As we’ve owned a car now for nearly 8 months, I thought it was about time I talked a little about it.
The most confusing thing about owning a car isn’t tax. It’s not even the MOT or servicing. It’s insurance.
Deciding on which type of car insurance or which company to go with can be incredibly confusing. All of the companies assume that you know their terminology or jargon when really it’s going over our heads. I think everyone agrees that knowing what we’re paying for or missing out on is important. And because insurance is one of the highest household costs (well, aside from our energy bills) I made a quick list of insurance terms and what they mean:
This is the value of the car which is calculated by looking at the market. This involves looking at the current sales of similar cars, and it also involves using the vehicle’s mileage, age, make, and model to figure out the value. Parkers is great tool used to help determine the value.
This is what you and the insurance company agree that the vehicle is worth. This is only common with modified cars, such as sports cars. The process of finding the value of the modified car is more difficult, because it has additional parts or details such as custom paint, wheelchair accessibility, or large stereo systems.
Third Party Cover (TPC)
Generally, this is the minimum required coverage level of insurance by government. It only covers damage to the other party. For example, if your vehicle hits another car then it will pay for the damages to the other car and any passengers in that car. You would responsible for damage to your vehicle and your doctor bills. Many choose the TPC route to save money, as Money Supermarket explains in an article that breaks down TPC insurance further.
Lenders require this level of coverage, because it will cover the entire value of the car. That means if the vehicle is in an accident then the insurance company will write a check for the value of the car minus the excess or deductible. Comprehensive cover typically includes coverage for injuries to passengers, and damage to the car due to acts of nature, such as a tree branch falling on the car. Its best to ask your insurance company to find out what is covered, because it does vary by company.
Excesses are also known as deductibles. It is an agreed upon payment in the case of an accident, which is paid by you. The way it works is that if you agreed to a £100 excess and it’s going to cost £800 to repair the vehicle after an accident. Then the insurance company would cut a check to the repair facility or you for £700, and the lower the excess the lower the insurance premium.
The premium is the cost of the insurance plan. It’s also known as rate and is based off of ratings.
Ratings are a collection of data on the driver and vehicle to determine the cost of the insurance plan. It uses the driver’s risk and vehicle data to determine the cost. That data includes driving records, vehicle safety ratings, and the value of the vehicle. Many insurance companies provide a large discount for safe drivers. For example, Aviva gives up to a 33% lower rate for those with clean driving records than for those with troubled driving records.
This is a request for payment from the insurance company. Basically you’re letting them know something happened to the vehicle and that you need help paying for the repairs. It only makes sense to call in a claim if the cost of repair is higher than the excess.
No Claims Bonus (NCB)
Most insurance companies give discounts for drivers that go a period of time without a claim, called no bonus claims. The discounts can compound creating a larger discount throughout time. The discount can end as soon as the driver files a claim causing the rates to jump back up. This can be prevented with a Protected No Claims.
Protected No Claims
This will simply protect you from having the rates increase in the case of filing a claim. It can work as an extra life in a video game. The various companies have the Protected No Claims organized differently than one another. So it’s best to ask about them when talking to your company. To help, Money.co.uk has a fantastic article that goes over the different costs that may be associated with protecting your no claims bonus, which can be seen at Money.
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