Car insurance can pay out if your car is stolen, vandalised, catches on fire or if you are involved in an accident. It also protects you against any damage you cause to the public, their property or other road users.

You only need to claim on your policy when an accident is your fault. If another driver is to blame their insurance should pay instead. 

Do you need car insurance?

Yes. It is illegal to drive on UK roads without it.

If you own a car and drive without insurance you could face a fine of up to £1,000 or have your vehicle seized and destroyed. The GOV.UK website has more details on the punishments you could face.

The only time there is no need to insure your car is when you have officially declared it not in use and off the road through a Statutory off Road Notice (SORN).

GOV.UK website - Uninsured drivers

How does car insurance protect you?

It protects you financially, but the level of protection depends on what policy you choose.

If you cause an accident your insurance company will pay out to cover the costs. All you will have to pay is your excess amount, which will be set out in your policy. If you claim your premiums are likely to increase.

Car insurance is available in different levels, and the level you choose will determine how much of the costs are covered by your insurance company.

What types of car insurance are there?

There are three levels of car insurance cover:

Fully comprehensive

Main features: Covers you, your car, your passengers and property, as well as any third parties involved in an accident. Also protects your car against vandalism and theft.

Suitable for: Most drivers. Three quarters of UK drivers choose comprehensive cover because it offers the most complete protection. Some fully comprehensive policies will allow you to drive other cars, but not all.

Third party, fire and theft

Main features: Covers third parties involved in an accident, but also provides protection for your car against theft and damage caused by fire. It will not pay out to cover the damage to your vehicle.

Suitable for: Those looking for a cheaper policy, although fully comprehensive insurance can still sometimes cost less. Check out our guide on the different levels of cover.

Third party

Main features: This is the most basic level and covers liability for injury to others and any damage to third party property only. This level of cover is the minimum legal requirement for motorists in the UK.

Suitable for: Drivers who drive infrequently, or those looking for the cheapest possible cover. Not all insurers offer this type of policy.

Other types of car insurance

Some policies are designed for specific drivers or vehicles. These include:

Multi car insurance

Black box insurance

Young driver car insurance

Learner car insurance

Taxi insurance

Short term car insurance

If you need car insurance cover for a shorter period you can take out a short term policy that can last just a day or a few weeks.

What affects the price of your car insurance?

The cost of your cover comes down to one thing: risk.

If you are viewed as a high risk driver by an insurer they will charge a higher premium because they think you will be more likely to have an accident and make a claim.

Car insurers use the following factors to determine how much of a risk you will be.

The car you drive

Your car: An expensive new car can cost more to insure as repair bills are usually higher. Equally some older cars have fewer modern safety features and can cost more to insure.

Engine size: The general rule is the bigger your engine, the bigger your insurance payments. The cheapest cars to insure tend to be small cars with low powered engines.

Modifications: Any performance related modifications (i.e. engine changes or spoilers) made to your car are likely to increase your premiums. Drivers with these improvements are statistically more likely to make a claim, so the cost of your cover will go up.

Personal information

Address: Where you live and where you keep your car also affects your premiums. If you live in a high crime area and park on the road you will pay more than if you live in a quiet, low crime area and keep your car in a locked garage.

Your age: Car insurers are notoriously ageist and charge young drivers more. The average cost of cover for 17-22 year olds was £1,628.60 in the first quarter of 2018*.

*Figures from AA British Insurance Premium Index

Your driving

Driving experience: The more experienced you are the less you are likely to pay. If your driving history is chequered, i.e. you have had driving convictions, then your premiums may be higher.

No claims bonus: Your premiums will be much lower, sometimes up to 75% cheaper, if you can prove you are a safe driver with years of no claims behind you. Read our no claims bonus guide for more information.

Planned usage: The more you drive, the more you will pay. Insurers ask how you will use your car; commuting, leisure or both and how many miles you drive each year.

Your policy

Excess: You can reduce your premium by choosing a higher excess amount. By agreeing to pay more if you need to claim you reduce the risk to the insurer as they will need to contribute less.