Car Insurance Guide

Do I need insurance for a test-drive?

It’s never legal to drive a car on public roads without at least basic insurance, so it’s important that you’re covered even before you take a test-drive. Dealers will usually have insurance cover for customers test-driving their cars, but it’s a good idea to check with them beforehand. If you’re test-driving a car privately, you’ll need to have your own policy, with Driving Other Cars (DOC) cover. This allows you to drive someone else’s car with their permission. If DOC isn’t stated on your policy documents, call your insurer to have it added before you begin test-driving. In some cases, a private seller might have extended their own coverage to allow potential buyers to test drive their car, but it doesn’t hurt to have your own cover anyway. Typically, DOC cover is third-party only. If you don’t have an existing policy, some companies offer test-drive insurance cover which you can buy by the day, or even the hour.

Do I need insurance on a leased car?

The answer is yes, you need insurance whether you’re leasing, financing or you own your car. Some leases do offer insurance cover as part of the package, but don’t assume that yours does. Unless it’s specifically pointed out by the leasing agent and stated in the lease documents, it’s your responsibility. At the end of your lease, remember to inform your insurance company so that they can change the cover to a new car, or cancel it completely.

Do I need Guaranteed Asset Protection (GAP) insurance?

GAP insurance covers the difference between the original value of your car and the amount an insurance company would give you if it was written-off or stolen.  It covers the depreciation of your vehicle between the time you bought it and when it’s written off. A new car can lose up to 60% of its value after 3 years. So, as an example, if you bought a new car that cost £10,000, and it was written off or stolen three years later, you’d potentially only receive £4,000 from your insurer. This might not be enough to pay off what you still owe on the car and GAP insurance would make up the shortfall.

Dealers normally suggest you take out a GAP policy when you’re buying a car, or you can take out a policy with another insurance company (which is sometimes cheaper), but it’s not essential. An insurer will normally pay out for a brand-new car if you write yours off in the first 12 months, and GAP policies typically cost between £100 and £300 per year.

GAP can be for a new or used car. However, GAP is more valuable when buying a new car as they depreciate at a much faster rate in the first few years. GAP only applies if you have fully comprehensive insurance cover, will normally not cover voluntary excesses on your claim, and doesn’t cover any alterations made to the car after purchasing it. A GAP payment will not be issued until your insurance claim has been settled. Until then, you are still responsible for any repayments you owe.

Will my insurance change when I own my car?

Your insurance premium may change when you have paid off your car loan or financing and you take ownership. If you want to ensure that your coverage continues make sure you contact your insurer well in advance. Your premium may well decrease too.

What are the different levels of car insurance?

There are three levels of car insurance cover:

• Third party
• Third party, fire and theft
• Fully comprehensive

What is third party insurance?

Third party insurance is the minimum you can legally have. It covers other people in the event of an accident, but not you.

If you injure someone or damage their property, they’re likely to be compensated by your insurance company. But if your own car is damaged or stolen, you are responsible for fixing or replacing it.

Third party insurance should be considered if you can’t get comprehensive insurance you can afford – maybe because of where you live or your driving history. But quite often third-party costs more than comprehensive insurance, so it definitely pays to research your options before deciding.

What is third party, fire and theft insurance?

Third party, fire and theft, like basic third-party insurance only covers other people in the event of an accident. The difference is that it does cover repairs or a replacement if your car is stolen or damaged by fire.

Like third party insurance, third party, fire and theft isn’t always cheaper than fully comprehensive cover, so always compare prices.

What is fully comprehensive insurance?

Fully comprehensive car insurance is the highest level of cover. You should try to have ‘fully comp’ if you can because it offers you, your car and anyone else involved in an accident the best coverage, should the worst happen.

As well as the coverage given by third party, fire and theft, fully comp is the only type of car insurance that covers you if you damage your own car, even if the accident was your fault.

With fully comp, you might also legally be able to drive other people’s cars if you have their permission. But when doing this you’ll usually only have third-party cover. Policies vary though, so always double-check to make sure you’re covered before driving someone else’s car.

What does fully comprehensive insurance cover?

Not all comprehensive policies are alike, so make sure when you’re shopping around for insurance that you check if a policy covers:

• The contents of the car, if damaged or stolen
• The front, rear and side windows of the car
• Towing and pickup services, if needed
• Car stereos and satellite navigation systems
• Loss or theft of keys
• Safety systems, such as airbags

What is car insurance excess?

Car insurance excess is the amount you’ll need to pay towards any claim you make on your car insurance. There are two types of excess: compulsory and voluntary. Compulsory excess is the amount set by your insurance provider and can’t be changed. Voluntary excess is the amount you choose to pay on top of the compulsory excess. For example, if your compulsory excess is set at £200 and you’ve agreed a voluntary excess of £150, you’re total excess is £350 when you make a claim.

How is the price of car insurance calculated?

From where you live to how old you are and what kind of car you drive or what you do for a living – these are all factors that go into calculating the cost of your car insurance. An insurer will consider a range of things to determine the cost of your insurance based on how much risk they think you are, these include, but not limited to:

• Age – people who are aged between 17 – 25 often have the highest premiums since they tend to be new drivers or deemed to be less mature
• Car type – expensive cars often cost more to repair and certain models, such as sports cars, are seen as a higher risk for accidents
• Location – where you live can contribute to higher insurance costs because highly populated areas tend to have more cars and higher risks of accidents
• Previous claims – if you’ve made any claims in the past or had any accidents your insurance premiums will likely be more expensive.

What is a No Claims Bonus (NCB)?

For an insurance company, the less you claim, the cheaper you are to have as a customer. That’s why all car insurance companies offer NCB. It’s only available on one car and generally for the policy holder only rather than other named drivers – check your policy for details. Your NCB increases every year you don’t make an insurance claim against your policy.

Typically, the increase is similar to this, though differs for each insurer:

• 30% discount after one year
• 40% discount after two years
• 50% discount after three years
• 60% discount after four years
• 65% or higher discount after five years

If you have an accident and you claim for it, you generally lose two years’ worth of no claims bonus and your premiums increase. If you have more than one accident in a year, you might lose all of your no claims bonus.

If you have an accident and don’t claim, you keep your no claims bonus but your premiums might still go up. Remember that even if you don’t want to make a claim, you must tell your insurance company if you have an accident. If you don’t, they might refuse any future claim you make. You can also pay to have your no claims bonus protected should you need to make a claim.

When you switch insurance providers, you’ll need to prove your NCB status in order to transfer it – not all insurers automatically provide documentation so you may need to request it.

Will my car insurance cover me if I drive another vehicle?

Driving other cars (DOC) used to be included on most comprehensive insurance policies but this is no longer the case. Don’t automatically assume you’ll be covered by your insurance should you need to drive another car that’s not listed on your policy – check with your insurer first. If you need to drive another car make sure you are covered to do so or you risk penalty points and a fine should you be stopped by the police.

Does my car insurance cover me if I drive overseas?

Currently all UK car insurance provides minimum third-party cover to drive in EU countries (including Ireland) and Andorra, Bosnia and Herzegovina, Iceland, Liechtenstein, Norway, Serbia and Switzerland. Check the fine print of your insurance details to determine if you have more cover. Theft or damage may cost you extra if you take your car abroad so you might want to add this before you travel. If you are travelling to a non-EU country, you will need to have a ‘green card’ that proves your insurance provides the minimum level of insurance required for that country. Your car insurer will be able to provide you will this.

Rules for travelling by car to EU countries up to date as of 1st March 2024.  Ensure to check the government website for the latest information.