Your handy car insurance jargon buster

If you drive, having car insurance is a legal requirement and it’s important to be sure that the cover you’re taking is right for your needs. But reading all the quotation, policy and terms documents can be confusing with all the jargon that’s used.

At Smart Money People you can understand what it’s really like to be a customer by reading the car insurance reviews left by our community. And, to help you understand the words and phrases you might come across in your car insurance documentation, we’ve created this handy jargon buster guide.

Accidental damage cover

This covers you for damage to your car in an accident or other unforeseen event. It’s included in comprehensive cover but not in third-party, fire and theft policies.

Act of God

This is any event that’s no one’s direct fault, for example, a lightning strike or a car being caught in a flood. Some policies cover you for it, others don’t.

Agreed value

This is an agreement between you and the insurer on the value of a vehicle before the policy starts. It’s often used for classic, high performance or restored vehicles.

Ancillaries

These are extra features added to the policy, usually for an additional cost. Examples include breakdown and legal cover as well as protection for your no-claims discount.

Annual mileage

The distance you drive each year in your car. Insurers will ask you to confirm your anticipated mileage and will factor this figure into working out your premium.

Annual premium

The cost of a year’s car insurance. You can usually choose to pay it in one go or split over monthly instalments (this can sometimes be a more expensive option).

Approved repairer

A list of garages and workshops insurers approve to carry out repairs they’re paying for. They may insist you use them if you need repairs covered by your insurance policy.

Black box

A small device that plugs onto your car that informs insurers about its use, for example the times of day it’s driven and the speed. Black boxes are mostly for newly qualified drivers who can lower their premium by having one fitted.

Broker

A company that helps you find car insurance policies. They act as an intermediary between you and the insurance company. They will generally receive commission from the insurer if you buy a policy.

Business use

Business use covers you when you use your car to carry out your work, whether that’s to visit clients or if you need to travel between different work sites.

Cancellation

This is the termination of a car insurance policy, which may involve fees if you cancel outside the cooling-off period.

Certificate of insurance

Also known as a Certificate of Motor Insurance, this is a document that proves a vehicle has the minimum level of insurance required by law to be driven on public roads.

Claim

This is a request to your insurance provider for compensation for damage or loss to your vehicle.

Claims history

The record of claims you’ve made on car insurance policies in the past. Someone with a long claims history will probably have to pay a higher premium.

Class of use

A declaration of how you intend to use your car. Options include social, domestic and pleasure, commuting and business use.

Commuting

Having commuting as a class of use on your policy means you’re covered for driving to and from one place of work each day.

Comprehensive cover

This covers you for accidental damage to your own car in addition to third party, fire and theft cover.

Compulsory excess

This is the amount of any claim, set by the insurer, that you’ll have to pay yourself. Each insurer will set its own compulsory excess levels.

Cooling off period

A minimum 14-day period after buying a car insurance policy during which time you can cancel it for any reason and get a refund.

Courtesy car

A temporary vehicle to use while your car is being repaired. Some insurers include it as standard, others may charge an additional fee for courtesy car cover.

Depreciation

The reduction in your car’s value over time, which affects the amount of money you’ll receive for a claim.

Driving other cars (DOC)

Some comprehensive insurance policies also cover you for driving other people’s cars, with the owner’s permission and only on a third-party basis.

Endorsement

A change to the details of your original policy, for example if you change address or car while it is still in force.

Exclusions

Specific situations or events your car insurance policy won’t cover, such as using your car for racing.

Fault claim

This is any claim on which your insurer has paid out. It doesn’t necessarily mean that you yourself were at fault.

Financial Conduct Authority (FCA)

This is one of the bodies, along with the Prudential Regulatory Authority, that oversees financial services companies, including insurers.

Financial Ombudsman Service (FOS)

An independent body that helps to resolve complaints and disputes between policyholders and insurers.

Green card

A green card is needed for insurance driving abroad and gives a basic level of cover. Usually there’s no charge for requesting one from your insurer.

Immobiliser

A device that prevents a vehicle from being started without the proper key. Insurers usually ask if one is fitted when preparing a quote.

Indemnity

Having indemnity means you’ll be returned to the state you were in before a loss occurred. So, if your car is damaged it will be repaired or you will receive its full value if it’s beyond repair.

Insurance intermediary

This is another way of describing an insurance broker.

Insurable interest

A car is said to have insurable interest as long as you own it yourself. So, you wouldn’t be able to insure a neighbour’s car for your use.

Insurance premium

The amount you pay each year for your car insurance policy.

Insurance Premium Tax (IPT)

This is a tax, that’s applied to insurance premiums in the same way that VAT is added to certain purchases.

Insurance provider

The company that provides the insurance for your car and is responsible for settling any claims.

Insured value

The replacement value you’d receive if your car was written off or never recovered after being stolen.

Key cover

Provides reimbursement for lost or stolen car keys, including replacement costs. This can be included as standard, or you may have to pay an additional cost for the cover.

Legal expenses cover

Helps pay for legal costs following an accident, such as recovering any uninsured losses. This is usually an optional extra you’ll have to pay for, but some insurers may include it for no additional charge.

Main driver

The person who will drive the car most often.

Material facts

Information you must tell your insurer that could affect your cover and premium amount. This could be relating to a criminal record or any previous claims.

Modifications

Changes that have been made to your car outside of factory standard fittings. Examples include lowered suspension and the addition of spoilers.

Named driver

Another person who is allowed to drive a car even when it’s insured in your name.

No claims discount (NCD)

An upwardly sliding discount that you qualify for with each year of claim-free driving. Most policies give you the chance to protect this in the event of a claim.

Non-fault claim

A claim in which the insurer has recovered all the costs from a third party.

Optional extras

Add-ons you can pay for like windscreen cover or breakdown assistance.

Personal business use

Insurance that also covers you for driving to meetings and other sites that aren’t your usual place of work.

Policy

A document that outlines the specific insurance cover you have for your car.

Policyholder

The person in whose name the car insurance has been taken out.

Protected no claims bonus

For an additional charge you can protect your no claims bonus or discount so you don’t lose it in the event of making a claim.

Quote

The price an insurer will give you when you ask how much they’ll charge to insure your car.

Registered keeper

The person whose name is on the V5C registration document for a vehicle to show they’re the legal owner.

Renewal

Each year you’ll receive a renewal notice from your insurer inviting you to stay with them for another year. You can choose to find a new insurer for better terms and pricing.

Road Traffic Act (RTA)

A law introduced in 1930 that guarantees compensation for the innocent victims of road traffic accidents.

Settlement

The resolution of any insurance claim.

Social, Domestic and Pleasure (SDP)

A category that covers you only for social, domestic and pleasure driving which means travel for business purposes, including to and from work, is excluded.

Social, Domestic, Pleasure and Commuting (SDP+C)

As above, but with the addition of travel to and from work.

Telematics insurance

Using a black box to check driving habits and behaviour, telematics insurance uses this information to decide insurance premiums for young and inexperienced drivers.

Third-party, fire and theft (TPFT)

Cover that will pay out for damages to others and if your car has a fire or is stolen and either damaged or not returned.

Third-party only (TPO)

The most basic form of car insurance simply covering damages to others.

Tracker

A device fitted to a car that tracks its whereabouts and movements that can be checked online. Having one fitted may reduce insurance premiums.

Uninsured losses

Items or events that aren’t covered by your car insurance policy.

Uninsured loss recovery (ULR cover)

This will allow you to attempt to recover uninsured losses from a third party who has been at fault. An example would be to claim back the excess you’ve had to pay or loss of earnings as a result of not having a driveable car.

Underwriter

The person or company providing the actual insurance under your policy.

Voluntary Excess

An additional amount to the compulsory excess that you can choose to pay in order to reduce your insurance premium.

Windscreen cover

Covers repair or replacement of damaged windscreens and windows.

Write-off

A car is a write-off if it’s too badly damaged to repair or if the cost of the repairs will be more than the insurer’s estimate of its value.