How Does Car Insurance Actually Work?

Once you've chosen your new car, you've got to deal with the nitty gritty of ownership. And that means insurance. Car insurance might seem complicated but the basics are actually pretty simple to get your head around. Here’s a brief overview of how it works.

Car insurance is a type of agreement that protects you against the cost of having to pay for damage to another person’s car in the event of an accident. In return for paying a monthly premium, your insurer agrees to pay out if you cause damage.

If the accident is your fault, you claim the cost for the other person’s repairs and the money comes out of your policy. If the accident isn’t your fault, the other person will be responsible for claiming and the money will come out of their policy.

An uninsured driver will have to pay for any damage caused to your car in accident out of their own pocket so there’s always the risk that they might not be able to pay, leaving you liable for the bill. Under the Road Traffic Act 1998, it’s illegal to not insure your car if you’re driving it on the road and this helps the reduce the risk of this situation happening.

Types of car insurance in the UK

There are three main types of insurance coverage in the UK. Third Party is the basic option and just covers you for damage to another person’s car. Third Party, Fire and Theft covers you for damage to another’s car, as well as damage to you own car caused by fire or theft. Comprehensive is the most expensive policy but gives the best coverage, covering you for damage to another’s car as well as your own, and damage caused by fire, theft or weather.

In terms of actually getting a car insurance contract, it’s surprisingly simple now, thanks to the growth of online comparison sites. All you need to do is fill out your personal details on the website, the type of coverage you’re looking for and details about your car and you’ll get a list of the best value insurance policies available for you.

What is the price of cars insurance

Car insurance varies massively in price depending on a whole host of factors. We’ve got a much more detailed page about the cost of car insurance here that you can check out, but here’s the basics. You’ll obviously pay more for a policy that protects you against more things.

Basically, car insurance quotes are also worked out according to how risky a driver the insurance company believes you to be. These companies obviously don’t want to be paying out loads of money because of clumsy drivers, so they’ll minimise their financial risk by upping the prices for people they consider to be more at risk of getting involved in accidents. It’s not particularly fair because it tars all drivers with the same brush and relies on stereotypes, but unfortunately it’s the norm throughout the industry.