What is Insurance and Car Insurance ?

What is Insurance and Car Insurance ? (Car Insurance Explained)

Insurance is the procedure through which people having suffered some kind of financial loss can recover their losses. It is based upon a contract entered into by a person who faces this risk and a company willing to compensate the victim should the situation arise. This contract is called a ‘policy’ and the person signing it is the ‘policyholder’. If any of the situations stated in the policy occur, the insurance company compensates the policyholder accordingly.The policyholder and the insurance company agree upon which circumstances (or conditions) the policy will cover. The policyholder is required to pay a fixed amount (premium) to the insurance company.

There are a number of areas insurance covers. The main insurance fields are home, motor and life insurance. Car insurance covers situations where the car (or cars) of the policyholder may incur some sort of financial loss. Home insurance deals with compensation for events which may damage either the house of the policyholder or the contents of that home. Life insurance ensures that upon the death of the policyholder, a named person (a dependant) will receive a cash amount.
Categories of Car Insurance Around the World:
Bodily injury and liability – In a situation where another person is injured due to your negligence, the insurance pays for the medical and legal costs incurred. There is a stated maximum amount of compensation per person and per claim that can be given.

Car Rental – This pays for a rental car for the policyholder if their car is being repaired after damages.
Collision – Payment is made after any collision even if the collision was the fault of the policyholder.
Full Glass – In some places comprehensive insurance only deals with windshield damage, and not any other windows. ‘Full Glass’ ensures that any broken glass is paid for.
Comprehensive – This covers any loss due to fire, theft, accident, or Acts of God.
Gap Insurance – This category is only relevant to leased cars and is used if you end up owing more on the lease than the car is worth.
Medical – This covers the medical expenses of the policyholder and his passengers.

Liability – If any stationary objects or vehicles were damaged and the policyholder is at fault, the policy holder will get compensation.
No-Fault – Similar to ‘Medical’, but can be used for pedestrians.
Out-of-Country – This is important for those who take their vehicles abroad frequently. Normal insurance will not cover claims made outside of the country where the policyholder lives.
Towing – This pays for any towing expenses incurred, but is obsolete due to the introduction of car recovery companies such as the RAC and the AA.

Commercial insurance

Commercial insurance brokers deal with many insurance firms and provide their clients with a wide range of choices for insurance packages, discounts, prices and service. This makes working with brokers convenient for customers. Commercial insurance brokers are regulated by the FSA and are members of BIBA (the British Insurance Brokers’ Association).

FSA: The Financial Services Authority (FSA) is an independent, non-governmental body that was given wide ranging powers according to the Financial Services and Markets Act 2000. The FSA regulates most financial services, markets and firms. It even has the authority to take action against firms that fail to comply with the standards set by FSA.

The British Insurance Brokers’ Association (BIBA) is an organization that represents the interests of insurance brokers, intermediaries and customers. BIBA has partner members from the leading companies in the insurance industry. BIBA also provides training, schemes, facilities, technical advice and regulation guidance.The members handle more than three quarters of UK’s industrial, commercial and consumer insurance business.
Types of Insurance Brokers
Long-term Investment Insurance Brokers

These brokers deal with life insurance and pensions and require an FSA approved qualification in insurance or financial advice.
Non-investment Insurance Brokers

These brokers deal with motor or house insurance and any non-investment contracts. Such brokers do not require FSA approved qualification but it is preferred that acquire one from FSA as it will improve their credibility in the market.

These brokers are located in your council or borough. They offer a personalized service in the form of advice, consultation, one-on-one sessions for auto, home and business categories.
A telebroker is like a telemarketer. They conduct a major part of their insurance business via the telephone. They offer commercial insurance products in the categories of auto, motorbike and home.
Internet Broker: This type of broker exists on the internet.If you have any queries regarding commercial insurance, you can ask them through an email or through an online form.
You will not have a face to face meeting, as all the products and services are featured on their website.

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New york insurance agency

What are the Liabilities Associated With Your Car Insurance ? (Liabilities Associated with Car Insurance)

Car insurance is a legal requirement in all four constituent countries of the UK (England, Wales, Scotland and Northern Ireland). Hence, you need to be aware of the critical liabilities associated with your car insurance. They include basic driving legalities, car insurance laws and essential legal documents.
Fundamentals Of Car Insurance:

Car insurance is the means by which you obtain a document for your vehicle to shield it from accidents, collisions and the like. This document is issued by your insurance provider, according to which you consent to pay a certain amount of money as premium. The time frame for the payment of the premium is mutually decided. Consequently, your insurance company agrees to pay for your damages if the need arises. Your car insurance policy provides coverage for :

Damage to your car
Theft of your vehicle
Damage to others’ property
Physical injuries to you
Physical injuries to others

The duration of your car insurance policy can be up to 1 year. Reminders are frequently mailed for the renewal of your policy.
Car Insurance Coverage

Third party car insurance - the minimum type of coverage legally required by every UK motorist. It ensures damages against other drivers /pedestrians/cars/property.
Full comprehensive car insurance - encompasses third party, fire and theft car insurance along with insurance for any kind of damages to your car and you.
Fire and theft - in addition to third party car insurance; it provides protection against fire breakouts or car theft.
Along with third party insurance, motorists are required to have some important legal documents such as an insurance certificate, a cover note, an insurance policy and a driver’s license.
A legal document issued by a car insurance firm or independent car insurance provider. It proves that the insurance document is valid and summarizes the coverage type, insurance benefits and the names of those insured. It also includes the date and time when the certificate will expire.

Cover Note : A certificate issued by your car insurance company giving the insured a provisional insurance policy until the issuance of the actual policy. This certificate is a legal document that can be tendered in the court of law, if required. The cover note becomes invalid when you obtain your car insurance policy. A written contract between the insured and insurance company represents a car insurance policy. It includes a car insurance compensation plan, level of coverage, included and excluded benefits, provisions and expiry dates.

Driver’s License : A license that allows a person to drive a vehicle. In the UK, it is issued by DVLA (Driver and Vehicle Licensing Authority).

It is important to remember is that if you are not in possession of any of these documents the police can penalize you with hefty fines. So it is essential for you to carry these documents at all times when driving.

10 Factors that Effect Car Insurance Premium

10 Factors that Effect Car Insurance Premium:

Car insurance premiums are calculated using a wide variety of details given by the customer. The most basic information is the make and model of the car to be insured. Each factor can have a considerable positive or negative effect on the premium.In the UK, a scale of 1-20 is used to determine the relative relationship between a car’s make and model and the premium rate that is imposed on the owner of the car.
Newer models earn a higher rating as their value is more. Older cars have a greater chance of needing breakdown recovery services which can raise the rate of the premium.

Cars rated on the lower end of the scale (nearer 1) have a lower premium and cars that attract a higher rating have higher payments. The more powerful the car engine, the higher the rating of the car.

The area in which the car will be kept is another consideration for insurance companies. Areas that have a higher crime rate have higher premiums due to the increased risk of the car being stolen or vandalized.
If you are a female driver, you may be able to get a discount with some companies. Women have been statistically proven to make low cost claims, so they enjoy the benefit of lower premiums to reflect this.

If you are a young driver who has a second-hand car, consider only getting third-party coverage. It might be worth the risk for the amount you will end up saving. Trying to reduce the annual mileage is another way to reduce your premium. The more a car is driven, the higher the risk of it being damaged, and as a result the premium is higher.
Younger drivers suffer due to their lack of experience. The payment scale is very harsh on those who have had little time behind the wheel. One way to balance this biased scale a little is to ensure that, as a younger driver, you have a less powerful car that costs less in insurance. If you are one of a number of people on the same policy (such as a household policy on the same car), consider only allowing those above a certain age to be included in your policy. This will reduce the costs you incur annually.

If you are insuring more than one car, try insuring with the same company. This can earn you some discount. If it is a pool of company cars being ensured, take out a fleet policy to get a better rate.
If your car is expensive, fit an anti-theft alarm or tracker device to it. Approved alarms and immobilizers can significantly reduce premiums. Garaging your car is another way to reduce your premium.
Try to avoid claiming money from the insurance company for low cost repair work. Making a claim may deny you your ‘no claims’ bonuses for the following year (unless you have it protected) which will lead to a rise in your premium rate.
Paying excess is worth the risk if you are confident that it will be unlikely that you make a claim. This is a major cost-reducing factor in calculating premiums.

There are so many factors involved in calculating a premium that it is hard to give a rough estimate of how much car insurance could cost you. It is necessary for each individual to give their details to at least 2-3 insurance companies before they can get an idea of what sort of premium would be expected.
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Comprehensive Car Insurance Glossary

Comprehensive Car Insurance Glossary


Here is a comprehensive alphabetical list of terms to simplify your understanding of the car insurance industry.

ABI Group- A ranking assigned to each car based on its potential risk.
Act of God- Any occurrence that is not due to the individual. These acts may or may not be insured by the car insurance company.
Additional Premium- An extra premium that a car insurance policy holder has to pay over and above the normal premium. Additional premiums can vary from company to company depending on the vehicle make and type.
Assistance- The facility provided by the car insurance provider to the insured car. An example of this assistance can be arranging for a car towing service incase of severe damages to the vehicle.
Authorised Insurance- All those car insurance companies that are certified under the Insurance Companies Act 1982 to operate one or more classes of insurance businesses in United Kingdom.
Approved Repairer- Car repairers as suggested to a policy holder by the insurance company provider. These approved repairers usually function as a part of the panel in a car insurance company.
Agent- A agent is generally a representative who acts on behalf of a car insurance company. Car insurance agents are not always salaried personnel, they can also be independent operators.
Annual Premium- A premium payable as and when decided by the insurance company provider. Annual premiums can be monthly or quarterly.
Benefit- The amount of money paid by the car insurance provider to the policy holder upon reporting a car insurance claim.

Beneficiary- A person who benefits from a car insurance policy.
Betterment- When the insurance policy holder pays to the insurer the cost of the claim, because his/her vehicle will be restored to a better condition after repairs than before the damage occurred. A betterment cost varies with each insurer.
Broker- A car insurance company that is registered with the IBRC (Insurance Brokers Registration Council). The car insurance company thus becomes a broker and acts on behalf of its clients.
Certificate- A documented proof of car insurance according to RTA 1988 c.52
Claim- A payment request made by the insured when his/her car experiences some form of severe damage or loss.
Co-Insurance- When several car insurance companies contribute in providing cover for one specific risk.
Commercial Business- An insurance policy that is issued by any auto company.
Commission- Remuneration paid to an agent for selling car insurance policies.
Comprehensive Cover/Insurance- A car insurance policy that provides cover for all possible risks to a vehicle.
Condition- One of the requirements of a car insurance policy that a motorist should ensure care of his/her vehicle.
DOC cover- DOC stands for Driving Other Cars. A type of insurance policy whereby a person can drive another person’s car with their knowledge provided the person driving has third party car insurance.
Endorsement- Changes made in a car insurance policy. Endorsement holds legal value in the court of law.
Excess- A certain amount of money that the insured has to pay towards the value of a claim. It can be voluntary or compulsory depending on the requirements of an insurance policy.

Excess of Loss Policy- A car insurance policy which includes claims over and above the amount stated in the policy.
Ex-gratia payment- Any disbursement made by a car insurance company which is not under the terms and conditions of the car insurance policy.
Exposure- The level to which an insurer is exposed to losses arising from a particular risk.
General Insurance- The insurance of risks whereby the car insurance policy proffers insurance for a reduced period of time. General Insurance is also known as non-life insurance.
Green Card- A car insurance document issued to UK motorists for driving in foreign countries. This is a proof of the bare minimum car insurance cover as necessitated by the law of the country visited.
Indemnity- A car insurance contract whereby the car policy holder is able to go back to his/her previous financial status after a car loss/damage as they were previously before it.
Insurance Premium Tax- Also known as IPT. It is a UK government tax imposed on certain insurance premiums. There are two rates for IPT; one is a standard rate of 5% and the other is a higher rate of 17.5%.
Insured- A car owner who is covered by a car insurance policy wherby his/her car related interests are protected by the policy.
Intermediary- An auto insurance company that advises and negotiates policies for their clients.

No Claims Bonus- For every year of claim free driving, you get a discount towards the cost of their renewal. These discounts are offered by car insurers.
Partner- Refers to you or another person sharing your accommodation and living together like a spouse.
Loss Adjuster- A certified professional who investigates large and complicated vehicle loss claims.

Market Value- The value of a car in terms of age, condition, make and model as established by the standardized trade car guides.
Mechanical Breakdown Insurance- This type of insurance provides coverage to all the motorized components of your car.
Period of Cover- The duration for which you and your car are insured as per the car insurance policy is identified as a period of cover.
Personal effects- Denotes your personal items that are in your car during theft, fire breakouts, theft or attempted vandalism. Some car insurance firms may not cover for money, stamps and documents that may be left in your car when such incidents occur.

Policy- A booklet that contains your certificate of car insurance along with all binding terms and conditions is known as a policy.
Qualifying period- This is a time period during which you keep making the premium payments for your car but are ineligible to make any kind of claim.
Registration date- The date when your car insurance policy commences is known as registration date.
Review date- This is the date when your car insurance registration has to be reviewed. This happens once a year.
Solicitor- The legal expert that will represent you in the court of law in case you are asked to appear in the court due to charges associated with car accidents or damages.
Territorial Limits- Denotes Great Britain, Northern Ireland, the Republic of Ireland, The Isle of Man, and the Channel Islands.
Third party cover- The minimum level of car insurance required by all UK motorists is third party cover. In addition to this coverage is cover for any fire breakouts or burglary attempts to your car.
It provides coverage to third parties i.e. pedestrians or other car drivers, in case you injure them or cause damage to their car.
Third party fire and theft- Refers to coverage given to third parties in case your car damages their car or causes any bodily injury to them.

You/your- Refers to the car insurance policy owner. It can also include a partner or a number of dependents.
Young driver- If your age is between 18-25 years, then your car insurer will classify you as a young driver.
Your car- Denotes the car as specified in your car insurance policy.
Uninsured losses- The costs that you cannot claim from your car insurance policy is indicated as uninsured losses.
We/our/us- Refers to your vehicle insurance firm or agent.
Windscreen cover- Cover provided for unintentional dents, scratches or breakage to the windscreen or windows of your car.

The Best Car Insurance

The Best Car Insurance Quote Can Only be Derived After a Lot of Leg and Brain Work (Getting the Best Car Insurance Quote) .


There are a great number of insurance companies and demand is such that a number of aggregates (brokers) have been established, especially in the UK. It is possible to contact both insurance companies directly or through these brokers. The difference between the two is that the broker is not underwriting you. If you make a claim, it is the insurance company and not the broker who will make your payment. The broker simply searches through a computer to find the best policy for you, but the broker will only search those companies on a set list. This will not always provide you with the best policy.
The amount of commission they take is also variable, so the premium they offer varies accordingly.

Intermediaries deal constantly with insurance companies, so they often have made different deals with a large number of insurance companies.
UK Insurance Company Operations
These methods of communication are there to benefit the customer, so choose whichever you feel more comfortable with.Insurance companies generally operate both in the traditional manner (over the phone, using handwritten or typed forms and face-to-face with a representative) and online (via the internet and e-mail).

If you feel under pressure to buy when you visit a direct contact to speak to a company representative, try shopping online. This is also more convenient as it is available 24 hours a day and 7 days a week with relatively little waiting involved. You can visit as many different companies as you want and obtain a quote within minutes. You have all the details you need to compare quotes and can make a decision in your own time.

If shopping online is easier for you, you might also want to try using an aggregate, as they compare quotes from different companies for you. The advantages are that you only have to fill the form in once and the aggregate passes this information on to various companies and gets the quotes back to you. Aggregates such as easycover.com, confused.com and insuresupermarket.com all offer their services online, and are quick and hassle-free.
Compare Car Insurance Quotes

You will need to get a quote from many car insurance companies so try to find companies which cater to your market segment, as this will reduce the amount of time which you spend in the process. Most companies are trying to attract a specific type of customer, so find the ones which suit you first. For example, women should try companies that offer discounts female drivers, such as ‘Diamond’ insurance. Whichever method you use, it will be necessary to ‘shop around’ if you want the best car insurance quote.

Always make sure that you read all the extras included in a policy so you know exactly what you are paying for and what you might need to pay for at the time of a claim. One thing to bear in mind is that when it comes to making a claim, you will need to be able to contact your insurer easily. This sometimes becomes difficult when a company only offers online contact. Try to find an insurance company or broker that can be contacted using phone, e-mail and in writing.