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Types of car insurance explained

Understand the different types of car insurance policies

There are a number of different types of car insurance, so here's how to pick the right one for your needs

By Emily Sullivan

Published: 18 August 2020

three girls in a car

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It's easy to become confused when comparing car insurance, especially with numberous insurers offering a range of policies and various kinds of deals.

But once you understand the difference between each level of cover, the world of car insurance becomes much simpler to navigate. This guide to car insurance types will help you get to grips with the different policies so you can secure the right cover for your circumstances.

What are the different types of car insurance?

There are three types of car insurance to choose from:

  • Third party
  • Third party fire and theft
  • Fully comprehensive

Each type of policy offers a different kind of cover. The legal minimum level of insurance is third party, which provides the most limited protection. If you want the most extensive type of insurance, you'll need to look at a fully comprehensive policy.

Third party

If you own a car and want to drive on the UK's public roads, third party car insurance is the minimum level of cover required by law. Even if you don't drive the car everyday, it must be insured all year since the Continuous Insurance Enforcement legislation was passed in 2011.

However, the cover provided by this type of policy is very basic. Third party cover simply agrees to pay for damage caused to other people’s property, or compensation or costs related to injuries they sustain, in an incident adjudged to be the fault of the covered driver.

So third part cover would pay out if you caused an accident and injured another driver, their vehicle and their passengers. Your passengers would also be covered, so the only persion not covered is the car's owner - you. 

The main thing to remember is that there are three different types to choose from: third party, third party fire and theft, and fully comprehensive cover.

Third part cover definitely has its limitations, as it doesn't cover the cost of repairs to your vehicle. It wouldn't cover you if your vehicle was stolen or damaged by fire either, meaning you would have to pay for any repairs or replacement yourself.

And for this reason, third party insurance may be better suited to a motorist who drives an older car - rather than someone who owns an expensive sporty number.

Third party insurance policies used to cost less than more extensive policies because the cover was very limited. Motorists saved money by opting for this type of cover, and it proved popular with young and newly qualifised drivers.

But these drivers, who are 18% more likely to crash, inevitably made claims on their insurance and payouts for this type of policy increased. In turn, insurers raised the premiums to offset the risk - and now it's actually the most expensive type of insurance, on average. 

In June 2020 the average cost for a third party policy was £1,306* per year - that's twice as much as the average fully comprehensive policy.

Before signing up to a third party only policy, it's worth looking at the other types of insurance on offer to check you are getting the best deal.

For more information, visit MoneySuperMarket's dedicated third party car insurance guide

*51% of people received a quote of £1,306.49 or less for third party car insurance based on data, June 2020.

Third Party Fire and Theft Insurance

If you’re looking for an additional layer of protection than that offered by third party only cover, you could consider third party fire and theft car insurance.

This type of policy offers the same level of cover as that offered by third party only policies, but it also protects against loss or damage if your own car is damaged by fire or stolen.

If you own a cheaper vehicle, you may want to consider opting for third party fire and theft insurance – rather than fully comprehensive cover – but it's unlikely to be the cheapest type of insurance.

In June 2020 the average third party fire and theft policy cost £823* a year. That's still more expensive than the average fully comprehensive policy quote by over £300.

The key to any insurance policy is to do your research, as premiums will cary according to a range of factors including the make and model of the car, along with any safety features.

For more information about this type of cover, take advantage of our third party fire and theft car insurance guide. 

*51% of people received a quote of £823.33 or less for third party, fire and theft car insurance based on data, June 2020.

Fully Comprehensive 

If you’re looking for the greatest level of cover from your car insurance policy, you should consider fully comprehensive car insurance. This includes cover for damage to your own vehicle as well as any damage suffered by others from a range of causes, including accident, fire and theft.

This offers a more extensive level of protection than third party only and third party fire and theft car insurance.

As mentioned, fully comprehensive policies have historically been the most expensive, but the recent trend for younger drivers to buy third party only cover and then claim has pushed up the price. So now, most of the time, a fully comprehensive premium is usually cheaper.

In June 2020 the average cost of a fully comprehensive policy was £490* per year.

That said, don’t assume that all comprehensive policies are the same, as some will cover the policyholder to drive another vehicle, or to drive their own car overseas – but not all will.

As a motorist, you need to take a moment to scour the terms and conditions to ensure the cover is right for you.

For more details on fully comprehensive cover go to our fully comprehensive car insurance page. 

*51% of people received a quote of £490 or less for fully comprehensive car insurance based on data, June 2020.

Additional cover

Some fully comprehensive policies will offer additional features such as breakdown cover, legal cover and courtesy cars - but these add-ons will not be offered with every policy, so you need to check this.

If you think these features will help you, you should find out at the outset if they are available, or whether you can purchase them as add-ons. But before buying any additional benefits, ask yourself whether you are going to actually make use of them, because if not, you will be wasting money.

Equally, if you're keen to have an add-on such as breakdown cover, you may find that it's cheaper to buy a stand-alone breakdown cover policy rather than buy this as part of your car insurance.

Compare different car insurance types

If you’re looking to buy a car insurance policy, you can compare cheap car insurance quotes from a wide range of providers with just a few clicks of the mouse at MoneySuperMarket.

But before making any decision, make sure you compare the deals available at different levels of cover – third party only, third party fire and theft and fully comprehensive – as this will ensure you find the best policy for your needs.

Read more about your car insurance needs in our range of guides.