When we insure our car, we might leave it to insurers such as one sure insurance to understand the terminology but it does not hurt to know some of it ourselves. With this in mind, we will look to demystify some of these insurance terms for ourselves. This will help us in obtaining insurance quotations and making the right decisions about choosing vehicles that are cost-effective to insure.
Approved Repairers
Insurance companies will have lists of repairers that they use for the repairs of policyholders’ vehicles. This will mean that repairs can be carried out quicker and to a known high standard. Because these approved repairers are spread out throughout the country, there will always be one local to you. The good thing is that if insurers have approved them, you are likely to receive a better repair to your vehicle. They will have been vetted for reliability too.
Breakdown Cover
It is good to know that you can have breakdown cover included with an insurance policy as this might be the cheapest way of obtaining it. However, be aware of just how much it covers. It is not, for instance, generally for if your vehicle will not start or breaks down for a reason other than an accident. So, check the small print carefully and make sure that you are not already covered for this type of cover elsewhere.
Broker
There are two ways that insurance cover is bought, whether online or at high street premises. It can be directly from an insurance company or via a broker. The latter will save you shopping around for the best premium, although will only offer you the choice of the insurance companies that a broker has agreements with. Brokers will take a commission, which will not affect what you pay, although can often mean that they are keen to sell you add-ons such as legal protection and that they charge you admin fees.
Courtesy Car
This is a type of car that will be provided by a garage while they are repairing a policyholder's usual vehicle following an accident. It is useful to find out if this would be funded by the insurance company or comes at an additional cost to you in the event of a claim. Garages cannot always repair a vehicle quickly if waiting for parts and a vehicle may be needed for commuting to work.
Excess
Whether compulsory or voluntary, this is the amount of a claim that the policyholder will pay. Be aware of raised excesses that make a car insurance policy look cheaper than another one. We have to take them into account when trying to compare the insurance premium of one company with another.
Indemnity
This is when an insurance company will promise to cover you for a loss. So, this is an important term to know. When we obtain a quotation, insurance is about how much cover is provided compared to the premium that would be payable.
Insurance Groups
It is essential to know that 50 insurance groups exist which determine the insurance premium for our car. The higher the group, the more you will pay, whether it is to purchase third-party insurance for your car by law or to extend that further to financially protect your valuable asset in the event of an accident.
Insurance Premium Tax
Introduced in 1994, insurance premium tax (IPT) is payable on top of the calculated premium. Insurance companies will usually quote with it included. It was introduced by the Government because insurance has traditionally not been subject to VAT like other products. It is a significant tax that needs to be factored into the cost of insurance.
Just to make things slightly more complicated, there are two rates of IPT. The good news for car owners is that most will only be charged the standard rate of 12%, which is also added to home and pet insurance. However, where new cars are bought directly from a car dealership, a policyholder might find they are paying the second and higher rate of 20%.
Main Driver
This is as opposed to named drivers on an insurance policy.The main driver should be the one who owns the vehicle and is the one purchasing the insurance for it. The named drivers should be driving the vehicle less frequently than the main driver, hence the term. Only the main driver, as the policyholder, will earn no claims bonus from the policy.
No Claims Bonus
No claims bonus is the discount policyholders receive off an insurance premium. This is in exchange for claim-free years.Without a claim, this will increase from 30% to 40% for twoyears and rise to 60 or 65% for five years or more claim-free driving. For an extra premium, bonus protection can be purchased so as not to lose your NCB following a fault claim. Be careful if you give up driving for a while and start again as a policyholder because your NCB may only be valid for two years, depending on the insurer.
Renewal Notice
This is a statement received each year to remind someone to renew their insurance policy. It will include the new premium for the next year. It is a time where people will shop around because insurance companies do not generally offer loyalty discounts. There are greater incentives to entice you to set up a new policy elsewhere. If you are with a broker, they will shop around for the best price on your behalf when your premium has notably increased from the previous year.
So, a few terms to bear in mind here when insuring your car. It is the language that insurance companies and brokers will use to explain things to you, whether verbally over the telephone, in print, or via a website.
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