Vehicle insurance is more recent concept than road tax and other vehicle costs in the UK. It wasn’t until 1930 that the UK government passed a law stating that everyone who used a vehicle on the road had to buy at least third-party insurance. Insurance is therefore a legal requirement, and driving an uninsured car on the roads could land you with a fine and points on your licence. Buying vehicle insurance can be complicated though, and it’s worth taking some time comparing policies to make sure you are getting the best value for money.
There is no “grace” period when you buy a new vehicle to get it insured. It’s your responsibility to make sure you have a policy in place when you pick up your new purchase and drive it away. This is much easier than it used to be – most of us use the internet to insure our cars and policies can be bought online whatever the time of the day or night. As with any purchase, the best tactic is to shop around, understand exactly what the policy will cover, and compare prices before buying.
The two main types of insurance sold for car, motorbike and van owners in the UK are known as third party and fully comp. There are important differences between the two varieties of policy.
Insurance companies use a whole range of factors when deciding what price to quote for your insurance policy. Some factors are obvious – it’s going to cost more to insure a top of the range brand-new sports car than it does to insure an old banger worth just a few hundred pounds. Insurance companies have lots of other factors they look at when deciding what to quote you. Looking at the profiles of people who have made claims in the past, their risk management software calculates how likely you are to make a claim. Where you live, whether your car is parked on the street overnight, your annual mileage, occupation, age and driving history can all affect the price.
Young drivers in particular can find getting affordable vehicle insurance a real challenge. There are some ways in which costs can be reduced, such as forgoing owning a car in their own right and building up some driving history as a named driver on a parent policy instead. Alternatively, look into telematics or “black box” policies which connect with an app on your phone and will adjust the price of insurance depending on how safely the vehicle is driven. Insurance companies might offer the chance to pay monthly rather than the whole year in one chunk which can help to spread the cost but can cost more overall. Smaller, older cars with less powerful engines are a more economical choice for new drivers.
One of the key insurance concepts is no claims bonus. This is, as the name suggests, a financial reward for not claiming on the policy. Driving for several years without ever making a claim proves to the insurer that you are a safe driver who is unlikely to be in an accident, and therefore a better risk. The more accident-free years you have, the bigger the discount you get. A no claims bonus is portable, and you can still shop around various insurance companies using your no claims. Your new insurance company may require proof of this, but it’s usually easy to arrange.
Many policies also offer the chance to “protect” your no claims bonus for an additional fee. This means that if you’ve accumulated, for example, five years’ no claims, this isn’t wiped out should you be in an accident and have to make a claim. If you’re shopping for insurance online, it’s usually easy to select and deselect the various cover options to see how this affects the overall premium.
If you want to drive a vehicle on the public roads, you need to have it insured. There are no exemptions to this requirement. Many drivers mistakenly think that vintage cars don’t need insurance, but the age exemption just applies to road tax, not to insurance. If you’re lucky enough to have lots of land which you use vehicles on, such as a farmer with tractors or quad bikes, these don’t have to be insured or taxed if they’re purely for farm use. The other exemption from insurance is a car which is off the road for some reason, because you’re currently not using it, or are renovating it. Although insurance in these cases isn’t a legal requirement, many drivers will still choose to insure their vehicle against other types of damage.
Given that insurance can be expensive to buy, lots of drivers take the risk and choose to drive uninsured. Unsurprisingly the law takes a dim view of this. The basic penalty is 6 points on your driving licence and a £300 fine. Police can seize your vehicle and charge you for removal and storage until you can prove you’ve insured it. You’ll also have to declare points for not having insurance on any future applications, costing you more to be insured in the future. Modern automatic number plate recognition technology (ANPR) makes it easier than ever for police to detect uninsured drivers, so it’s really not worth the risk.