Car Insurance Categories

There are essentially three categories of car insurance, although some people confuse categories with insurance groups, which relate to types of vehicle and their relative risk factors. The three categories are:

  • Third Party Insurance, which as the name implies only covers you for any damage to another party’s vehicle or property. This is the minimum level of insurance that you require to legally operate (including parking) a vehicle on public roads. You will only get any compensation for damage to your vehicle if it is determined that it was not your fault AND the other party had valid insurance policy.
  • Third Party Fire and Theft Insurance covers the above, plus it will pay out if your vehicle is damaged by fire or it is stolen.
  • Comprehensive or Fully Comprehensive Insurance, as it is sometimes referred to, covers your vehicle if it is damaged regardless of whose fault it was, or whether the other party had a valid insurance policy.

When considering what type of policy to take out you should consider not only the risk you are taking but also the specifics (small print) of the policies you are looking at purchasing. If your car is not worth much, how much will the insurance company pay out if it is written off in accident AFTER they have deducted the excess amount stipulated in your policy! Not all comprehensive policies cover the same thing or have the same penalties should you make a claim. The price comparison websites usually highlight the major differences but policies which seem very similar often come with significantly different price tags because they exclude or include some items which might cost you dearly in the case of a claim. The most obvious one is the protected no-claims bonus. You should check what it is actually costing you and what protection you are actually getting. Remember also that even if the insurance company maintains your no-claims bonus, they can still increase the premium if they think you have become a greater risk!

Source: Matt J Sims

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