As most of us are aware, car insurance in the UK is a legal requirement, so we thought it would be a good idea if we explain what a lot of the jargon means when talking about car insurance.
To break this topic down for you, let's start with the types of cover.
TPO this means Third party only - This is the minimum level of cover you can have in the UK which means if you are involved in an accident, TPO covers the other vehicle, and its driver, for any damage that you may be liable for. Any damage to your own vehicle or own injury, you will not be covered.
TPFT means Third party, fire and theft. Essentially this is the same as TPO cover, however it will also cover your vehicle for damage or loss resulting from a fire or theft.
Fully Comp - In a nutshell, regardless of who is at fault this cover is known as fully comprehensive and pays out if you damage your car, someone else's property or injure someone in an accident.
SD&P. Social, domestic and pleasure. When taking out car insurance, your broker or insurer may ask you how you intend to use your vehicle on a day to day basis and therefore if you are not going to use your vehicle for business purposes, it’s use will be SD&P which is largely using your vehicle for commuting back and forth to work, socialising, and trips out.
Now you will often hear the abbreviation IPT, which means insurance premium tax. The current rate of IPT is 12% and is paid on insurance premiums.
Approved repairer – This is a network of crash repair centres that is contracted or owned by your insurance company.
If your vehicle is damaged during an accident, your insurer may offer you the use of their ‘approved repairers’ or if your insurer has specified that you must use their approved repairer, you should check your policy wording and check your rights in the event you don’t wish to use their ‘approved’ network.
Often by not using your insurers approved network, your policy excess (see below) could be affected.
Policy Excess – This the initial amount you must pay if you make a claim on your insurance policy. Often when taking out your policy you can choose to increase or decrease your policy excess, and this is likely to have an impact on your premium you pay.
Exclusion – An exclusion is something that is not covered under your insurance policy and is detailed in the policy wording itself.
Indemnity – This is where your insurer will restore you to the same financial position you were in before a loss was experienced. So, for example, if you crash your car and subsequently your car is BER 'beyond ecomomical to repair' i.e a 'write off' and the value is £4,500 your insurer will indemnify you for the £4,500.
Lapse – If you choose not to renew your motor insurance, it will end from the date specified on your renewal documents and on your existing policy, this is called ‘lapsed’. This means you no longer have cover being provided by your insurer.
Limit of indemnity – If you see this term in your policy, this means you have a specific amount listed in your policy so, in the event of a claim, that specific amount will only be paid out by your insurer and nothing more.
Material fact – These are circumstances that affect an insurer’s assessment of the risk when offering a quotation. An example of a material fact is points on a driving licence, these points (material fact) can alter the quotation.
NCB - No claims bonus. Most car insurers offer a bonus which correlates to the number of years where you haven’t made a claim on your policy. For example, if you haven’t made a claim for five years, you will accrue a ‘no claims discount’ from that specific period.
Period of insurance – This is the time period that your insurance policy is valid for. The period of insurance runs from the date the policy was incepted to the date it lapses.
Renewal – With most motor insurance policies being valid for 12 months, when your policy comes to this end you may have the option to either renew your policy, or move to a different provider from the renewal date. It’s very important to ensure you have the appropriate cover in place if you choose to move to another broker or insurer.
Underinsurance – This occurs when you insure your vehicle for less than its actual value, and this is why for particularly niche vehicle owners we suggest you look at agreed value options available at Vint-tro.