Quick answer: Car insurance in the UK works by protecting you financially if you're involved in an accident. You pay a monthly or annual price for cover, and if something goes wrong, your insurer pays for repairs, replacements and compensation. The UK legally requires all drivers to have at least third-party cover.

First time getting car insurance in the UK? You might be wondering how car insurance works over here, what types of car insurance are available, and what you actually need. In this simple guide we'll look at everything you need to know.

One key difference from other countries: UK car insurance follows the driver, not the car. That means your policy covers you to drive a specific vehicle. If you want to explore your options, you can learn more about car insurance from Marshmallow.

How does car insurance work in the UK?

Car insurance in the UK protects you from the costs of accidents, damage and injuries. Here's how it works:

• You buy a policy from an insurer that covers you for 12 months.
• You choose your level of cover and pay either monthly or annually.
• If you have an accident, damage your car, or injure someone, you make a claim to your insurer.
• Your insurer handles the costs of repairs, replacements and compensation.

In the UK, car insurance is mandatory. You cannot legally drive without it. The police can check if you're insured, and driving without cover can lead to heavy fines, points on your licence, or even having your car seized.

The UK system differs from many countries because insurance follows the driver, not the car. Your policy covers you to drive a specific vehicle. If someone else wants to drive your car, you must add them to your policy as an additional driver. Similarly, if you want to drive someone else's car, you need to make sure you're covered either by your insurance or the car owner's insurance. Learn more about who can drive your car.

What are the types of car insurance in the UK?

There are three main types of car insurance available in the UK. Each offers different levels of protection.

Fully comprehensive car insurance

Fully comprehensive insurance offers the highest level of protection available in the UK.

Fully comprehensive car insurance covers:

• Damage to your own car and other people's vehicles.
• Theft or damage from fire, storms or vandalism.
• Injuries and compensation to other people involved in an accident.
• Unlimited cover for damage to other people's property or vehicles.

Despite offering more protection, fully comprehensive policies are often similar in price to other types of car insurance. That's why many UK drivers choose this option. You can learn more in our detailed guide to fully comprehensive car insurance.

Third-party, fire and theft insurance

This type of cover sits between fully comprehensive and third-party only. It covers damage and injuries to other people, plus it protects your car if it's stolen or damaged by fire. However, it won't cover damage to your own car from an accident.

Third-party, fire and theft policies are less common in the UK today because they often cost nearly as much as fully comprehensive cover.

Third-party only car insurance

Third-party only insurance is the minimum legal requirement in the UK. It only covers injuries and damage to other people and their property. It does not cover any damage to your own car.

Many people assume third-party only insurance is the cheapest option. However, these policies have become more expensive in recent years. That's because insurers have found that third-party only policies are often taken out by less experienced or higher-risk drivers, leading to more claims.

If you damage your own car with third-party only cover, you'll need to pay for all repairs yourself. This can cost thousands of pounds, which is why many drivers choose fully comprehensive insurance instead. Find out more in our guide to third-party car insurance.

How does excess work in UK car insurance?

When you take out car insurance in the UK, you agree to pay an excess. This is the amount you contribute towards any claim you make. Your insurer covers the rest of the costs, no matter how expensive the damage is.

There are two types of excess:

• Compulsory excess is set by your insurer based on factors like your age and driving experience. You cannot change this amount.
• Voluntary excess is an optional amount you can add on top. Choosing a higher voluntary excess usually reduces your monthly payments, but means you'll pay more if you need to make a claim.

If you make a claim, you pay both the compulsory and voluntary excess together. Your insurer then covers all remaining costs for repairs, replacements and any other damage.

For example, if your compulsory excess is £250, your voluntary excess is £100, and your repair costs £3,000, you pay £350 and your insurer pays £2,650.

Learn more about how this works in our detailed guide to car insurance excess.

How does car insurance work for claim-free driving?

UK insurers reward drivers who don't make claims. This is called a no claims discount. The longer you drive without making a claim, the bigger your discount becomes. This discount can significantly reduce your annual policy price.

Your no claims discount builds up year by year. After one claim-free year, you start earning a discount. After five years without claims, you could save a substantial amount on your car insurance.

At Marshmallow, we recognise proof of claim-free driving from any country, not just the UK. This means if you've driven abroad without making claims, we count that experience towards your discount. This approach helps UK newcomers save money on their car insurance.

Find out more in our complete guide to no claims discount and learn how to provide no claims discount proof.

How do car insurance claims work in the UK?

If you're involved in an accident, you need to make a claim to your insurer. Here's how the process works.

After an accident, gather as much information as possible:

• Note the weather conditions, location and exactly what happened.
• Take photos of the damage from multiple angles.
• Get the other driver's details including their name, phone number, car registration and insurance company.
• If there are witnesses, get their contact details too.
• If the police attend, make a note of the incident number.

Contact your insurer as soon as you can. Many insurers have 24-hour helplines or apps where you can report accidents immediately. Your insurer will guide you through the claims process and arrange for repairs or replacements.

The more detailed information you provide, the smoother your claim will be. Your insurer will investigate the claim and determine who was at fault. If the other driver was responsible, your insurer will try to recover costs from their insurance company. If you were at fault, your insurer covers the costs and your policy price will likely increase at renewal.

Read our step-by-step guide on how to make a car insurance claim, learn what to do after a car accident, and understand more about non-fault accidents.

What affects car insurance prices in the UK?

Multiple factors affect how much you pay for car insurance in the UK. Insurers assess risk based on statistics and set prices accordingly.

Key factors that influence your price:

• Your age, driving experience and claims history. Younger or less experienced drivers typically pay more because statistics show they're more likely to have accidents.
• Where you live. Areas with higher crime rates or more accidents usually have higher insurance costs.
• The type of car you drive. Cars are grouped into insurance groups from 1 to 50. Lower groups are cheaper to insure because they're less powerful, less expensive to repair and less likely to be stolen.
• Your occupation and annual mileage.
• Where you park your car overnight. Even small details like whether you have a garage can affect what you pay.

If you make a claim, your policy price will likely increase when you renew, even if you switch insurers. That's because all insurers check your claims history when calculating your price. However, your price should gradually decrease again if you drive claim-free in future years.

Learn more about what impacts your car insurance price, discover why car insurance is expensive in the UK, and understand UK car insurance groups.

How to get car insurance in the UK

Getting car insurance in the UK is straightforward. You'll need to provide some basic information about yourself and your car.

Before you start, gather:

• Your driving licence details.
• Vehicle registration number.
• Information about where you park your car overnight.
• Proof of any no claims discount from previous insurers.

You can get quotes from insurers directly or use price comparison websites to see multiple options. When comparing, make sure you're looking at the same level of cover and excess amounts. The cheapest option isn't always the best value if it offers less protection.

Once you choose an insurer, you'll complete your application and arrange payment. You can usually pay monthly or annually. Annual payment is often cheaper overall, but monthly payments spread the cost throughout the year.

Your policy starts on the date you choose. You'll receive your insurance documents by email. Keep these safe, as you may need to show them to the police or when taxing your vehicle.

Read our complete guide on how to get car insurance and find out what car insurance documents you need.

Get car insurance from Marshmallow

At Marshmallow, we specialise in helping people who are new to the UK. We recognise your driving experience and claim-free driving from anywhere in the world.

You can apply online in minutes, all our policies are fully comprehensive and you can manage your policy from anywhere with our app.

Get a car insurance quote today to see what you could save.

Understanding your car insurance policy

Your car insurance policy is a legal contract between you and your insurer. It's important to understand what's included and what's not.

Your policy documents explain exactly what you're covered for:

• The type of cover you have.
• Your excess amounts.
• Any additional drivers.
• Optional extras you've added like breakdown cover or legal protection.

Most UK car insurance policies last for 12 months. When your policy ends, you'll need to renew it or find a new insurer. Your current insurer will send you a renewal price, but you're not obligated to accept it. Many people get quotes from other insurers before renewing.

If your circumstances change during the year, you must tell your insurer. This includes changing your address, buying a new car, or getting points on your licence. Failing to update your details could invalidate your insurance.

You have 14 days after buying your policy to cancel with minimal charges. This is called the cooling off period. After this period, you can still cancel but may face higher cancellation fees.

Find out more in our guide to cancelling car insurance.

Frequently asked questions

How does car insurance work if someone else drives my car?

You must add anyone who drives your car as an additional driver on your policy. Without this, they won't be covered and you could invalidate your insurance. Some policies include cover to drive other cars, but this usually only provides third-party protection. Learn more about who can drive your car.

Can I drive someone else's car with my insurance?

This depends on your policy. Some comprehensive policies include driving other cars cover, but it's usually limited to third-party only protection. Always check your policy documents or ask your insurer before driving someone else's car.

What happens if I drive without insurance in the UK?

Driving without insurance is illegal in the UK. You could receive a fixed penalty of £300 and six points on your licence. In serious cases, you could face unlimited fines, disqualification from driving, and having your car seized and destroyed. Read our guide on driving without insurance in the UK.

How does car insurance work if I'm new to the UK?

You can get car insurance in the UK with a foreign driving licence. Some insurers recognise your driving experience from other countries, which can help reduce your price. At Marshmallow, we count your claim-free driving from anywhere in the world.

Do I need car insurance if I'm not driving my car?

Yes. In the UK, your car must be insured even if you're not driving it, unless you declare it off the road with a Statutory Off Road Notification (SORN). Without insurance or a SORN, you could face fines.