Car Insurance Payouts
If you’re unlucky enough to have your car stolen, or it’s involved in a crash, your insurer will have to work out what it’s worth and pay out accordingly. How much it’s worth will also dictate whether or not it’s written off, depending on the cost of fixing it; you can find out more about how and why cars are written off in our guide. Having to make an insurance claim tends to be traumatic enough, without it turning into a battle between you and your insurer. Unfortunately that’s exactly what often happens; you’ve got a sum in mind when you put in that claim and your insurer has a different figure. If you’re lucky the two aren’t so far apart that there’s no hope of meeting somewhere in the middle – but don’t count on it. The bottom line is that your insurer will pay out what it thinks your car is worth – or in other words, the cost of buying an identical replacement. And therein lies the problem, because finding a car just like the one owned by you that’s just been crashed or stolen might be all but impossible. When insurance companies are dealing with payouts they’re not attached to your car like you might be. They don’t care about the hundreds of hours you’ve lavished on cleaning it and keeping it as good as new. The fact that you’ve owned it from day one so you know it’s never been crunched. Or the fact that you’ve just spent £1000 on a full service and a new set of tyres. If it’s old it’ll be relatively worthless, so don’t expect to get back all of the money you’ve put into it.
Why is my car insurance so expensive?
We all hate having to pay insurance, whether it’s on our homes, pets or cars. The thing is, while it’s optional on most things, you get no choice when it comes to your car. And what’s worse, car insurance is never cheap – but why does it have to be quite so expensive? The simple answer is that insurance companies claim they don’t make much profit out of car policies, even at current prices. Many supposedly run at a loss, the business subsidised by more lucrative insurance areas such as home cover; here’s why they reckon it’s not profitable and why your car insurance costs so much. Fraud Too many people think that defrauding their insurer is a victimless crime. After all, claiming for whiplash in the event of a rear-end imapct is so easy. But everyone with an insurance policy ends up footing the bill so it’s far from a victimless crime. Whiplash claims are a particular problem as about 1,500 are filed every day in the UK – we’re way ahead of other European countries when it comes to making such claims. They all add up to a massive £2 billion-worth of payouts each year, which is enough to add £90 to the average car insurance premium. There’s also the spectre of cash-for-crash claims, in which collisions are staged so that claims can be made for personal injury. Nobody knows the scale of the problem but it’s reckoned this type of fraud adds around £44 each year to the typical insurance premium. Inefficiency The insurance industry isn’t always run as efficiently as it might be. It’s not unusual for a car to be scraped with just some light remedial work required to fix things. Yet the car’s owner could end up with a hire vehicle for weeks while an assessor does their job and the car languishes in a compound waiting for half a day’s work to be done to. Somebody has to pay for all those weeks of car hire, and you can guess who that is…
Insurance jargon explained
Drive a car and you have to have insurance to be legal, but understanding some of the terminology isn’t always easy. Before you buy an insurance policy it’s essential that you get to grips with what’s on offer; here’s how to decipher the code. Types of cover Legally, you need only Third Party insurance which covers claims by someone if you cause an accident that damages them or their property. The next level up is Third Party, Fire and Theft (TPFT) which adds protection against fire and theft to your Third Party cover. Fully comprehensive insurance covers you for everything, even if the accident is your fault. It’s not always the most expensive, but even if it is, it’s worth the extra because of the added protection. For more on the different types of car insurance check out our recent blog. No-claims discount For each 12 months that you insure a car without making a claim, you’ll earn a year’s no-claims bonus (NCB) or no-claims discount (NCD), usually up to a maximum of five years. How much this is worth depends on the insurer, but it’s not unusual for a five-year NCD to cut your premium by 60% or more. Normally, you need to have a policy in your own name to start earning your NCD. But if you’re a named driver on someone else’s policy, some insurers allow you to build up NCD of your own, if you then take out your own insurance with the same company.
Types of car insurance cover
The problem with car insurance is that it’s full of jargon, but you need to get to grips with it if you’re to stay legal and get the best deal you can when buying cover for your car. One of the key things to consider with car insurance is what level of cover you want – as well as what you can afford. There are three types to consider – plus a raft of add-ons, only some of which are worth having… Third party car insurance This is the minimum level of cover that you can buy for your car, but it’s all you need to drive legally. As a basic policy you could be left feeling very exposed in the event of an accident – especially if it’s your fault. Third party car insurance will only cover the costs of anybody who would otherwise be left out of pocket by your actions. So if you drive into someone or something, repairs to their property will be taken care of and so will any personal injury claims. For some people this is enough, but don’t be fooled into thinking that it won’t happen to you. Misjudging a corner, skidding on a wet road or failing to spot someone as you pull out from a junction are all things that might just happen. And if one of these things does happen to you, the cost of repairing or replacing your car will be completely down to you. There’s also the possibility of your car being stolen or catching fire; newer vehicles, with their high-pressure fuel systems, along with modern fuels which are incredibly flammable, mean car fires are more common than ever. With this most basic level of car insurance you won’t be covered in the event of your car being pinched or burned out, so you could be left hugely out of pocket. So before opting for third party insurance cover only, think very carefully.