Third-party
Third-party car insurance is the minimum legal level of cover you can get if you own and drive a vehicle. It insures you for any damage you do to another person (the third party), their vehicle or their property
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Pay-as-you-go insurance (sometimes known as telematics insurance) monitors one or more aspects of your driving, either based on how much you drive or the way you drive and adjusts your car insurance premiums accordingly.
All types of pay-as-you-go car insurance give your insurer a more accurate view of how you drive, so they can use this to give safer and more responsible drivers lower car insurance premiums.
Insurance providers get this view by using something known as telematics to monitor your driving – usually by using a black box, a plug-and-drive device, or an app on your smartphone.
The device you choose sends information about your driving depending on the type of pay-as-you-go cover you take out – some will only send mileage, while others send location and timing too.
What type of pay-as-you-go car insurance can I get?
Pay-as-you-go car insurance policies aren’t all the same – they offer different types of tracking depending on how you’d like to pay for your cover.
Pay-per-mile car insurance means you pay premiums based on the mileage you drive each month. Standard car insurance policies ask for an estimated mileage, but a pay-per-mile policy gives your insurer a more accurate picture of your driving. Pay-per-mile policies use a telematics device to keep track of how far you’re driving to work out your monthly premium, but they don’t use driver scoring to use how you’re driving to change your price.
These policies often use GPS technology to collect data before feeding it back to the insurer though some can collect mileage directly from your car’s odometer. They have a flat premium rate that covers your car while it’s parked, before the remaining amount is added based on the miles you covered over the month.
Pay-per-hour car insurance works in a similar way to pay-per-mile, however instead of monitoring your mileage and basing your premiums off how much you’ve driven, insurers monitor the time you spend on the road.
As with a pay-per-mile policy there is usually a flat rate to cover your car while it’s stationary, while the remainder of your premiums depends on you. They’ll also send a tracker, either a black box, plug-and-drive device or smartphone app, to send data.
An imported car is a model you've bought and had delivered from abroad. They're often more difficult and expensive to insure because they usually cost more to repair, and are often higher-spec, with more powerful engines. They're sometimes modified to fit with UK regulations - all this leads to extra hassle and risk for insurers.
When you take out pay-as-you-go car insurance, you may find providers offer fully comprehensive cover as standard. However, if you are given a choice, you’ll normally have the same standard levels of cover to pick from:
Third-party car insurance is the minimum legal level of cover you can get if you own and drive a vehicle. It insures you for any damage you do to another person (the third party), their vehicle or their property
Third-party, fire and theft is the next step up, and as well as third-party cover you’ll also be able to claim for damage done to your own car as a result of a fire or theft
Fully comprehensive car insurance offers the most cover, and includes all of the above as well as a range of extra protection for your own car
Pay-as-you-go car insurance works quite differently to standard car insurance policies, so it’s useful to be aware of the pros and cons of this type of cover:
You may be able to save money if you’re a low mileage driver
It can also be more economical for high-risk drivers already facing high premiums
You can earn discounts on future premiums through good driving
It could work out more expensive for high mileage drivers
Some policies have limits on when you can drive, and they could also have age limits
Your insurance costs might increase if your circumstances change
The specific types of cover you’ll get from your policy will depend on the level of protection you take out as well as any add ons you might select. A good fully comprehensive policy should offer most of the following either as add-ons or as a standard part of your cover:
Cover for your vehicle against theft, loss or damage resulting from an array of causes – check your policy for more details
Cover for damage you cause to another person, their property or their vehicle
Cover for the cost of calling out emergency roadside assistance and repairs should your vehicle break down
Cover for any legal fees you might face related to a car insurance claim
Financial compensation for you or your dependents if you’re seriously or fatally injured in a road accident
Cover for two or more cars on one policy with multi-car insurance, or for further named drivers on the policy for one car
Cover against theft, damage or loss of personal items you keep in your car, like sat-navs or clothes
Cover for taking your car overseas – often included as standard up to third-party level with fully comprehensive available as an extra
Other policy features like cover for lost keys, wrong fuel and cracked windscreens
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Pay-as-you-go car insurance is similar to short-term car insurance, but not exactly the same. While a pay-as-you-go policy charges by the mile or by the hour, temporary car insurance policies offer the standard level of protection – and you pay a set price for a set amount of time you’ll be covered.
They can be more economical than year-long policies in certain situations – for example, if you only need cover for a day to move home, or for a month if you’re borrowing a car from a friend.
Some insurers offer a black box which you’ll need to get installed into your car by an approved mechanic – however they may also offer a plug-in device that goes into your cigarette lighter, or an app that uses your mobile phone’s GPS tracker.
Pay-as-you-go car insurance can be cheaper than a standard policy – it really depends on how, when and where you drive.
You might find pay-per-hour cover isn’t as useful in a big city where you might often be sat in traffic, but if you’re a low mileage driver you could save money with a pay-per-mile policy.
Likewise if you’re in the country and you’re often driving fast along open country lanes, pay-per-mile cover might work out less economical than a pay-per-hour policy.
Your insurer will keep your driving data safe and secure, generally just using it to monitor your driving habits and checking any claims you make or someone else makes against you. They may also share it with their business partners, but they won’t sell it.
Pay-as-you-go policies are likely to have all the same standard exclusions as a regular policy – but specific exclusions you might look for include:
Commercial or business usage: You’ll likely need specialist business car insurance if you use your car for commercial reasons – you might find some pay-as-you-go providers won’t offer commercial cover at all
Track days or rallies: You may also not be able to attend track days, rallies or trials if you use telematics or pay-as-you-go cover
Device tampering: If you tamper with your device, whether it’s a black box or a plug-in device, this will almost certainly void your cover
With pay-per-mile or pay-per-hour policies it’s only the time or distance you drive that will be tracked, but for full telematic policies they’ll also track your speed, cornering, braking and other aspects of your driving performance.
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