Choosing the right car insurance: Comprehensive vs third-party vs third-party, fire and theft

What are the main types of car insurance in the UK?

Car insurance is a legal requirement in the UK. You can choose from 3 different types.

Third-party

This is the legal minimum amount of cover you can get. It only covers damage to other cars, people and their property. It doesn't cover the cost of any injuries you get, or damage to your car. It also doesn't cover your car against theft or fire.

Third-party, fire and theft

This is the same amount of cover as third-party, but it'll also cover your car if it's damaged in a fire or stolen.

Comprehensive

Comprehensive car insurance is the highest level of car insurance you can get. It covers your car and any third party's car and their property. It also covers injuries you sustain, and anyone else involved in the accident. It also comes with optional add-ons that we'll talk through later in this guide.

What is third-party only (TPO) car insurance?

This is the legal minimum amount of car insurance that you can buy in the UK. It only covers damage to other people and their property. It doesn't cover your car, property or passengers.

For example, if you hit someone else's car, third-party insurance would cover the damage to their car. And if they got an injury, that would be covered too. But your car wouldn't be covered, and neither would any of your injuries.

In short, it covers other people and their property if you're at fault. But you don't have any financial protection.

Not many insurers offer third-party only insurance. That's because it's generally higher risk than the other types of insurance as people with this type of policy tend to have more accidents.

What is third-party, fire and theft (TPFT) car insurance?

Third-party, fire and theft offers slightly more cover than just TPO because it covers damage to your car if it's involved in a fire, or stolen.

Again, it covers damage to other people's cars, but if you're at fault, your car and your injuries aren't covered.

Although there's slightly more protection with a third-party, fire and theft policy, it still doesn't offer as much protection as comprehensive car insurance.

What is fully comprehensive car insurance?

Fully comprehensive car insurance is the highest level of car insurance you can get.

Comprehensive car insurance kicks in to cover your car, passengers and your belongings whether you're at fault or not. Other non-accident related damage is covered too, such as storm damage or theft.

Most comprehensive car insurance policies cover injuries if you'r ehurt in an accident. Some even include cover for your windscreen and any personal belongings in the car.

You might even be covered to drive other people's cars, too. But this is often only third-party cover and just for emergency travel.

You can choose to add extras to your comprehensive cover, too. For example, you can add a courtesy car, which means you'll have something to get you from A to B if your car is off the road.

Then there's motor legal protection. This can cover your legal costs if you decide to take legal action after a non-fault car accident.

Breakdown cover is another optional add-on. This helps you get back on the road if you've broken down at home or while you're travelling.

What's the difference between fully comprehensive and third-party car insurance?

Here are the differences between all 3 policy types at a glance:

Why is fully comprehensive car insurance sometimes cheaper?

Fully comprehensive is often the cheapest type of car insurance because, historically, drivers who were less risky opted for comprehensive car insurance. Less risk means insurers may not have to pay out as much, so that means lower insurance prices.

It's a common misconception that third-party only cover is the cheapest type of insurance. This used to be the case, but because high-risk drivers often chose it as the cheaper option, insurers ended up paying out more on those policies - and eventually this raised the cost of third-party cover overall.

How to choose the right car insurance for you

The 'best' policy for you depends on you and your circumstances. Your insurance price and the type of policy you choose depends on factors including:

• Your age

• Your driving experience

• Your car's value

• How you use your car

• Where you park

• Your claims history

If you're a learner or a new driver, your car insurance premiums could be expensive. That's because new drivers don't have as much driving experience, so it's difficult for insurers to judge risk.

That's where black box or telematics insurance can come in handy. This device attaches to your car and assesses your driving in different scenarios. It then gives you a score or results which your insurer uses to price your insurance policy. Having a black box fitted means your actual driving is assessed, and your risk isn't just based on your age.

If you've got a brand new car, comprehensive insurance could be the best option. New cars are often more valuable than used cars - so if you had TPO insurance, you'd have to replace the car yourself if you were at fault in an accident and it was written off. Also, new cars might be more attractive to thieves - a third-party only policy wouldn't cover theft of your car.

Comprehensive car insurance can cover your car whether you're at fault or not, and it can cover the cost of a replacement car of the same value. Everyone's needs vary, so it's always worth shopping around to find the right level of cover for you.

But third-party insurance could come in handy for older or low-value cars because the overall cost of comprehensive cover might be more than the vehicle's worth. However, your injuries wouldn't be covered if you were in an accident.

How does your car usage affect your insurance?

The way you use your car can affect your car insurance cost. Insurers call these different use types 'classes of use' There are 3 to choose from:

• Social, domestic and pleasure (SDP) - This covers you for social driving. It doesn't cover you for anything related to work, like your commute. It includes driving to the shops or visiting family and friends. It'll also cover day trips and holidays.

• SDP and commuting - This covers all the social driving, but also your commute to work. For example, driving to your office or a train station to continue your commute.

• Business use - This covers your commute, and any driving you might do for work. For example, visiting clients, transporting items to different offices, or travelling to different branches of your company.

You should always be accurate when declaring how you use your car. Otherwise, you risk invalidating your insurance.

In practice, if you had an accident while your car was parked at your workplace but you only had it listed for SDP, your insurer might not cover the damage. That means you'd have to pay to repair your car out-of-pocket.

How to get cheaper car insurance premiums

Here are a few different ways to make your car insurance cheaper:

• Black box (telematics) - This device attaches to your car and rates your driving in real time. Your premium is based on how you drive while the black box is active, rather than the risk factors of other people in your age group.

• Reducing annual mileage - Reducing the amount you drive can make your insurance cheaper. Because you're spending less time on the road, you're not as much risk. But this isn't always possible, so it's best to be accurate with your mileage. Don't over or underestimate it.

• Park securely - If you can park in a secure garage, driveway or CCTV-monitored parking area then this could help reduce your insurance price compared to parking on a pavement or road, for example. If you don't have access to this, try adding some extra security to your car, like a steering wheel or gear stick lock, or making sure your car has a Thatcham-approved immobliser.

• Consider multi-car policies - If you've got several cars in your household, putting them all on one multi-car insurance policy could be more cost-effective than having individual policies. Plus, there's less renewal dates to think about if they're all insured under one policy.

• Choose a car in a lower insurance group - If you can afford it, try to pay for your car insurance annually. While it's tempting to break the payment into affordable monthly costs, your insurer adds interest on to these. Paying outright means you avoid these extra interest costs.

• Increasing voluntary excess - If you increase your voluntary car insurance excess, your insurance price will usually drop. That's because if you're willing to set your excess higher, your insurer might see you as lower risk. Word of warning though: you'll have to pay this amount if you make a claim, on top of any compulsory excess amounts set by your insurer.

• Maintaining a good no-claims bonus - The less you claim the better. If you don't claim, your insurer gives you a discount every year when they're working out your insurance costs. Insurance is there to support you if you need to make a claim, but if you can avoid claiming (for example, paying to fix a small dent rather than claiming), you can protect your no-claims bonus.

What about driving other cars on your policy?

Sometimes, driving other cars cover (DOC) is included in comprehensive car insurance policies. This isn't as common as it once was because it increases the risk level for both drivers and insurers.

If it's available on your policy, it's likely to be third-party only cover. And you might only be allowed to use this cover in emergencies. Make sure you check your insurance policy carefully before you jump behind the wheel of your friend's car.

If you need to borrow someone's car, temporary car insurance can work well. You can choose to borrow a car for an hour up to a month in some cases. Most temporary car insurance policies are also fully comprehensive, and they protect the owner's no-claims bonus if you have an accident in their car.