How Car Insurance works in the UK: What You Need to Know

How Car Insurance works in the UK: What You Need to Know Header Image

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What is motor insurance in the UK?

When trying to understand how car insurance works in the UK, the first thing you need to know is exactly what it is. Vehicle insurance (also known as car insurance, motor insurance, or auto insurance) is insurance for cars, trucks, motorcycles, and other road vehicles. Insurance is a contract, which comes in the form of a policy, in which an individual or organisation receives financial protection and reimbursement of damages from the insurer. The specific terms of vehicle insurance will vary by policy and insurer.

Is car insurance compulsory in the UK?

Yes, it is a legal requirement in the UK for motorised vehicles that use public roads to have insurance. Therefore, to drive your car legally, you must have a car insurance policy in place. Third party insurance is the legally required minimum.

The only exception to the above is if your car is “off the road” which means that it is not on public land and not being used. This could be the case if it is in a private garage, on a drive or on private land. In this situation you can make your vehicle subject to a SORN (Statutory Off-Road Notice), which means you can stop taxing and insuring it.

Driving in the UK

driving in england

How to calculate the cost of car insurance

The cost of car insurance in the UK is based on many different factors. These will generally include your age, occupation, driving record, postcode, and the type of car you drive. The insurer will want to know about the car’s security, annual mileage and your driving habits too.

To calculate car insurance cost in the UK, insurance companies consider risk; the higher level of risk the more expensive the premium will be. Insurers have huge amounts of data at their disposal and they know that some occupations and UK postcodes are riskier than others.

The car you drive is one of the key elements involved in an insurer’s risk assessment, which then affects your final premium. All vehicles in the UK are assigned a ‘grouping’ and insurers use these groupings as a guide in their assessment. There are 50 car insurance groups in the UK, which are simply known as group 1 to group 50. Vehicles in the highest groups have the highest premiums. A car’s grouping depends on factors like its price, performance, claims history and the cost of repairs.

As an example, if we take the popular Audi A3: an entry level 1.6 diesel 3 door is likely to be assigned to a group around ‘18’ but the Sportback RS3 with 360bhp is likely to be in a group around ‘45’. It’s also worth noting that a car’s grouping can vary with each insurer.

Different types of car insurance in the UK

Another aspect of knowing how car insurance works in the UK involves getting to grips with the different types there are available.

In the UK there are three main different types of car insurance;

Third Party

This is the minimum cover required by law in the UK. It covers drivers against costs that arise from a claim by a third party for injuries, damage to their vehicle and third-party property.

Third Party, Fire & Theft

This is third party cover with added protection against your insured vehicle being affected by theft, attempted theft and fire.


This is the most popular car insurance type in the UK as it protects drivers and cars against most eventualities. This type of car insurance includes:

Comprehensive driving insurance covers you in all of the following instances:

  • Injuries to other people and damage to their vehicles or property
  • Your vehicle being damaged, stolen or destroyed in a fire
  • Accidental damage and medical expenses* (*these may not be automatically included in a comprehensive policy – sometimes this is an optional addition)
  • Damage or theft of vehicle’s contents* (*Maximum limits will apply)

There are some additional aspects to consider when choosing your car insurance. Not all policies include windscreen cover as standard, and it’s also worth checking the legal expenses, and it’s advisable to find out about the courtesy car which will keep you mobile in the event of an accident and/or when your car is being repaired and vehicle breakdown cover.

What information do I need to apply for car insurance?

When you apply for car insurance you will get asked a range of questions, all of which are necessary – so it’s a good idea to have your information to hand.

You should be prepared to answer all of the following regarding your personal details:

  • Your age
  • Occupation
  • Address
  • Details of any previous claims/motoring convictions together with your NCB (No Claims Bonus) in years

You will also be asked questions about the vehicle including:

  • Its registration number
  • Age
  • Make and exact model
  • An estimate of your annual mileage
  • Where it will be kept overnight

If your vehicle be regarded as ‘high performance’, you will be asked additional questions about your driving experience, previous vehicles, and more.

Should the vehicle be different in any way from standard, it could be regarded as modified. In this case all changes must be disclosed, and it might be worth looking into arranging modified car insurance.

You will also be asked about your intended use of the vehicle. The options include;

  • Social Domestic and Pleasure
  • Social Domestic and Pleasure with Commuting to work
  • Social Domestic and Pleasure with Commuting to work and Business Use

Insurance fraud is a criminal offence, so it is important to be open and honest with your answers. Failure to disclose any relevant information could invalidate your policy. You should also inform your insurer if anything changes during the policy term.

How Car Insurance Works in the UK: Understand No Claims Bonus

A major factor affecting the price of your car insurance premium is your record as a driver; insurers reward careful driver. One of the best ways to cut the cost of motor insurance is to drive carefully and build up a no-claims bonus discount. The more years you accumulate without making a claim, the more savings you will make on your premium.

Being a returning expat or new to the UK, Keith Michaels is likely to be able to help you use your foreign no claims bonus insurance. We have access to insurers who will consider your driving record and NCB from your own country, which could possibly be applicable in some specialist polices.

How Car Insurance Works in the UK: Understand Car Insurance Excess

Excess can be a confusing element when arranging insurance policies. The excess amount is always mentioned in discussions being material to all policies, but it only ever emerges when there is a claim. All car insurance policies and indeed other types of insurance have excess fees. This is an amount of money that the policy holder must pay towards any claim made.

Confusion can arise because there are two types of excess; compulsory excess and voluntary excess. The compulsory excess is set by your insurer on your policy and cannot be changed. However, the size of any voluntary excess is agreed by you and can be from zero up to a few hundred pounds. It must usually be within a range that is set by your insurer.

An example of both types of excess costs would be; if your claim is £1,500 and you have a compulsory excess of £350 and a voluntary excess of £50, the insurer will only cover £1,100 of the claim. You will have to contribute the excess amount, totalling £400.

How long does a car insurance policy last?

Standard car insurance policies in the UK last for 12 months. Usually the premium for the year is paid when the policy commences as a one off payment, or on a monthly basis. At Keith Michaels we have access to various schemes which allow the premium to be paid across several months or a year.

What is specialist car insurance?

Mainstream insurers cover a wide range of motorists and vehicles, but in some situations – like being an expat or new to the UK – is it likely that you might need a specialist car insurance policy.

Specialist providers can also help if you’re looking for classic car insurance or your car is modified, or if you’d like to insure an imported car.

Get answers to more questions about car insurance for expats with our FAQs page.