What are the different types of car insurance?
Key takeaways
Car insurance is always required unless the vehicle is registered as “off road” with a SORN
The most basic policy covers costs to a third party and isn’t always the cheapest
You can pay for extras include breakdown cover, personal accident cover, and motor legal expenses cover
Do I need car insurance?
Yes, in the UK it’s legally required that every driver has car insurance to cover the potential costs associated with road accidents, car damage, or theft.
This legal requirement ensures that all parties involved in an accident have some form of financial protection.
Even if you're not actively driving your car, it still requires insurance. The only exception is if you register it as “off road” with a SORN (Statutory Off Road Notification), which frees you from the obligation to insure and tax the vehicle.
What are the three main types of car insurance?
Car insurance comes in three main types, each offering varying levels of protection and cost:
Types of car insurance
Third-party only
Third-party only car insurance is the bare minimum required by law. It covers damages to other people's property and injuries but does not protect you or your vehicle. While it offers the least protection, it can sometimes be the most expensive due to high claim rates.
Third-party, fire, and theft
Third-party, fire, and theft policies build upon the third-party only cover by adding protection for your car in case of theft or fire damage. However, this type of insurance does not cover accidental damage to the policyholder's car if they are at fault in an accident.
Fully comprehensive
Fully comprehensive car insurance is the most inclusive policy, covering you, your car, its contents, and passengers. It often includes extras such as windscreen cover and the use of a courtesy car as standard. Surprisingly, it is often the cheapest option and the most popular in the UK.
What other types of car insurance are there?
For certain motorists, specialised policies may better suit their specific needs:
Telematics insurance
Ideal for safe and younger drivers, a telematics insurance policy uses technology to monitor driving behaviour and reward safety with lower premiums
Driving abroad cover
Often included for a limited time with comprehensive policies, this covers you when driving overseas
Electric car insurance
Electric car insurance provides additional cover for electric vehicle-specific components like batteries and charging cables
Temporary car insurance
Offers short-term cover and can be a convenient option for adding a named driver to an existing policy
Pay-as-you-go cover
Tailored for those who prefer their driving to be closely monitored, with options like pay-per-mile and pay-per-hour policies
Learner driver car insurance
Essential for those practicing with a provisional licence before obtaining a full licence
Business car insurance
Necessary if you use your car for work-related activities beyond commuting
Multi-car insurance
A cost-effective option for insuring multiple cars under one policy, often with a discount
Classic car insurance
Designed for vintage cars that are used mainly for leisure
Track day insurance
Provides cover for those wishing to drive their car on a racetrack during organised events
What are car insurance extras?
Policyholders can add extras to their insurance for specific needs, usually at an additional cost:
Breakdown cover: Assistance if your car breaks down
Personal accident cover: Compensation for serious injuries or death
Motor legal expenses cover: Covers legal costs for non-fault accidents
Courtesy car cover: A temporary car while yours is repaired
Windscreen cover: Replacement costs for damaged windscreens
Replacement key cover: Costs for replacing lost or stolen keys
What exactly do insurers factor into the price of different types of car insurance?
Insurers consider a variety of factors when determining the cost of car insurance:
Age: Younger drivers usually face higher premiums
Driving history: A record of past claims and convictions can hike up premiums
Location: High crime rates in an area can lead to increased premiums
Insurance group: Cars in higher insurance groups attract higher premiums
Make and model: More powerful or expensive cars are costlier to insure
Car value: A higher value can increase the risk of theft and repair costs
Annual mileage: More miles on the road can increase the risk of accidents
What is a car insurance compulsory excess?
A car insurance compulsory excess is the fixed amount you're required to pay towards a claim, determined by your insurer. It's generally higher for demographics more likely to file a claim, such as new or young drivers.
Policyholders can also choose a voluntary excess to potentially lower their policy price, but caution is advised to avoid setting it too high, as it could become financially burdensome in the event of a claim.
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Rebecca Goodman
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Rebecca is an award-winning financial journalist with over a decade of experience writing for print and online media. Her mission is to take the jargon out of personal finance and to help everyone...
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