Running A Car - Car insurance jargon buster

Car insurance policies are littered with words and phrases that, while they make perfect sense to the industry insiders writing the documents, often mean little or nothing to the average driver.

After all, acronyms such as DOC and TPFT and terms including “non-fault claim” and “material fact” are not exactly used everyday by the majority of people.

Thant can prove hugely confusing for motorists keen to work out exactly what cover they have from an insurer as a result.

Here we lift the lid on the jargon so you can get to grips with your policy and ensure you get the best deal.

Types of cover
One of the first decisions to make when it comes to car insurance is what level of cover you want to take out.

However, even this can be difficult if you do not fully understand what the different types of cover provide.

Most insurers offer three levels of cover: Comprehensive, Third Party and Third Party Fire and Theft.

“Comprehensive” cover offers the highest level of protection. This generally includes injuries to other people, damage to other people's property and accidents caused by your passengers or a driver named on your policy as well as fire or accidental damage to and theft of your vehicle.

Most comprehensive car insurance policies also cover medical expenses and the loss of or damage to personal effects in your vehicle – up to a stated limit.

It is still important to check the terms of an individual policy, though, as features do vary.

At the other end of the scale, “third party only” insurance, or “TPO”, is the minimum level of car insurance cover required by law and contains no cover for damage to your vehicle.

It does, however, usually cover your legal liability for injuries to other people, accidents caused by your passengers or a person who is a named driver on your policy or damage caused to other people’s property.

The third cover option, meanwhile, is “third party, fire and theft”, or “TPFT”.

It provides the same levels of protection as third party insurance, but additionally allows claims against damage caused to your vehicle by fire or from theft– as long as you're not at fault.

Claims
Despite being a legal requirement for drivers in the UK, car insurance only really comes into its own when things go wrong.

Consequently, it is crucial to know what you can claim for and how much you are likely to get as a settlement as well as the service you can expect to receive.

It is worth knowing, for example, that an “approved repairer” is a garage recommended by your insurance company for car repairs covered by your insurance policy.

“Insured value” is another important term as it is the total amount the insurance company will agree to pay out for your vehicle if it has been damaged beyond repair and can be either the amount that the car was worth when the policy was taken out or its market value at the time of the claim.

Any losses which are not covered by your policy, for example things such as policy excess, are referred to as “uninsured losses”. And you may be offered “uninsured loss recovery, or “ULR”, cover to help you to recover these from a third party, should you be involved in an accident that is not your fault.

On that note, it is useful to know that a “fault claim” refers to a claim relating to an accident or loss where you are considered to be to blame, or where costs cannot be recovered from someone else.

This includes incidents such as your car being crashed into while parked by a driver who cannot be traced.

With a “non-fault claim”, on the other hand, your insurer is able to recover the cost of the claim from someone else.

The “settlement” is the total amount your insurer pays out for a claim.

Premiums
When you apply for car insurance, your premium will be set by an “underwriter”, who will take into account the “material facts” given by you in your application.

It is worth pointing out that your policy may become invalid if you leave out information that could influence his or her decision to offer you cover.

The overall cost of the policy will also include “insurance premium tax” or “IPT”, which is a tax on all general insurance premiums.

Other factors that affect your premium include your “no-claims bonus/discount” or “NCB/D”, which should reduce the amount you pay for every year you do not make a claim.

The Motor Insurance Repair Research Centre or “Thatcham”, which conducts research for the motor insurance industry on the cost of car repairs and vehicle security, also has an impact on the size of your premium.

Other common terms
Some comprehensive policies provide you with third party cover to drive other people’s cars. In policies, this is referred to as “driving other cars” or – more confusingly – “DOC”.

This is not a standard feature, though, so check with your insurer before jumping behind the wheel of another vehicle.

If your policy contains the word “indemnity”, meanwhile, then it means that the company will undertake to place you in the same financial position after a loss as you were before it.

This would be the case should the insurer pay to repair your car following an accident, for example.

Any claims you make are likely to be rejected as a result.
This article has been researched and written by whatcar.com's car insurance partner, MoneySupermarket