Cars have a reputation for being hard to get hold of, so it’s hardly surprising that insurance companies have an interest in finding a way to make them more affordable.
But while most of us have a fair idea of how much we’ll pay for a car, we can’t quite say how much will actually cover what we might want to cover.
We may not need the car we’ve paid for in full, but if we’re not careful, we could end up with a premium on top of our deductible.
So how can we tell the difference between what we’ll need to cover and what’s covered?
And what should we look for when shopping for a policy?
The basicsIf you’re new to insurance, you may have been surprised to learn that you can buy car insurance from the insurance firm that you buy your policy from.
That’s because car insurance is sold on the same level of terms as commercial insurance.
So for example, a commercial insurance policy is priced at a fixed amount, whereas a commercial policy can vary depending on how many miles your car needs to be insured.
If you buy a commercial driver’s licence, the amount you’ll pay will depend on how much you’ve paid on the vehicle in the past.
You’ll also pay for the costs of the car itself, including the engine, transmission, brakes, wheels and tyres.
If you’ve purchased a new car, your car insurance will also be subject to the same rules.
If you bought your car in the UK, you will need to pay the amount of your vehicle’s liability insurance premium (LTP) on top, and that’s typically set at 10% of your eligible car’s value.
If the insurance company is going to be paying for a new insurance policy, they’ll usually want to pay a lower LTP, because the cost of the new policy is usually higher than the amount they pay on your existing car.
For example, the insurance will normally want to charge a 10% premium on a policy that’s worth £2,000 ($3,300), and that means the cost will be £800 ($1,300) higher than your existing policy.
The insurance companies may also want to adjust the LTP based on your vehicle type, such as whether you’re buying a used car or a new one.
If you’ve bought a car in another country, the LTC on the new car will be based on the value of the vehicle, rather than the actual cost.
The first thing you should do when buying a car is check the insurance quote for the car you want to buy.
If the insurance offers a low-cost policy, that might be the best deal you can get.
But if you’re still unsure about the LTLP for your car, you should talk to your insurer.
If there are any restrictions on the insurance that you’ve applied for, they might want you to pay more than what’s listed on the policy.
In the US, this is usually a maximum LTP of 20% of the amount paid by your insurer, or 30% of any excess over your original deductible.
For example: if you’ve had a car accident, your LTP will probably be £2.50 ($3.20), and the insurer will charge you £2 ($3) per mile you drive.
That means the LTS will be around £2 million ($3 million) – but the insurer might have decided to charge you a higher LTP than you were originally offered.
This is why it’s always a good idea to talk to an insurance agent about any restrictions you might have applied for.
If an insurance policy doesn’t cover the car, but offers some form of cover for other vehicles, you can usually use the policy to cover other types of vehicle.
For example, if you buy car hire or lease insurance, it might be suitable for an older vehicle, or for your first car purchase.
The best insurance policyFor the most part, car insurance companies will be able to offer you a good insurance policy.
It’s the difference that makes the difference.
You may be able get a good deal on a car policy by getting a low LTP.
In that case, the best option is to go with a higher rate, or to have a separate car policy.
If your car is covered by a commercial licence, for example an FCA licence, you’ll have to pay all the costs involved in obtaining the licence.
A commercial insurance quote is usually quoted based on this, and the cost is often set by the car manufacturer.
If your car has a fixed LTP for its class, it will usually be based at a higher level than the LTDL.
If this doesn’t work, you might need to consider using an alternative vehicle insurance policy if your car doesn’t meet the requirements.
For more information on car insurance, check out our guide to the basics of car insurance.