Car Insurance Policy Sections

Introduction

Any car insurance policy is composed of one or more sections. Each section of the car insurance policy relates to a different aspect of cover. The number of sections in your car insurance policy is probably an indicator of the number of different benefits that the insurer provides. The covers shown below as separate are often merged into larger sections.

Liability to third parties : Comprehensive, Third Party Fire and Theft, Third Party Only

  • Covers your liability for injury to a third party or to their property

  • A Third party is any person who is not connected to the contract of insurance - the insurer is the first party o the contract and you are the second party to the contract.

  • By law in the UK the liability section MUST cover:-

    • Unlimited liability for personal injury

    • £250,000 liability for property damage - in fact most insurers give £20,000,000 cover

  • Most insurers actually only provide a small amount of cover themselves e.g. £2,000,000 and take out insurance  against having to pay more.

  • A claim under this section will affect the No Claims Bonus unless a Protected Bonus has been taken

Accidental damage to the Vehicle: Comprehensive

  • Covers the vehicle against accidental damage from most causes.

  • This is the section that most people believe is the only extra section a comprehensive policy covers.

  • Typical exclusions: wear and tear, mechanical breakdown

  • Almost all policies now have an Accidental damage Excess - which is increased for young and inexperienced drivers

  • A claim under this section will affect the No Claims Bonus unless a Protected Bonus has been taken OR the insurance company make a full recovery of their expenses.

Malicious damage to the Vehicle: Comprehensive Only

  • Covers the vehicle against malicious damage e.g. a person spraying paint remover

  • Almost all policies have a Malicious damage Excess - which may be increased for young and inexperienced drivers.

  • A claim under this section will affect the No Claims Bonus unless a Protected Bonus has been taken (or the company make a full reclaim of their expenses but this is unlikely)

Damage to the vehicle caused by fire or theft: Comprehensive, Third Party Fire & Theft 

  • Covers the vehicle against damage caused by fire or theft only - or attempt thereat

  • There must be fire to claim under the fire section - melting of cables due to an electrical fault  is not covered

  • Almost all policies now have a Fire/ Theft Excess - which may be increased for young and inexperienced drivers.

  • A claim under this section will affect the No Claims Bonus unless a Protected Bonus has been taken ( or the company make a full recovery of their expenses - but this is unlikely

Windscreen Cover: Comprehensive only - may be purchased on Third Party Fire & Theft

  • Usually extends to all glass -e.g. side windows

  • Covers scratching to bodywork providing caused by the glass itself

  • Most policies allow unlimited windscreen claims but some e.g. Provident have limits

  • A Windscreen Excess usually applies - typically £40 - £60

  • Some companies insist on their approved repairer is used otherwise the excess is increased or benefits limited

  • Most companies waive the Excess if the windscreen can be repaired rather than replaced.

  • A Windscreen claim will not normally affect a no claims bonus - providing no claim is made on any other section and the policy limits are not exceeded.

Personal Effects: Comprehensive Only

  • Covers personal effects in the car against loss or damage.

  • Policy limits are low - £50 - £200

  • Cover will NOT extend to business goods or money

  • Benefits are 'indemnity' so a deduction may be made for wear and tear.

  • This benefit may be excluded for some types of vehicles e.g. soft-top cabriolets

  • Watch out in  case your policy excludes cover unless the effects are in the boot or a locked compartment

  • A claim under this section will affect the No Claims Bonus unless a Protected Bonus has been taken

Personal Accident Benefits: Comprehensive Only

  • Will pay out if a person is injured or killed in a motor vehicle.

  • No weekly benefits

  • May not apply for certain high performance vehicles or for elderly people 60+ - 70+

  • A claim under this section will affect the No Claims Bonus unless a Protected Bonus has been taken

Emergency Medical Expenses: Comprehensive, Third Party Fire and Theft, Third Party Only

  • Covers emergency treatment bills that the NHS can charge after an accident

  • The bills are raised irrespective of blame.

  • This section is compulsory for car insurance policies

  • A claim under this section only will NOT affect the No Claims Bonus

Foreign Use: Comprehensive, Third Party Fire and Theft, Third Party Only

  • By law all policies must provide The Minimum Required Cover when travelling in an EU country.

  • In the UK this is unlimited injury cover and £250,000 property damage cover BUT other EU countries have different minimum levels of cover.

  • Policies vary widely on how they provide cover abroad and it is important to check - examples could be:-

    • No additional cover unless the insurer is notified and an additional premium paid

    • No additional cover unless the insurer is notified - but cover is free for a certain number of days

    • Automatic transfer of all policy benefits for up to a certain number of days each trip

    • Automatic transfer of all policy benefits for up to a certain number of days each year

    • Automatic transfer of all policy benefits

  • One insurance company (Norwich Union) Provides free breakdown cover - useful for regular travellers

  • Direct companies tend to make a charge for foreign travel arguing, legitimately, that people who don't need the cover should not have to pay for those who do - but if you intend to use the car abroad a lot it is worthwhile finding out how much the extra costs will be.

  • Policies may be extended to include driving outside the EU - costs, cover and availability depend on the insurer

  • We recommend drivers take a European Accident Statement (EAS) form and read about specific requirements for driving in other countries

Legal Defence Costs: Comprehensive, Third Party Fire and Theft, Third Party Only

  • Provides cover (at the insurer's option) for the costs incurred in defending certain serious road traffic act convictions.

  • Not to be confused with Legal Expenses (Uninsured Loss Recovery) policies

  • As a successful prosecution means that liability will be established insurers may opt to defend such prosecutions - especially when there is a dispute as to liability for an accident

Audio Equipment: Comprehensive, sometimes Third Party, Fire and Theft

  • Often included in this section is satellite navigation equipment - but the section may not extend to that

  • Different limits set for Manufacturer's standard equipment and non-standard equipment fitted later

  • In general cover for manufacturers standard equipment is much higher

  • Policy limits for non-standard equipment vary widely - from £150 - unlimited so it is important to check these if you have non-standard equipment fitted.

  • Cover is indemnity - a deduction may be made for wear and tear

  • A claim under this section will affect the No Claims Bonus unless a Protected Bonus has been taken

Loss/ theft of Keys: Comprehensive, Third Party Fire and Theft

  • If someone else has keys to the vehicle there is an increased chance of the vehicle being stolen.

  • Some insurance companies therefore pay the cost of replacing the locks (up to a certain limit)

  • They may ask for evidence that the location of the vehicle might be known - e.g. theft of wallet/ purse as well

  • A claim under this section may affect the No Claims Bonus unless a Protected Bonus has been taken

New Car Replacement: Comprehensive, Third Party Fire and Theft

  • Usually you can't get third party fire and theft cover for new cars due to their value!

  • If the vehicle is 

    • Bought Brand New - no previous owner NB this means that demo vehicles are excluded

    • Damaged by more than 60% of its replacement cost

  • AND

    • You ask!

  • The insurance company will replace the vehicle with a new one. At least one insurance company also specifies that the cost of the new vehicle must be less than or equal to the value of the new vehicle on the proposal form.

No Claims Bonus: Comprehensive, Third Party Fire and Theft, Third Party Only

  • If there are no claims made on an insurance policy, insurer's will give a discount from the premium for next year.

  • The scale is often NIL - 30% - 40% - 50% - 60% - 65% - with a two-year step-back but insurers can alter these as they please either as a marketing ploy "We give 75% bonus!" or because they believe that statistics show that the discounts are warranted.

  • For rating purposes, it is the number of YEARS no claims bonus, not the percentage that matters.

  • Of course the most significant feature is not the percentage given, but the final premium

  • Drivers who have a high maximum no claims bonus percentage discount 70% - 75% will suffer much more if they make a claim with higher premiums than those with a lower maximum bonus discount.

  • Please remember that in most cases it is a no claim discount not  a no-blame discount. When any claim is reported the no claims bonus is reduced and is only reallowed when a full recovery of losses is made.

Protected No Claims Bonus: Comprehensive, Third Party Fire and Theft, Third Party Only

  • Usually only available for customers who have 4 or more years no claims bonus (some companies offer it at an earlier stage)

  • Protects the no claims bonus against a certain number of fault claims (usually 2) in a specific period (usually 5 years)

  • The Best protected bonus is with NIG - unlimited claims.

  • Important to find out what happens if the protection is lost due to claims - insurers can

    • Just remove the protection - keeping the discount at maximum 

    • Remove the protection - and step back the bonus

    • Remove the protection and set the bonus back at NIL

  • See policy sections for information as to when a claim will affect the bonus

Driving Other Cars: Comprehensive, Third Party Fire and Theft, Third Party Only

  • Only applies to the policyholder (in rare exceptions e.g. in the name of a company - another person)

  • Policy cover is Third Party Only. This means that:

    • There is no damage cover on the vehicle being driven

    • There is no theft cover on the vehicle being driven

  • Some insurers allow other motorcycles to be driven under this section

  • This section will NOT apply for minibuses or HGVs

  • The section may be removed if the proposer is young, has serious convictions or is in the motor trade.

  • If someone is insured by the owner to drive a vehicle and also has driving other cars cover on their own vehicle then the claim will be handled by the insurer of the vehicle.

  • A claim under this section will affect the No Claims Bonus unless a Protected Bonus has been taken

Driver Extensions: Comprehensive, Third Party Fire and Theft, Third Party Only

  • Your policy may be extended to cover certain additional drivers

    • By someone in the motor trade for the purposes of overhaul, upkeep or repair

    • By someone who is going to park the vehicle (Valet parking) e.g. at a major hotel

Uninsured Loss Recover - Legal Expenses: Usually Policy add-on

  • After an accident the vehicle insurer pays for damages and losses that are covered under the policy.

  • Some losses are NOT covered under a policy - examples are:-

    • The Excess - usually £100 but many people now take much higher excesses to get a 'cheap' quote

    • Cost of hiring a vehicle while the vehicle is being repaired

    • Injury, pain and suffering, time off work..

  • To recover these losses used to involve hard work or solicitors and failure meant substantial costs.

  • This section covers those costs to £50,000 or £100,000

  • Usually the company providing the service tries to recover the uninsured losses themselves.

  • Typical premium costs (unless provided free) - £15.00 - £20.00

Reconsideration Clause

  • All private car insurance policies will have a 14 day 'reconsideration' clause. This means that you will have 14 days from when you receive the policy documents to reconsider your purchase. If you do reconsider then the insurance company must refund your premium - less a small service charge which depends on the policy and your intermediary may also make a small charge to cover the work they have done in arranging your policy - our charge is £20.00. You do not have to give any reason for your decision. You may be able to get your money back even if you have made a claim - providing that the vehicle is not a total loss - this depends on the policy.

  • To cancel the policy you will have to return the certificate of insurance to the insurer/ broker.

  • In case you were wondering whether this meant you could get the car taxed for nothing - insurers record all policies on a central database - the Motor Insurance Database, to which the police have access and to which they will be given unrestricted access.

Cancellation Clause

  • Insurance policies do not need to have a cancellation clause in them - but all motor policies do.

  • Insurers may cancel the policy in general by giving you 7 days notice by recorded delivery to your last address. If they do they normally have to refund the unexpired portion of your policy on a pro-rata basis.

  • You may cancel the policy by returning the certificate of insurance to the insurer. If you do and if there have been no claims the insurer may give you a refund in accordance with their published scales.

  • The broker will charge a fee as well if you cancel the policy to cover the loss of commission - see their IDD

Claims Service Benefits

It is when a policyholder makes a claim that they find out how good their policy is - not the price they pay for it! The following may apply if the damage to the vehicle is covered under the policy. Many companies do not offer all these benefits - as usual your best policy is to discuss matters with your independent insurance intermediary who is required by law to offer you a policy with the benefits you need if available.

Courtesy Car

  • Only provided whilst the damaged vehicle is being repaired. Some Direct Companies apply this literally, excluding cover whilst the garage waits for spare parts - others include it from when the garage takes the vehicle in for repair.

  • Is NOT usually provided if the vehicle is a total loss or has been stolen and not recovered

  • Is usually a basic vehicle - customers involved in non-fault claims can often get a better car from their Legal Expenses insurer

  • Some Direct Companies (and Highway) do not offer this benefit as standard but give you the option of buying 14 days hire-car after an accident even if your car is a total loss

Recovery of Vehicle

  • Includes the recovery of the vehicle from the scene of the accident to the repairer and return of the vehicle - often valeted - after it has not been repaired.

  • Recovery of vehicle does NOT mean recovery of passengers!

Recovery of Passengers

  • Means the transportation of the passengers to their destination or back home after an accident. Very useful if stuck on the M25!

Emergency Hotel Accommodation

  • Pays for the driver and passengers (up to policy limit) to stay overnight in a hotel. Useful for high-mileage drivers.

Breakdown Cover: Usually a policy add-on. 'Assistance' free with Zurich Solutions

  • Covers the vehicle if it breaks down.

  • Most policies provide up to three levels of cover:

    • Roadside Assistance - try and get the vehicle going. If impossible take it to nearest garage

    • Roadside Recovery - includes the option of taking vehicle and passengers to home or destination

    • 'At Home' - Covers vehicle breakdowns occurring with  1 mile of home.

  • Most policies cover the Vehicle - not the owner

Policy Limitations and Exclusions

The following are limitations and exclusions often added to policies. Some of them will be applied based on information you provide to the insurer - either direct or through an intermediary so it is important you give the correct information and adhere to any limitations you wish to make.

Driver Limitations - can be found on the certificate of insurance

  • Insured Only to Drive - the most restricted. Only you can drive the car under the policy. Although usually the cheapest form of insurance some insurance companies give a discount for adding on the spouse.

  • Insured and Spouse only to drive - In this case spouse means 'legally married partner'. Most if not all insurers give large discounts where the two drivers are in a Common Law situation, but this has to be declared.

  • Insured and Named Drivers - The  named driver could just be the common law partner as above or could be anyone. Although more expensive than insured only or insured and spouse this option is often a lot cheaper than open driving policies as the insurer knows everyone who will drive.

  • Any driver over XX - XX is usually 25, 30, or 21. The certificate of insurance will show any person may drive the vehicle as one cannot specify who can drive by age on the certificate.  Drivers under the permitted age may have no effective cover (the insurer will claim back all amounts paid out) or may have third party cover only - better check! Please note that even if you select this form of policy you must still declare anyone who to your knowledge may be a regular driver - especially if they have had any claims or convictions.

Mileage Limitations - can be found on the schedule as an endorsement

  • Many companies allow a discount if the vehicle is driven less than the average - 12000 per annum. If they do allow the discount however they may impose terms if the vehicle does more than the mileage allowed - and they record the vehicle mileage at inception.

  • Examples of terms are : Imposing an additional excess in the event of a claim : Charging an additional premium : Reducing cover to third party only.

Useage Limitations - can be found on the certificate and the schedule

  • If the vehicle is used for business purposes there is a higher mileage and a greater likelihood of an accident. Insurers therefore base their premium partly on the use of the vehicle. the following is the traditional useage.

  • Pleasure use only - Excluding Commuting (e.g. retired/ housewives/ unemployed)

  • Pleasure & to/ from work - 

    • Please note that this normally means 'a permanent place of work, providing that no business calls are made on the way'

    • Commuting cover may only be given to the policyholder and/ or spouse

  • Pleasure and by the policyholder in person (and spouse?) in connection with their business.

    • Some companies will charge extra if both policyholder and spouse use the car for work.

  • Pleasure and for the business of the policyholder (and spouse?) exc commercial travelling

    • Known as Class II this cover means that anyone can use the vehicle for the business of the policyholder. It does not mean that they could use the vehicle for their own business!

  • Pleasure and for the business of the insured - including commercial travelling (Class III)

    • Not often seen now due to difficulty in defining commercial travelling - this was for sales reps.

  • All policies will exclude certain useages - hire & reward, racing, speed testing, motor trade

Excesses

  • An Excess is the first part of the claim that a policyholder pays themselves. If the claim is less than the excess the policyholder gets nothing. If the claim is more than the excess, the excess is deducted from the claim settlement - or e.g. the policyholder pays the garage the amount themselves before recovery of the vehicle.

  • Each section of the policy may have its own excess e.g.

    • Accidental Damage Excess

    • Malicious Damage Excess

    • Fire Excess

    • Theft Excess

    • Windscreen Excess

  • If a claim involves more than one section of a policy the excess is applied under each section.

  • Be very careful when selecting a Voluntary Excess. Although selecting such an excess will reduce the premium most policies have a Compulsory Excess - typically £100 and young/ inexperienced drivers have higher excesses - these could be as much as £1000!

  • An additional excess may be added due to the type of vehicle or claims/ conviction experience of the drivers.

Key Exclusion Clause

  • All policies require the policyholder to exercise reasonable carefulness when leaving the vehicle. This has been under dispute in the courts as to what is reasonable care so most insurers now have a Key Exclusion Clause.

  • "If the vehicle is left unattended it must be locked and the keys removed otherwise theft cover is excluded"

Miscellaneous restrictions/ warranties

  • Drink/ Drugs warranty : If the policyholder is drunk or under the influence then cover is restricted to third party

  • Speeding warranty: If the policyholder was travelling over the speed limit then cover is restricted

  • Security Warranty: if a security device is not fitted and working then theft cover is excluded

  • Garaging Warranty: if the vehicle, when at its own address, is not kept in a garage overnight (hours vary) then theft cover is excluded

  • Access to vehicle: the policyholder must allow the insurance company reasonable access to the vehicle when requested. (some companies do random tests on vehicles to confirm that they are the correct make/ model proposed)

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