Types of car insurance explained

Last updated by mustard.co.uk on March 2nd, 2022

Searching for car cover can be confusing and sometimes it can feel like there’s simply too much to choose from. Yet in fact, there are just three types of car insurance – here’s what they are and how to find the best policy for your needs.  

What are the different types of car insurance in the UK?

If you drive a car, you must have car insurance by law. There are three types of policy to choose from:

Third party only

This is the minimum level of insurance you can have by law. These policies pay compensation and cover the cost of repairs if you injure other people or damage their property. It will also cover any passengers travelling in your car.

It’s important to know that ‘third party only’, does not cover you or your car. If you cause an accident, you won’t receive any compensation for your own injuries or to fix your vehicle.

Third party, fire and theft

This includes third party only cover, but it will also pay for repairs or a replacement if your car is stolen or damaged by fire. Again, because this is a third party policy it won’t cover the cost of injury to you or repairs to your car.

Comprehensive cover

This includes third party, fire and theft cover but crucially, it will also compensate you for injury and damage to your car – even if an accident is considered your fault.

Comprehensive insurance is the highest level of cover available.


Can I add other features to my car insurance?

Yes, when you’ve chosen the type of policy you want, you can add on other features which will increase the cost. It’s entirely up to you whether you add on extras but doing so means you’ll be covered for a wider range of events and incidents.

When you compare quotes, you’ll often find comprehensive policies include a number of extra features already, so you won’t necessarily need to add more on. Features to look for include:

  • Legal expenses cover – pays for professional advice if you need to defend yourself in court or if you want to make a claim against someone else.
  • Breakdown cover and courtesy car – offers roadside help or a temporary replacement if your car is being repaired after an accident.
  • Windscreen cover – to cover repairs or replacement.
  • Personal accident cover – provides compensation if you’re seriously injured.
  • No claims bonus protection – allows you to keep your no claims bonus intact so you’ll still get the same level of discount off your premium even after a claim.


How does car insurance work?

Car insurance is there to protect you and other people from financial loss if you’re involved in an accident.

If you do have an accident and injure another driver or damage their property, your insurer will cover the cost of compensating them. If you have comprehensive cover, your insurer will also pay to repair (or replace) your car too.

If your car is damaged in an accident, you should let your insurer know before you take it in for repairs. In most cases, your insurer will need to assess the damage and agree to the repair costs; they may even ask you to use a specific garage or mechanic from a pre-approved list.

To find out more and what to do after an accident, take a look at our guide to Making an Insurance claim.


Which type of car insurance is the cheapest?

In the past, third party only cover was often the cheapest policy available but that’s not always the case now. That’s because insurers found more claims were made by third party policyholders compared to those with comprehensive cover, so premiums were adjusted to reflect that.

With that in mind, comprehensive cover often provides the best value for money but it’s still worth comparing different types of policy to find the most competitive deals.


What affects the cost of car insurance?

Car insurance cost varies considerably and depends on a whole host of factors – for example:

  • Age – young drivers pay some of the highest premiums of any age group because under 25s are statistically more likely to be involved in an accident.
  • Your car – as a rule, the more powerful or expensive your car, the more you can expect to pay for your insurance.
  • Where you live – if you live in a busy, congested city or in an area with higher than average crime rates, you can expect this to be reflected in a higher than average premium.
  • Insurance group – all cars fall into one of 50 insurance groups with group one cars being the cheapest to insure.
  • Car security – good security can lead to cheaper premiums so if you don’t have a locked garage, consider investing in an immobiliser or approved security alarm.
  •  Your driving history convictions and penalty points can mean you pay more for cover than someone with a clean driving record.
  •  The number of miles you drive – when insurers ask how many miles you cover each year, be as accurate as you can. The more miles you cover, the greater the risk of an accident occurring which can result in higher premiums. If you don’t drive many miles, it’s worth comparing low mileage car insurance quotes as this can help cut the cost even more.


Compare car insurance quotes for the best deals

Of course, the quickest and easiest way to find the best deals, is to compare policies from different insurers.

At mustard.co.uk, you can search for a range of quotes from leading UK insurers simply by filling in our online form.

Comparing what’s on offer helps you find the right policy for your needs, at a price that fits your budget. If you’d prefer to speak to an expert, you can call a friendly member of the team on 0330 022 8790.


Car Insurance FAQs

Do I need car insurance?

In short, yes. If you drive a car on public roads in the UK, you must have car insurance by law.

You must also have a car insurance policy that suits the way you use your car. For example, if you use your vehicle to courier goods, you’ll need appropriate business car insurance or courier insurance.

If you’re caught without car insurance you can face an unlimited fine and in some cases, be disqualified from driving.

What type of car insurance do I need?

The best type of car insurance for you will very much depend on your circumstances and your own attitude towards risk.

For instance, if you have an old car that isn’t worth very much, a third party policy might be the most cost effective insurance but comprehensive cover might give you greater peace of mind.

On the other hand, if you’ve got a brand new car, a comprehensive policy may be more suitable as repairs are likely to cost a lot more.

Which insurance is best for my car?

No matter what type of policy you choose, most insurers will be able to tailor it to suit your specific needs. So, whether you own a family saloon, a  classic car, an import or performance car, there’ll be a policy that gives you the protection you need.

How can I reduce my car insurance?

Some factors that affect the cost of your insurance are out of your control (for instance your age and driving history) but there are ways to keep premiums down – for example:

  • Pay for premiums in one go to avoid interest fees: If you can afford to, paying for your insurance up front, can help you save money. Monthly instalments could mean you end up paying more in admin and interest charges so it’s best to take the hit to your bank balance in one go – you’ll be grateful later.
  • Don’t auto-renew: Auto-renewing your insurance might make life convenient, but it will rarely save you money as prices are typically more expensive compared to new quotes. Your existing insurer should let you know when your policy is due to end and when they do, it’s time to start searching for new deals.
  • Build up your no claims bonus to earn yourself a bigger discount: Your no claims bonus (NCB) is your reward for not making a claim on your insurance. If you haven’t made a claim by the end of your 12-month policy, you earn a discount which is taken off your premium. The more years no claims you have, the greater the discount.
  • Protect your no claims discount: If you’ve built up years’ worth of no claims, it’s sensible to protect them. Most insurers will give you the option of protecting your NCB for a small fee. Always read the terms and conditions if you’ve chosen to protect your NCB because different insurers have different rules about how it’s applied. For example, some providers limit the number of fault claims (where the accident is your fault) you can make so if you exceed this then you risk losing your NCB protection.
  • Only pay for the cover you need: It’s tempting to include extra features ‘just in case’ but doing so could mean you end up buying add-ons you simply don’t need. So, if you’d never contemplate taking your car abroad, then buying European cover (for example) is money wasted.
  • Be accurate with mileage: The number of miles you drive influences the cost of cover (the more you do, the greater the chance of an accident). So, always be as accurate as you can because rounding up your mileage could push your premium up too. If you don’t drive much, then take a look at low mileage car insurance as well.
  • Think about your job description: Most of us know that jobs influence insurance cost. What you might not know, is that variations in job title can also have an impact. For instance, typical occupations for cheap car insurance include ‘nurse’ but opting for ‘midwife’, ’state enrolled nurse’ or ‘matron’ – could alter your premium and result in an even lower cost. Don’t get too carried away though because inaccurate information will invalidate your policy.
  • Choose your car carefully: If you’re looking for a new car, then you could save some money by choosing your car by insurance category rather than how quickly it can go from 0 to 60.
  • Choose a telematics policy which bases premiums on the way you drive: Telematics (or black box insurance) is a great tip for teenagers and young drivers to get cheaper car insurance., A small electronic device is used to monitor your driving with premiums based on how well you drive – also worth considering if you have driving convictions.
  • Increase your voluntary excess: Voluntary excess is what you agree to pay in addition to the compulsory excess set by your insurer, in order to proceed with a claim. If you increase the amount, it could lower your overall premium, but make sure it’s something you can afford – find out more in compulsory and voluntary excess explained
  • Avoid modifications to your car unless they make your car more secure: Cars that are modified in any way are likely to cost more to fix, which in turn can push up the price of your premium so they’re best avoided.
  • Take an advanced driving course but check whether the course is recognised by insurers: Taking an advanced driving course helps you brush up or learn new skills, but it’s also another way of getting cheaper car insurance – especially for new drivers. A range of courses are available and while you’ll need to pay to do them, the long-term savings are often worth the cost. Courses on offer include those by:

Who is mustard?

We are experts in insurance comparison, dedicated to helping you compare quotes online quickly and easily.

We search quotes from some of the UK’s leading insurance providers to help you find the right policy for you at a price to suit your budget.

Don’t just take our word for it, take a look at some of our car insurance comparison reviews.

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