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Which Car Insurance do I Need?

Getting your car finance sorted and picking a vehicle is one thing, but once it is time to take to the road you need to have insurance for your car. With each insurer offering a wide variety of coverage, it pays to examine the fine print carefully to make sure you are covered for what you need. From the excess, to no claim bonuses, car hire, after-accident care, and many other factors – pause and consider.

Insurance types

The main insurance types you will encounter include third party, third party fire and theft, and comprehensive. They should be self-explanatory to you by now, although to quickly summarise: third party covers damage to others property; third party fire and theft does likewise but also affords you some limited cover for damage to or loss of your own car caused by fire or theft; comprehensive covers damage and loss to your car and others property.

If you're buying your car new, it is often wise to opt for comprehensive, particularly because the value of the car is still rather elevated, and you would hate to be out of pocket for an accident that you cause where your car could easily be covered. Premiums will be far higher of course, but that's because the value of the car is higher too.

The third party policies are more fitting for second-hand cars, generally because they are old and not worth much. However, in some instances, it might be a choice for a new driver who otherwise faces higher premiums, though the risk of a gap in coverage for your own car should be noted. Conversely, some owners of vintage cars may benefit from comprehensive cover, although this is highly specific to the car, since it would need to be one with a value high enough to warrant the increased premiums.

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Car valuation

The valuation assigned to your car dictates the premiums you pay for your insurance, as well as the cover you are eligible for under comprehensive insurance in the event of a write-off. You will typically have the choice between an agreed value, or a market value.

When you choose agreed value car insurance you will need to come to a direct agreement with the insurer as to the value of your individual car. As it is a key term within the policy, this will take place when you first sign the contract.

For the most part, agreed value car insurance is beneficial when your car has particular modifications, enhancements or is unique in some particular way. For example, if you have fitted the car with performance upgrades, or additional amenities that are not stock, an agreed value should reflect a higher valuation on account of including these features.

Unlike agreed value car insurance, market value does not involve a direct negotiation or discussion as to the car’s valuation. It is decided solely by the insurer based on the prevailing market price for the same car in its current condition. Some people assume that this translates to the vehicle’s second hand price, however that’s not exactly the case because that in itself is a negotiation process.

As a general rule of thumb, market value car insurance is more likely to be affordable than if the policy were undertaken with an agreed value. Whereas agree value is useful for unique cars, market value is best suited for regular cars, particularly older vehicles in average condition.

Policy excess

With comprehensive policies, you also have scope to adjust the excess that you pay in the event of an accident where you need to lodge a claim. This is the fee to effectively cover your liability.

Most insurers will have a tool embedded in their insurance quoting software to allow you to tweak the excess. Generally, the higher the excess, the lower your premium, and vice versa. However, the relationship is not linear, and will vary from one insurer to the next, so you should weigh up the cost-benefit proposition, as well as take into account how you use your car - for example, how regularly you drive it, what type of conditions you drive in, how long you plan to own the car, your budget and cash flow, and so forth.


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