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    Car Insurance types explained

    There are various levels and types of insurance which will cost different amounts based on the cover provided.

    All car drivers are legally required to have insurance which, as a minimum, will provide compensation to other people disadvantaged in the event of an accident. There are various levels and types of insurance which will cost different amounts based on the cover provided. Broadly, ‘third party’ refers to a basic policy which will only ensure other people are recompensed for their losses; ‘fully comprehensive’ will also cover your own vehicle.

    How much you pay each year - the premium - is based around risk. This is calculated using many factors concerning the car, those who drive it and the type of use the car will have.

    So if the vehicle is kept in an area with a higher crime rate (typically closer to a city centre), the driver has a history of claiming for accidents, theft or criminal damage or even if a driver is deemed to have a higher risk profession, these factors will all increase the premium. Younger drivers with less experience are famously charged more for their insurance due to their higher likelihood of making a claim.

    Of course insurance costs are also calculated taking the particular vehicle into consideration. Most people will appreciate that high performance and expensive models will cost more to insure based on both perceived risk and desirability for theft. But other aspects come into play too, for example how easy and costly it is to repair a car with even minor damage. For every new vehicle, an industry group agrees a specific rating which is used to help calculate the insurance premium, with groups starting at 1 for the lowest insurance cost to 50 at the top end.

    The other key aspect which can affect the premiums of an insurance policy is the excess. This is the amount you agree to pay toward any repair in the event of a claim (be it your fault or not). In general, the larger the excess you agree to pay towards any claim, the lower the premium.

    When you take out an insurance policy, the contract is based on you telling truth about all factors relating to the car, its usage and those who drive it. This includes any modifications to the car and certain specified health conditions of drivers. After a claim, if the insurance company finds you have omitted to provide accurate or full details, they may not pay up which could leave you facing a significant bill.

    Remember, it is a crime to drive without valid insurance and the police use automatic number plate recognition (ANPR) systems which read the registration plates of cars and check to see if they are properly insured.

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