Car insurance glossary

Car Insurance Glossary

A

ABI

Association of British Insurers, a trade association made up of UK insurance companies.

ABI group or car insurance group

The make and model will affect the cost of motor insurance. Insurers use the Insurance group rating system to categorise vehicles into groups. The cost of your premium will partly depend on which group your vehicle falls into. The group rating panel is administered by Thatcham Research. Car groups can range from 1 to 50. Lower insurance groups are cheaper to insure than the higher ones. The factors that Thatcham considers when assigning a car make to an insurance group include:

  • damage and parts costs
  • repair costs and times
  • new car values
  • parts prices
  • car performance
  • safety
  • bumper compatibility
  • car security

You can check the group your car belongs to by logging into My Vehicle at Thatcham Research. Groups may vary depending on the insurance company

Act of God

An event that is not directly caused by an individual, such as a lightning strike, flooding, or extreme weather. Acts of God may not be insurable, depending on your policy.

Amendment

A change to your original policy.

Annual business mileage

The total number of miles you drive in a year during your business activities.

Annual mileage

The total number of miles you and all drivers complete in a year. This will include pleasure and business use

Annual premium

The amount paid to cover the cost of the insurance policy for a year.

Approved repairer

A garage or service centre which is recommended by your insurer for car repairs covered by your insurance policy.

B

Betterment

The extent to which repairs improve a car beyond its insured value. Your insurance company will insure you up to the value of your car at the time it was insured. You are liable for any improvements beyond this value.

Breakdown cover

Breakdown assistance coverage is a service that assist motorists’ in the event of an electrical or mechanical failure that leaves the driver stranded

Broker

A person or company registered as an adviser on insurance and an arranger of insurance cover with an insurer on behalf of a client

C

Cancellation

The termination of your insurance policy prior to the normal expiration of the policy. This cancellation can be requested by you the customer or imposed by the broker or insurance company.

Car alarm

An anti-theft device installed in your car

Certificate of Motor Insurance

The proof of the motor insurance you need by law. The certificate of insurance shows which car is covered, who can drive the car, and what the car can be used for.

Class of use

How you use your vehicle. It is important to be honest about your car’s class of use. If you have the wrong class of use on your policy, your insurance may be invalidated.

Comprehensive cover, or fully comprehensive

The highest level of car insurance. It covers your car against any damage caused by an accident, or someone else, whether you were at fault or not. It typically covers you for:

  • injuries to other people
  • damage to other people's property
  • accidents caused by your passengers or a driver named on your policy
  • fire damage and/or theft
  • accidental damage to your own car
  • medical expenses, up to a stated limit
  • loss of or damage to personal effects in the car, up to a stated limit

Compare third party cover, and third party, fire & theft.

Compulsory excess

The amount that you must pay to your insurer if you are in an accident and want to make a claim. Your policy, the type of car you drive, and your age will all have an impact on how much this will be. Check your policy documents for details.

Conviction code

A four-digit number that corresponds to a motoring offence. If you are convicted of an offence, the DVLA will note the conviction on your licence for a specified period. Conviction codes for Northern Ireland are different than for the rest of the UK. You can view them at NI Direct.

Cover type

Not all insurance policies are the same. Each type offers different levels of protection. See:

Comprehensive

Third party, fire & theft

Third party only

D

Driving licence

A permit to drive a motor vehicle. There are different licences for different types of vehicle.

Driving other cars (DOC)

The driving other cars extension on a private car policy allows the policyholder to drive a car which is not owned by, registered, or leased to them under a hire purchase agreement. The extension covers the policyholder and does not extend to apply to named drivers. The cover provided is third party only meaning any damage caused by the driver to the vehicle they are driving is not covered.

Driver & Vehicle Licencing Agency (DVLA)

The agency responsible for maintaining a database of drivers in Great Britain, and a database of vehicles for the entire United Kingdom. It issues licences, collects excise duty, and sells private number plates.

Duty to Disclose

You must tell your insurer about any changes that may affect your policy. These may include changing your name, address, conviction, incidents or the type of car you drive.

E

Endorsement

A clause that alters the cover provided by the policy.

Excess

An amount that you must pay if you make a claim. This can include compulsory and voluntary excess. You can elect to pay higher voluntary excess payments, which will reduce your premium, but take care—saving money on your premium may incur large payments if something goes wrong.

Exclusion

An event or circumstance in which the insurance company is not obliged to pay out. These circumstances will be clearly set out in your policy terms and conditions.

F

Fault claim

When you have caused an incident, or when your insurer is unable to recover the full cost of an incident from the third party. If your car is damaged while it is parked, and the person at fault cannot be traced, you will be held liable. See non-fault claim.

Financial Conduct Authority (FCA)

The UK's conduct regulator for financial service firms and financial markets. The FCA regulates financial services companies, including insurance companies.

Financial Ombudsman Service (FOS)

An independent body that arbitrates on complaints about general insurance products and other financial services.

G

Geographical limits

The areas where your insurance policy is valid. Refer to your policy booklet for cover applicable to your policy.

I

Immobiliser

An electronic security system that prevents your car from being started unless it recognises a signal from a transponder in your key.

Import or imported vehicle

Vehicles brought into the UK market which were retailed outside of the UK.

Indemnity

A payment that ensures you're returned to the same financial position that you were in before the insured loss. If your insurance company pays to repair your car following an accident, you will be returned to the same financial position you were in before the car was damaged.

Insurable interest

You must own the car that you insure. The investment that you have made in the car, and the benefits that you derive from it, represents your insurable interest.

Insurance premium tax (IPT)

A tax payable on all non-life insurance policies. This tax is included in the price of your car insurance premium.

Insured value

The total amount for which your car is insured, and the insurer will pay out in the event that your car is damaged beyond repair. This will be the amount that you stated the vehicle was worth when you took out the policy, or the current market value at the time of the claim, whichever is lower.

M

Main driver

The person who drives the car most often.

Market value

The cost of replacing a car with another of the same type, similar age, mileage, and condition (before the loss or damage).

Material fact

If you do not take reasonable care to provide complete and accurate answers to questions asked, your policy may be invalidated if you leave out information that may affect your cover.

Motor Insurance Database (MID)

An independently operated database of all the insured cars in the UK. Insurers are required to supply the details of your cover to the MID within 14 days of your policy start date.

Motor Insurer's Bureau (MIB)

A company that provides compensation for victims of accidents caused by uninsured and untraced drivers. It is funded by an estimated £30 contribution each year from each insured’s premium.

Modifications

Any changes made to your vehicle which are not factory standard, such as engine modifications, alloy rims, or spoilers.

N

No-claims discount (NCD)

If there is no claim being made, or arising during a period of insurance, your insurer will allow a discount in accordance with their no claims discount scale.

Non-fault claim

A claim for an incident where you were not to blame and your insurer can recover the costs from the other party.

Non-UK specification

A vehicle imported into the UK which differs from UK standards. Imported vehicles are generally more expensive to insure.

P

Period of cover / period of insurance

The length of time that an insurance policy is effective.

Penalty Points

If you are found guilty of a motoring offence, a number of points will be added to your licence. Each conviction code carries a different amount of points. You must make your insurer aware of any points on your licence, as they will affect the price of your premium.

Policy

The contract between you, the policyholder and the insurance company.

Policyholder

A person in whose name an insurance policy is held.

Premium

The amount you pay to insure your car.

Q

Quote

An estimate of the amount that you will pay in premiums to receive your insurance cover.

Q-plate

A registration plate that begins with a 'Q' it indicates a vehicle where the age or identity is in doubt, or one that has been built using many spare parts—kit cars, for example.

R

Registered keeper

The person who is using or keeping the vehicle. This is not necessarily the owner.

Renewal

The date on which you are invited to restart your insurance for another year.

Renewal notice

A letter sent by your insurance company inviting you to renew your policy.

Risk

The chance that damage, injury, liability, or loss may occur. Risk is, to a degree, based on mathematical probability, and is used by underwriters and actuaries to decide how likely you are to make a claim, and how costly the claim will be. They can use this to calculate the premium you should pay.

Risk address

The address where the car is regularly kept overnight.

Road Traffic Act

Legislation that regulates motor vehicles and traffic on roads, and for the protection of innocent victims of road traffic accidents. All vehicles and drivers in the UK must abide by the law set out in the Road Traffic Act.

S

Schedule

A document that forms part of the contract of insurance and sets out the details of the cover the policy provides. This usually includes:

  • name and address of the policyholder
  • the period of your insurance
  • the sections of the policy that apply to you
  • your car details
  • relevant excesses and endorsements

The policy schedule should always be read in conjunction with the policy booklet

Settlement

The amount your insurer pays out for a claim.

Statutory Off Road Notification (SORN)

A notification process you must complete if you don't use or keep your vehicle on a public road. This applies to keeping it in a garage, or driving it on a private property.

Statement of fact

A statement of fact is an alternative to a completed proposal form. A statement provided by the insurer clarifying the basis on which insurance is accepted forms part of the contract of insurance. It details the information that you provided to your insurer

T

Telematics

Technology that monitors your driving and records information such as you average and maximum speeds, how hard you brake, and how quickly you accelerate. Combined, this data creates a picture of how safe you are as a driver. Insurers can use this picture to assess your car's risk and calculate your premium.

Thatcham Research

The motor insurers' automotive research centre. The Group Rating Panel, which assigns new car models to an insurance group, is administered by Thatcham Research on behalf of the Association of British Insurers.

Third party

A person involved in a claim but who is not the policy holder or the insurer.

Third party only

The minimum level of cover required to drive on UK roads. It provides no cover for damage to your vehicle. It typically covers your legal liability for:

  • injuries to other people
  • damage to other’s property
  • accidents caused by your passengers or a driver named on your policy

Compare comprehensive cover and third party fire & theft.

Third party fire & theft

One step up from the minimum level of cover legally required to drive on a public road. In addition to third party cover, it also protects you against damage to your vehicle from fire, or theft of the vehicle.

Compare comprehensive cover and third party.

Total loss

When an insurer deems a car incapable of being repaired, or when the repair costs will exceed the value of the insurance policy.

Tracker

An electronic device fitted to your car which allows the owner, or a third party, to track the location or movement of the vehicle.

U

UK specification

A vehicle that matches UK standards, but was imported from another country.

Underwriter

A company, or person, who provides the insurance cover that underpins your insurance premium. They decide whether to accept you as an insurance risk and calculates your car insurance premium.

Uninsured Drivers Agreement

If you are in an accident with an uninsured driver, or the person at fault refuses to give you their insurance details, you must contact the police and your insurer. They will try to identify the driver.

Uninsured losses

Those expenses that are not covered by your insurance policy. This includes:

  • excess
  • loss of earning
  • damage to valuable goods
  • compensation for injury caused by the accident

Uninsured loss recovery

Assistance in recovering your uninsured losses from a third party, when an accident is their fault.

Untraced Drivers Agreement

An arrangement similar to the Uninsured Drivers Agreement. It is used when you are involved in a hit and run accident, or when the driver refuses to share their insurance details with you.

V

Voluntary excess

You can usually choose to pay more towards that cost of a claim, in addition to compulsory excess. Generally, higher voluntary excess payments leads to lower premiums in the future.

Take care—saving money on your premium may incur large payments if something goes wrong.

W

Write off

A vehicle damaged beyond repair, or damaged in such a way that the repairs would cost more than the value of the vehicle.

Y

You, your

The person named on the policy details.

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