Car insurance terms – a glossary

ABI

ABI stands for the Association of British Insurers. The ABI offers consumer advice, while working with the Government. Its aims are to promote clarity and best practice within the insurance industry. The ABI is also involved in recommending insurance group ratings.

‘Act of God’

An event or accident that no one could have prevented. It usually relates to natural disasters like storms or floods.

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.

Approved repairer

Someone your insurance provider recommends using to fix a car. 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.

Breakdown cover

You don’t want to end up sitting on the side of the motorway for example, if your car breaks down. Breakdown cover means you wouldn’t have to. You’d receive roadside assistance, or a mechanic might tow your car to your house and get your car started there.

Broker

An intermediary that sells insurance on behalf of different insurance companies.

Car insurance excess

This is a fixed charge you’ll need to pay if you want to make a claim. There are two types of excess - compulsory and voluntary excess.

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, and comprehensive.

Certificate of insurance

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

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 is the highest level of cover. It insures your 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.

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.

DOC cover

DOC stands for ‘driving other cars’. You’re not automatically allowed to drive someone else’s car, so before you get behind the wheel of a friend’s car, check if DOC is included in your policy. If your policy does include DOC, it’ll only be on a third-party basis – you won’t have full comprehensive cover. Alternatively, your friend or family member could add you to their car insurance policy as a named driver.

Endorsement

This is an extra clause that changes the standard cover the policy provides.

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, formerly known as the Financial Services Authority. The FCA regulates firms that provide financial services to consumers, like car insurance providers.

Fronting

Car insurance fronting is a type of 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.

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.

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

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

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. It’s 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.

Named driver

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

No claims discount

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.

Period of insurance

The dates an insurance policy is valid for.

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.

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.

Settlement

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

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 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 should you have to claim).