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Car insurance explained

This car insurance buyers' guide outlines the types of car insurance and issues you need to be aware of as a buyer of car insurance.

You must have car insurance if you drive – it's a legal requirement to make sure that, if you injure someone or damage another car, you can meet the bills – which could be millions of pounds in cases of serious injury.

It is an offence to keep a car without insurance. So even if you don't drive it, you must insure it unless you've notified the DVLA that it's permanently off the road.

Types of car insurance – the car insurance buyers' guide

There are different types of car insurance policy – make sure you buy the best car insurance for your circumstances.

Type	What it covers	Best if ...
Third party	The minimum required. It covers claims by anyone you injure or whose property you damage.	You can't afford anything more (comprehensive policies can cost thousands for some people). Your car isn't worth much more than the cost of the insurance premiums (under £1,000, say).
Third party fire and theft	Adds on cover for damage to your car by fire or theft.	Your car isn't worth much (£1,000 to £3,000, say). You're a young or new driver with only a small (or no) no-claims discount (and so can't afford comprehensive cover).
Comprehensive	Covers you for damage to your own car in an accident. You also get medical expenses covered up to a set limit and may be covered for theft of your possessions from the car.	You drive regularly and need a car. Your car would cost a lot to repair or replace (over £4,000, say) if you caused an accident.

Type

What it covers

Best if ...

Third party

The minimum required. It covers claims by anyone you injure or whose property you damage.

You can't afford anything more (comprehensive policies can cost thousands for some people).

Your car isn't worth much more than the cost of the insurance premiums (under £1,000, say).

Third party fire and theft

Adds on cover for damage to your car by fire or theft.

Your car isn't worth much (£1,000 to £3,000, say).

You're a young or new driver with only a small (or no) no-claims discount (and so can't afford comprehensive cover).

Comprehensive

Covers you for damage to your own car in an accident.

You also get medical expenses covered up to a set limit and may be covered for theft of your possessions from the car.

You drive regularly and need a car.

Your car would cost a lot to repair or replace (over £4,000, say) if you caused an accident.

What extras do you want?

Even comprehensive policies differ in terms of add-ons. The following may not be an option, may be standard, or may cost extra:

Windscreen cover: to pay for getting your windscreen fixed, often without affecting your no-claims discount.
Courtesy car: a replacement car while yours is being repaired, and sometimes if yours has been stolen.
Legal expenses insurance: helps pay legal costs if you need to sue another driver who was at fault to pay for medical bills or the cost of a replacement car.
Protected NCD: it typically costs an extra 10% or so to protect your NCD and is an option usually only after 4 years with the same insurer.
Driving other people's cars: this is likely to be on a third-party basis only (so it won't cover accidental damage you cause to the car, even if you have comprehensive insurance for your own car. You may want to get yourself named on the other car owners' insurance, instead).
Driving in the EU: again, you'll get only the minimum cover (third-party), although there are issues with driving in some countries. Always check with your insurer first.

Your premium explained

Insurers look at their experience of insuring different types of people and cars, and price their premiums accordingly.

On top of that, some want a mix of customers, while other specialise in high performance cars or avoid younger drivers.

Factors they take account of include:

Your age and gender.
How long you've been driving, how much you drive and whether you use the vehicle for work.
Your car's age, type, where you keep it and what security is fitted.
Any convictions.
The excess you choose – the first part of any claim you agree to meet.

If the facts change – you get a speeding fine, or move house –tell your insurer straight away, or you could invalidate your insurance.

Car insurance explained guide brought to you by LowerMyBills from Experian

The LowerMyBills guide to car insurance was created to help you understand car insurance types, extras you want covered, and factors that affect premiums, giving you the information you need to make an informed decision when you next buy car insurance.