A Beginner Guide to Car Insurance Terms

Car insurance documents are full of terms that are not always explained clearly. Understanding the basics makes it much easier to compare policies properly rather than just looking at the headline price.

Third party, fire and theft vs comprehensive

Third party only covers damage or injury you cause to others, not your own car. Third party, fire and theft adds cover if your own car is stolen or damaged by fire. Comprehensive covers your own car too, regardless of fault, and despite the name is often not much more expensive than the lower tiers.

Excess

The excess is the amount you pay toward a claim before the insurer covers the rest. A compulsory excess is set by the insurer; a voluntary excess is an extra amount you choose to accept in exchange for a lower premium — useful to understand since a lower headline price sometimes just means a higher excess.

No claims discount (NCD)

A discount that builds up for each year you do not make a claim. Some policies let you protect your no claims discount for an extra cost, meaning one claim will not reset it to zero.

Premium

Simply the amount you pay for the policy, whether annually or in monthly instalments (monthly instalments are usually slightly more expensive overall due to interest).

Named driver vs policyholder

The policyholder owns the policy; named drivers are additional people allowed to drive the car under it. Who is listed as the main driver matters — listing someone else as main driver when they are not (known as fronting) is insurance fraud and can invalidate a policy entirely.