and the sort of things they won’t cover. We’ll explore the various different types of policies available below. But for an example of what a policy looks like, head here.
  • Premium – Your insurance premium is the amount you pay for your cover. Many things can affect the price of your premium, including your age and level of experience as a driver, and the sort of car you drive. Below we’ll explain how you can reduce the cost of your car insurance. We also have a guide to car insurance groups, which explains why some cars cost more to insure than others. Find it here.
  • Excess – If you’re involved in an accident, you’ll have to report it to your insurers. You may also have to make a claim on your insurance. If you make a claim, you’ll have to pay a contribution towards the full cost of your claim. This contribution is called an excess. You can read our full guide to insurance excess here.

Choosing the Right Car Insurance for You

The cover you choose will largely depend on how you intend to use your car. But before you think about that, you’ll first have to decide what level of cover you need.

There are three types of insurance cover:

  • Third Party Insurance Cover – It’s illegal to drive without car insurance, and third party insurance is the minimal legal level of cover you can get. It covers you against claims of damage and losses suffered by a third party. So if you’re involved in an accident, third party insurance will cover any repairs to the other drivers car, but it won’t cover any repairs to your car. Third party insurance might cost less than other types of insurance. But as you’ll have to pay for your own repairs, you might not save much in the long term.
  • Third Party With Fire and Theft – This gives you all the cover of standard third party car insurance. But it’ll also cover you if your car’s stolen, or destroyed or damaged in a fire. And you’ll be covered for any damage that’s caused by a fire or an attempted theft.
  • Comprehensive Car Insurance – If you’re involved in a collision, comprehensive car insurance will cover you for everything, regardless of who’s at fault. This is the ultimate motoring safety net. It might cost more than third party insurance, but in exchange you get total protection and total peace of mind. You can even choose add-ons for your insurance, such as breakdown recovery.

Head here to read our full guide to the difference between third party and comprehensive insurance cover.

What is Domestic Use and Business Insurance?

Beyond this, the type of cover you choose will depend on how you intend to use your car. If you’ll just be using your car for yourself – for driving to the shops, doing the school run, and so on – then you’ll need social, domestic and pleasure cover. Or you can choose a Social Domestic Pleasure and Commuting policy if you also need to commute to work.  But if you use your car as part of your job, you’ll need specialist business cover.

Why do you need to specify how you intend to use your car? Simply because certain types of driving make accidents more likely. If you use your car as part of your job, for example:

  • You’ll drive more miles than many other drivers
  • You’ll spend more time driving on major roads
  • You’re likely to spend more time in unfamiliar areas

Insurers believe that this places you at greater risk of an accident, so they’ll charge you a higher premium as a result.

How to Reduce the Price of Your Car Insurance

Unfortunately, new drivers always pay more for car insurance than older and more experienced drivers. Again, this is because insurers consider young drivers and new drivers to be higher risk. If you’re inexperienced on the roads, if you’re nervous and lacking in confidence, then you’re more likely to be involved in an accident.

This might seem unfair, but it’s backed up by statistics. According to one study, 23% of 18-24 year olds crash within two years of passing their driving test.  Although only accounting for 1.5% of all UK licence holders, drivers aged 17-19 are involved in 9% of fatal and serious crashes.

So if you’re a new driver, you should expect to pay a comparatively high premium for your insurance. It’s unavoidable. However, there are ways you can reduce the price of your car insurance. For example, you can take an advanced driving course after you pass your test, or you can choose a safe and sensible car that insurers view as lower-risk.

In the long-term, the best way to save on car insurance is through committing to being a safe and conscientious driver. This way you can build up a no-claims bonus. Over time, this will demonstrate to your insurers that you’re lower risk, and you’ll pay lower premiums as a result.

We have a detailed guide to finding cheaper car insurance as a new driver. Find it here.

Do I Need Car Insurance While I’m Learning to Drive?

Yes, you do. It’s illegal for any driver to drive without insurance, and this includes learner drivers.

Your driving instructor or your driving school will usually include insurance as part of their fee. But if you want to quickly build up your confidence on the road, it pays to get experience outside of your lessons.

You can get practice outside of your lessons so long as you’ve got a car, some L-plates, and someone to supervise you. This person must be aged at least 21. They must be qualified to drive the sort of vehicle you want to learn in, and they must have had their full driving licence for at least three years. Read our full guide to getting practice outside of lessons here.

You’ll have to sort out your own insurance for these practice sessions. Many companies offer specialist learner driver insurance, with policies designed to meet your needs as a learner. Head here for more information.

How to Get Car Insurance

To get car insurance, first you need to pick an insurer. Then you’ll have to tell them a bit about yourself – how long you’ve been driving, the sort of car you drive, and so on. They’ll give you a quote for your premium. It’s up to you whether you accept this quote, or whether you continue to shop around for a better quote.

At Go Girl, we’ll give you the car insurance cover you need at a price you can afford.

Our comprehensive policy offers new drivers up to £100 of personal belongings cover and £200 for handbag cover. So if you leave your bag in the car and it gets stolen, then you’re covered. Our comprehensive policy also gives you legal cover and a courtesy car for the duration of your repair following an accident, so you won’t find yourself having to miss work, or cancel plans with your friends.

With all our cover you have the option to add RAC breakdown cover. So help is at hand if your car lets you down and you have chosen RAC Cover.

You can get a quote and buy online in minutes. And our UK-based claims team are on call 24/7 if you ever need to make a claim. Head here for more information, and to get a free quote in minutes.