Motor insurance - what's that all about?

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Q. What is the difference between Road Traffic Act (RTA), third party only (TPO), third party fire and theft (TPF&T) and fully comprehensive (Fully Comp) insurance?

A. In the UK the lowest cover of insurance that is legally required by a motorist is Road Traffic Act (RTA) and is the minimum legal requirement for driving a vehicle on the public highway - insurers will act as RTA only in certain circumstances, but will not generally offer RTA only cover for sale. The next level of insurance is third party only (TPO) cover. You are covered to drive/ride on the roads and, as the name suggests, any third party is covered against any accident which is your fault. These policies frequently have no excess written into the policy agreement. TPO cover isn't usually the cheapest type of cover any more as insurance companies are generally phasing out RTA/TPO schemes, with the exception of motorbike policies. TPO insurance for motorbikes is still competitive and usually the cheapest, BUT be aware, this type of cover gives you the very lowest protection. In the event of an accident which is your fault you will get nothing back, only the third party invovled will be covered. There is also no fire or glass cover, unless you have Accidental Damage, Fire and Theft (ADF&T) included for your policy, generally a good thing to have if, for example, you are unable to use your vehicle for an extended period for any reason.

Third party fire and theft (TPF&T) is the next level of cover up from third party only. It covers you exactly the same as TPO, but includes fire and theft cover as standard. TPF&T cover comes with a mandatory (and, if you wish, additional voluntary) excess. In the event of a claim for fire or theft you will be required to pay the excess. For example, if your mandatory excess is £250, you will have to pay the first £250 towards any fault claim. So, in the event of a total write-off, if your car is worth £1250, you would get £1000 back from the insurance company. You cannot claim for accidental damage which is your own fault on this type of policy and you do not normally have windscreen/glass cover.

Fully Comprehensive cover is, as the name suggests, the most comprehensive insurance cover you can buy and is usually the most costly. Fully Comp cover includes windscreen/glass cover that will have its own mandatory excess, with the benefit that you can make a claim on your windscreen/glass cover without it affecting your no claims bonus (NCB). The policy covers you if you damage your own car, if it is vandalised, stolen or set on fire and it covers any third party costs if the claim is due to your fault.

Q. Why, when I contact an insurance company, do they ask what is the best quote I have had so far?

A. An insurance quote can take some time to complete, depending on the complexity of your specific circumstances. The premium you are quoted is made up of two basic parts - the insurers / underwriters fee for the risk and an additional amount that makes up the commission for the insurance broker. BOTH of these are negotiable - to a degree - Both the broker and the underwriter need to make a living, but they also want to provide you with appropriate cover at a fair price. The main reason that this question is asked is so that the broker can refer it to the insurance company / underwriter and see if they can cut their fee for the proposed risk. Most insurance companies use a range of statistics and something called propensity (How likely is it that ... ) to calculate people's insurance premiums. In addition, they may add or exclude features, (such as voluntary excess - an amount on top of the mandatory excess that you agree to pay in the event of a fault claim), in order to reduce your premium. The insurance companies don't know what prices other insurance companies are charging for insurance. To ensure they are competitive they ask the customers and, where they can, will change their prices accordingly to compete. Most insurance brokers would like to say that they are giving you the cheapest price possible - the best will give you the right product at the right price!

Q: If I have comprehensive cover on my vehicle, what cover do I have for driving other vehicles?

A: The simple answer is that you must always check to see if you have additional benefits, such as TPO cover for driving third party vehicles, on your policy as some insurers no longer offer this and most insurers do not offer this if you are under 25. If you drive without insurance you will be liable for costs of any accident and will receive a penalty such as driving without insurance for the common misconception that you are automatically covered in this way.

On some policies, you will be entitled to the benefit of cover when driving other vehicles even if you are only insured Third Party Fire and Theft. It is important to note that the car, other than your own, that you drive on this benefit must not be owned by you and cannot be a hire/courtesy vehicle.

Q: What constitutes a vehicle modification? Do I need to disclose modifications to my insurance company? What happens if I don't disclose a modification and have a claim and state it is a factory fitted optional extra, how will my insurance company know?

A: A vehicle modification is a permanent fixture or alteration to the vehicle, whether it is performance enhancing or not, that doesn't come as standard to that particular model of car. This includes the interior as well as the exterior of the vehicle.

If you don't disclose modifications that you have on your vehicle, regardless of whether the modification was made by yourself or a previous owner, your insurer could choose to void your insurance in the event of a claim, which will leave you liable for any expenses occurred to a third party. Some insurers may be more lenient and make you pay the additional premium that you would have paid originally then they will cover the claim costs, but beware it is entirely up to the insurers discretion and they are not liable to pay out any costs in this situation.

Your insurance company have access to records which enable them to view the standard versions of every make model etc, If you have a modification on your vehicle the insurer will be able to find out.

Q. What is an accelerator bonus policy and why do some companies not accept them?

A. Some companies offer an 'accelerator policy' as a quick way of getting a no claim bonus however, this isn't quite what it appears. You will only get insurance for the period stated and your no claims bonus will only be for the same period, which cannot be transferred to a different company as a full year's no claims bonus when the time for renewal comes up, simply because you do not have a full years no claims record. So you would find that instead of gaining a years no claims bonus you will actually only have a proportion of a year's no claims bonus.

As appealing as they may sound, you are more than likely to end up paying more in the longer term!

Q. Can I insure my child(ren) on my policy?

A. When a new, young driver is looking around for their first insurance quote on their car, it can seem like an expensive, up-hill struggle, as the premium can be quite high. As a result, it is not uncommon for parents to take out the policy in their name and have their child on as a named driver.

This can work out badly in several ways - The insurance premium will still be relatively high as it is based on the highest risk driver on the policy. In addition, the named driver will not be earning any No Claims Discount (NCD) during this time. The insured driver is expected to be the main driver with the child using it occasionally and if it is proven otherwise following an accident it could cause the policy to be void.

Some insurers give NCD for being a named driver. Please note that those companies are generally the only companies that will accept this type of NCD, therefore you are narrowing your market for future years and this will result in you not getting the best available premium. However, some brokers do provide policies that can have an introductory NCD, based on a proven clean driving record - shop around!

2Gether FS are our preferred insurance broker - give them a call on their landline number - 01945 585322 - for impartial, friendly advice and a competitive quote.