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Shedding Some Light: The Main Types of Car Insurance Explained

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Car insurance – not the most fun subject, but one you’re better off knowing plenty about. That’s because, if you drive, it’s an absolutely essential part of life – and a relatively costly one at that.

Car insurance comes in two primary forms – third party, fire and theft (or sometimes just third party) and comprehensive. Additionally, there’s GAP insurance, which isn’t an essential form of insurance but one that many newer car owners pick up to protect the value of their vehicle. Regardless of what you choose, where you choose matters as prices vary greatly. That is why so many trust Freeway Insurance for affordable car insurance.

You should also consider cheap sr22 insurance, which offers for high-risk drivers throughout California, Arizona, Texas, Nevada, Ohio, New Mexico, Wyoming, North Dakota, South Dakota, and Montana.

If you’re looking for flexible financing options, a revenue based loan could be the perfect choice for you. And, to protect any transactions online, where you share the minimum data required for the product or service you want to access through a secure, digital journey, explore open banking.

Here, we’ll explain all three, so you can feel more assured about being insured.

Third party/third party, fire and theft (TPFT)

It’s fairly unusual for someone to have TPFT insurance only, and even more unusual to just have third party.

Third party insurance is the legal minimum cover you need to get behind the wheel. It’s a completely stripped-down form of insurance that covers injury and repair costs for the driver you bump into but not yourself, as well as any property damage you might cause.

TPFT insurance adds fire damage and theft cover to your car, so if your car sets ablaze unbeknownst to you or it gets stolen, TPFT insurance will cover a replacement or damage caused in the event of either.

While that might sound good, both forms of cover are fairly limited. TPFT will not cover any damage to your car, any injury costs for you or your passengers (personal injury cover) or offer windscreen protected. The same goes for third party, but with the removal of cover for fire or theft instances.

A further interesting sidenote lies in the cost of TPFT cover. Considering it’s a limited insurance format, it should be much cheaper than comprehensive cover, right? Yes, it should, but because TPFT has become so heavily associated with high-risk drivers (young drivers and drivers with limited experience, for example) looking for cheaper cover, it is in many instances more expensive to opt for it. So if you’re a high-risk driver, you better check out sr22 insurance Washington and other states to see the minimum requirements.

Bizarre, but true.

Comprehensive cover

The choice of virtually every driver on UK roads, comprehensive cover, as the name suggests, offers the broadest form of protection for drivers, offering everything included in a TPFT package along with:

  • Damage cover for your own car in the event of an accident, even if it’s your fault.
  • Personal injury cover, covering injury costs for you and your passengers.
  • Damage protection for your car, regardless of whose fault it is.
  • In some cases, fully comp cover also allows you to drive other people’s cars

A much more encompassing solution, then, but fully comp insurance typically doesn’t cover the following:

  • Breakdown cover
  • Courtesy car cover
  • Windscreen cover
  • Legal expenses cover

In many cases, insurers will either offer these services at an additional cost (breakdown cover, courtesy car cover) or include them as a complementary service (windscreen cover). You’ll often have the option to add these sorts of elements in or out when choosing your policy.

GAP insurance

Finally, stepping out of the world of compulsory insurance, you have GAP insurance. A GAP insurance (guaranteed asset protection) is designed to cover the difference between the value of your car when you bought it versus the value of your car when you get into an accident.

Say, for example, you have an accident in your third year after buying a new car. The amount your insurer pays out will be based on the value of your car now rather than what you paid when you got it. In a world where depreciation on new cars is huge – ranging from up to 30% loss of value in the first year through to 50% loss of value after three – this can mean big financial losses for the claimant.

Thus, GAP insurance is relatively popular with new car owners who will suffer from the impact of depreciation most, and it’s a service that’s often sold alongside a new car purchase. It’s not compulsory in any way, and it only makes sense for certain car owners, but if you are looking to effectively freeze the value of your car from an insurance perspective, GAP insurance is the way to go.

In reality, topping up your insurance each year will almost always boil down to picking the cheapest or best comprehensive cover policy for you. Still, if you find a notably cheaper TPFT policy out there, you may be tempted to go for it. As for GAP insurance, that’s up to you – what’s important is establishing the right policy set up for your needs.