Car insurance terms – a glossary

ABI

The ABI is a trade association made up of UK insurance providers that offers consumer advice, while working with the government on regulation and policymaking. Its aims are to promote clarity, best practice and competition within the insurance industry. The ABI is also involved in recommending insurance group ratings.

‘Act of God’

This is a term that was used in insurance policies to describe events such as natural disasters. It’s no longer used - instead policies will simply set out what is and isn’t covered.

Amendment

A change to the terms and conditions of your original car insurance policy.

Annual mileage

How many miles you expect to drive in a year. If you use your car for business, your insurance provider may want you to detail how much you use your car for work, and how much for everyday errands. Your estimated annual mileage is one factor that affects the cost of your car insurance. 

Annual premium

How much you’ll pay for your car insurance if you decide to pay for the full year up front. If you’re able to do so, paying for your car insurance annually could save you money.

Approved repairer

Someone your insurance provider recommends using to fix your car and assess the damage after you’ve made a claim on your car insurance. You don’t have to use an approved repairer, but if you don’t, you might have to pay an extra charge. If you do use an approved repairer, you’ll often get an extended guarantee (usually three years) on the work.

Betterment

If, when your car’s repaired, it’s worth more than it was when you bought it, your insurance provider might ask you to pay something towards the cost of those repairs. This is called a betterment charge.

Black box

If you have black box, or ‘telematics’ insurance, a small box is attached to your car to monitor your driving. It measures how you drive, for example how you brake and take corners, as well as your speed. The data is sent back to your car insurance provider. If you drive well, your insurance provider could charge you less for your premium. This can be useful for young drivers facing expensive car insurance quotes.

Breakdown cover

Breakdown cover gives you roadside assistance if your vehicle breaks down while you’re out and about. A trained professional will come out to where you’re stranded to either fix your car at the roadside and get you back on your way, or tow your car to a nearby garage for more extensive repairs.

Broker

An independent intermediary that sells insurance on behalf of different insurance companies. A car insurance broker can be useful if you need a specialist policy.

Cancellation

If you end your car insurance policy early, you may be charged a fee. This should be detailed in your policy documents. If your insurance provider cancels your car insurance because they find that you’ve given false or misleading information, this could mean higher car insurance premiums in the future.

Car insurance excess

This is a fixed charge you’ll pay towards a claim. There are two types of excess – compulsory and voluntary.

Car insurance policy

Your car insurance documents detailing the terms and conditions of your contract. There are three types of car insurance policy:

• Third party
• Third party, fire and theft

• Comprehensive.

Certificate of motor insurance

This is the legal proof that a driver is insured. It shows which car is covered, what period the insurance covers, who’s allowed to drive the car and what it can be used for – for example, whether that’s business or pleasure.

Claim

If you have an accident and want your insurance policy to cover the cost of repairing the damage, the formal application you’ll make to your insurance provider is called a claim. Read our guide on how to make a car insurance claim.

Classic car

Insurance providers have their own definitions of what constitutes a ‘classic car’. In some cases, an insurance provider may consider your car classic if it was built more than 15 years ago. Meanwhile, your car may be eligible for a ‘historic vehicle’ road tax exemption if it was built or first registered more than 40 years ago. 

Class of use

Class of use covers how you intend to use your car. There are three classes-of-use groups: Social, Domestic and Pleasure (SDP), Social, Domestic, Pleasure and Commuting (SDP+C), and Personal Business use (SDPC+Business use).

Comprehensive car insurance

Comprehensive car insurance – also known as fully comprehensive – is the highest level of cover. It insures you for damage to your own car, as well as any other cars you might damage in an accident.

Compulsory excess

This is how much you’ll have to pay to make a claim. Your insurance provider sets the amount, which is non-negotiable. This is different from voluntary excess, which is the amount you choose to pay in addition to the compulsory excess.

Conviction code

A four-digit code that is put on the driving licence and record of a motorist who is convicted of a motoring offence. Each offence has a different code and may include a certain number of penalty points. For example, if you’re convicted of ‘driving without due care and attention’, you’ll get the code CD10 on your licence and between 3-9 penalty points. These ‘endorsements’ may stay on your driving record for 4 or 11 years, depending on the offence.  

Courtesy car

If you have an accident or your car breaks down, your insurance provider could offer you a courtesy car. You can drive the courtesy car until your car is repaired. It’s often included in a comprehensive car insurance policy, but might not be, so always check with your provider.

Cover note

A document that is provided as a temporary proof of cover while your official insurance policy and certificate of motor insurance are being prepared by your insurance provider.

Defaqto

An independent financial information and research business that aims to help consumers make informed decisions about financial products. Defaqto gives star ratings to financial products, on a scale of one to five, so that customers can easily compare them.   

DOC cover

DOC stands for ‘driving other cars’. Few policies include this cover. And even if they do, it’s only likely to apply in an emergency. If you need to drive a friend or family member’s car, they could add you to their car insurance policy as a named driver or you could consider temporary car insurance.

Driving licence

A permit that allows you to legally drive a vehicle after passing your driving test. There are different categories of driving licence that allow you to drive different types of vehicles.

Duty of disclosure

Under the duty of disclosure, it’s your responsibility to inform your insurance provider straight away of any changes that may affect your car insurance policy, such as moving house or changing vehicles.

DVLA 

DVLA stands for the Driver and Vehicle Licensing Agency. The DVLA is the part of the UK government responsible for keeping the records of UK drivers, collecting vehicle excise duty (VED) and issuing driving licences.

Double car insurance

If the same person has more than one insurance policy on the same vehicle at the same time, this is called double or dual car insurance. Normally doubling up happens by accident, often as a result of automatic renewal or overlapping policies.  

Endorsement

This is an extra clause that changes the standard cover the car insurance policy provides. For example, you could get an endorsement on your policy if you change your car part way through your policy. Note that endorsement could also refer to the penalty points added to your driving record if you’re convicted of a motoring offence.

Exclusions

There are specific things that insurance providers won’t pay out for. These exclusions should be clearly set out in your policy terms and conditions.

Fault claim

A claim made when an accident is your fault and you’re liable for the damage. Or it could be that the accident isn’t your fault but there’s no one to claim against. For example, a deer jumps into the road, or another driver causes the accident then drives off. If this is the case, it counts as a fault claim and you might be liable to pay for repairs. You could also lose your no claims discount.

FCA

FCA stands for the Financial Conduct Authority. It regulates firms that provide financial services to consumers, such as car insurance providers.

Fronting

Car insurance fronting is a type of insurance fraud and is illegal. It usually happens when a younger driver names an older, more experienced, person as the main driver on their insurance policy to keep the premium down, even though it’s the younger driver who drives the car the most.

Green card

A green card is required for driving abroad in certain countries outside of the EU. It proves that you have the minimum car insurance required for the country you’re driving in.

Immobiliser

An immobiliser is a piece of electronic car security kit. It prevents a car from starting if someone tries to hotwire it or start it with the wrong key. If your car was made after 1998 it’ll probably have had an immobiliser fitted when it was manufactured. If not, you can get one fitted. Having an immobiliser could help you make savings on your car insurance.

Import vehicle

A vehicle that was made outside of the UK and not intended for sale in the UK, that is then imported into the UK. If you are importing a vehicle into the UK, you’ll need to tell HM Revenue and Customs, pay any required tax and import duties, get the vehicle approved and register it with the DVLA.  

Indemnity

This ensures you won’t lose out financially after an accident. So if your car is damaged, you’ll still be in the same financial position you were before it happened.

Insurance Premium Tax (IPT)

Insurance Premium Tax (IPT) is a tax on all insurance policies. It’s automatically included in the premium price.

Insured value 

The amount your car is insured for. 

Legal owner

The legal owner of a car is the person who paid for it. This won’t necessarily be the same as the registered keeper of the car, who is the person who keeps and uses it. Company cars are an example of when the legal owner and the registered keeper may be different.

Loss adjuster

Someone who investigates claims on behalf of an insurance provider to make sure it’s a legitimate claim, and to ensure that the insurance provider isn’t paying out more than they should.

Main driver

This is whoever drives the car most, not necessarily who owns it. This is worth noting if your teenager drives your car more than you do, for example. If that’s the case, you’ll need to make sure they’re named as the main driver on your policy, or you could be guilty of fronting.

Market value of your car

This is the price your car would sell for on the open market now. Your car’s market value is likely to be less than you bought it for. When you take out car insurance, you’ll usually give the price you paid for the car as its value. But if your car is written off and you make a claim, your pay-out will be for its market value.

Find out how the value of your car affects the price you’ll pay for car insurance.

Modifications

Any changes you make to your vehicle’s ‘factory settings’, such as alloy wheels, tinted windows, changing the engine, adding spoilers or lowering the suspension, are classed as modifications. You’ll need to tell your insurance provider about any modifications and in some cases you may need specialist cover.

Motor insurance database (MID)

The Motor Insurance Database (MID) is a national database of all the cars registered in the UK. It’s used by the police and the DVLA to check drivers are insured.  

Named driver

A named driver is an additional driver who’s been added to a car insurance policy, for example your partner or child.

No claims discount (NCD)

A no claims discount (NCD), also known as a no claims bonus (NCB) is the discount you’ll receive on your premium if you don’t make a claim. The discount is calculated every year when you renew. The policy has to run for a full year before you can earn that year’s discount.

Non-fault claim

A non-fault claim is when your insurance provider can recover the total cost of a claim from the person responsible for the accident.

Ogden Rate

The Ogden rate is a discount rate applied to the lump sum that insurance providers pay out to people who have suffered extreme personal injury. The rate is meant to reflect the likely return on the money that person should receive if they invest the lump sum, and it can have a significant impact on the price of car insurance premiums.

Optional extras

When you buy a car insurance policy, you may have the choice to pay extra for certain add-ons. For example, you might choose to add European breakdown cover, personal accident cover or windscreen cover if they’re not already included on your chosen main policy.   

Period of insurance

The dates an insurance policy is valid for.

Points on your licence

Points are added to your driving licence when you’re convicted of a motoring offence, such as speeding or driving under the influence. The number of points awarded reflects the severity of the crime. Points stay on your licence for 4 or 11 years, depending on the offence. If you’re given 12 or more penalty points in a three-year period, you can be disqualified from driving.  

Policyholder

The person who took out the car insurance policy.  

Policy schedule

This is part of the insurance contract and sets out details of your policy. It shows the period of insurance, car details and information about the policy excess.

Premium

How much you’ll pay for your insurance policy. This is usually paid via direct debit either monthly or annually. Check out our car insurance calculator to find out what will affect the cost of your car insurance premium.

Q plate

When a UK number plate starts with the letter Q, it means that the car is either a ‘kit car’ or has undergone radical modifications. Drivers of cars with Q plates may need to look for specialist car insurance cover. 

Rating factors

These are the factors that insurance providers look at when they’re calculating your premium. Rating factors include your age, your address, your job, what car you drive, your claims history and if you have any motoring convictions.  

Registered keeper

The registered keeper of a car is the person who uses it and keeps it. They’re also responsible for the car as far as the police and Driver and Vehicle Licensing Agency (DVLA) are concerned, and their details will be on the V5 registration document. The registered keeper isn’t necessarily the same person as the legal owner of the car – the owner is the person who paid for it. Think of a company car, for example. This is why the V5 document isn’t considered evidence of ownership.

Renewal

The date when your current car insurance period ends, is when it’s up for renewal. Your insurance provider should send you a renewal notice to remind you when it’s time to renew. Some insurance providers offer automatic renewal, but it’s a good idea to shop around before the renewal date to make sure you’re still getting the best deal.

Risk address

Insurance providers calculate your insurance premium by looking at risk factors and your address is one of them. Your risk address is the place where you normally keep your car overnight.  

Road Traffic Act

The legislation passed in the Road Traffic Act 1988 means that all drivers in England, Scotland and Wales must have third party motor insurance as a minimum to drive on roads and in other public places 

Settlement

The amount of money an insurance provider is willing to pay out if a claim is successful.

SORN

SORN stands for Statutory Off Road Notification. If you want to take your car off the road for a while and you don’t want to pay road tax or insurance, you must apply for a SORN. The car must be kept on private property though. If you want to keep it on a public road, it would have to be taxed and insured. 

Statement of fact

A form showing all the information you’ve given to your insurance provider. A statement of fact forms part of your insurance contract.

Telematics car insurance

Also known as ‘black box insurance’, telematics car insurance involves an in-car device or online app that monitors your driving. The information is relayed back to your insurance provider who may use it to work out your premium. It’s useful for young drivers who can sometimes lower the cost of their premium by showing they can drive safely.

Third party car insurance

Third party car insurance is the most basic level of cover, and the minimum required by law. It covers damages to the owner of the other vehicle and passengers in your car. It won’t cover any injuries you suffer, or damage to your car if the accident was your fault.

Third party fire and theft

Third party fire and theft insurance provides the same level of cover as third party, but also means you’d be covered if your car is stolen or damaged by fire.

Underwriter

Underwriters create insurance policies and cover. They decide whether someone is a good risk and worth insuring. They also work out the cost of premiums for insurance providers.

Uninsured driver promise

This is a feature on many comprehensive car insurance policies that means you won’t lose your no claims discount and you’ll have your excess reimbursed if you’re hit by an uninsured driver. Read our guide on what to do if you’re in an accident with an uninsured driver.

Uninsured loss recovery

If you have an accident that’s not your fault, uninsured loss recovery (ULR) could help you reclaim any money you have to pay out to fix the damage.

Voluntary excess

How much you choose to pay if you make a claim. This is usually agreed when you take out the policy. Having a higher voluntary excess could bring down the cost of your premium (just make sure you can afford both the voluntary and compulsory excess if you have to claim).

Write off

Also known as total loss in insurance terms, a car is ‘written off’ after an accident when it would cost more to repair than it would to replace.