Car insurance

The Road Traffic Act requires all drivers to have car insurance for any vehicle that they use on the road, in order to meet liabilities they incur should they injure other people or cause damage in an accident, and all motor insurers to issue the insured a certificate of car insurance. Most car insurance covers much more than these legal requirements, and fall into four basic categories to choose from in the UK:

Act only car insurance

Act only car insurance is the minimum required by law, and covers third party liability risks incurred on public roads. Policies of this type are very rarely issued, and only a few motorists are happy to rely on act only car insurance. Those opting for this type of cover are usually motorists with a poor driving record that cannot obtain any other cover.

Third party car insurance

The person who is injured is known as the third party. The first and second parties are the car driver and their insurance company respectively. The third party may be a pedestrian, a passenger in the car driven by the insured person, or the driver or passenger in another vehicle. The injured third party can claim compensation from the driver of the offending car. The driver then relies on his or her insurers to pay the other person's claim.

Third party car insurance covers the insured when driving on public roads, and when the car is on private property. It covers third party claims and gives the insured protection against other legal liabilities and costs.

For example: passenger indemnity, covering the possibility of a passenger in the car causing an accident perhaps by carelessly opening a door and knocking a cyclist over.

Third party fire and theft insurance

Third party fire and theft car insurance protects the third party insurance, and additionally covers the insured for loss or damage to the car as a result of fire, theft, or attempted theft.

Comprehensive insurance

Comprehensive car insurance is the most common form of cover. In addition to third party fire and theft, comprehensive cover protects for accidental damage. This means that policyholders can have their own damaged vehicle repaired or replaced. Comprehensive policies also include personal accident insurance, providing payments for death and specified serious injuries such as the loss of a limb or sight. Such payments are usually restricted to the policyholder and his or her wife or husband.

Some forms of comprehensive cover even include small amounts of medical expenses for anyone in the insured car injured in an accident, and for loss or damage to personal effects in the car.

	Act Only	Third Party	Third Party Fire & Theft	Comprehensive
Third party cover on public roads
Third party on private property
Protection against legal liabilities and costs
Loss or damage as a results of fire, theft or attempted theft
Accidental Damage

NOTE: This is intended as a guide only. Car insurance description will vary for individual insurance providers