Car insurance explained

Car insurance can sometimes be a little confusing because it often contains terms rarely used in everyday conversation.

That's why we've put together this A to Z of car insurance jargon which we hope will help you understand your NCB from your IPT and the difference between a no claims bonus and a non-fault claim.

Here's our guide to motor insurance terminology – in plain English.

Act of God

An event as a result of a natural cause where no driver is to blame, such as a lightning strike or extreme weather. 

Your policy will clearly set out what you're insured for and list any exclusions that apply.

Agreed valuation

Particularly important in the field of classic car insurance, the agreed valuation is the amount your insurer agrees to pay if your car is written off. 

Rather than just valuing it using a trade price, it also takes into account the amount of work that has gone into a classic.

Amendment

A change to your original motor insurance policy. Examples of amendments include: 

• changing your name on the policy
• adding another driver
• changing your annual mileage figure 

Annual mileage

This is the total number of miles you expect to drive in your car during the year ahead. You set this when you start or renew your policy.

Approved repairer

If your vehicle can be repaired and the damage is covered by your insurance, your car will be fixed by a garage in your insurance company's approved repairer network. 

An approved repairer is a garage that has been audited and inspected to make sure their work is of a high standard. 

Our approved repairers work to Thatcham standards and wherever possible use manufacturer parts that won’t affect your warranty. 

They’ll also give you a courtesy vehicle while yours is being repaired. 

Authorised insurer

An authorised insurer is an insurance company given permission to provide insurance in the UK and supervised by the Financial Conduct Authority.

Cancellation

This is when you end your insurance policy before the policy expiry date.

Certificate of Motor Insurance

An essential document which provides legal evidence of your car insurance and the period it is in force. 

It should also show who is insured to drive your car and for what purposes the car can be used.

Comprehensive

Often referred to as ‘fully comp’, comprehensive cover offers you the highest level of protection. 

You’re covered for accidental damage, fire, theft or malicious damage to your own car, as well as damage you cause to other people and their property.

Different tiers of comprehensive cover can include different benefits, so check what's included when you get a quote. 

Compulsory excess

Compulsory excess is a fixed amount you have to pay when you make a claim on your car insurance policy. 

It’s determined by your insurer and is different to voluntary excess (see below).

Courtesy car

Many comprehensive car insurance policies – ours included – offer a courtesy car as standard, as long as your car's repairable and being repaired at an approved garage.

For more on this take a look at our guide on getting a courtesy car.

Cover note

This document acts as temporary proof of cover for a car until your new insurance policy has been set up.

Fault claim

This is a claim where the insurer is unable to recover all their costs from the other party/insurer. 

Usually this is where you have caused the accident or damage, but it may also be where the other driver is uninsured or cannot be traced. (See also ‘Non-fault claim’ below)

Financial Conduct Authority

The FCA is the UK's financial watchdog. It regulates financial services companies, including insurance companies.

Fronting

Fronting is fraudulent and occurs when a driver declares to a car insurance company that he or she is the main driver, but it's actually someone else who is the main user of the car. 

An example of fronting would be where a parent buys their newly qualified child a car but takes out the policy in one of their names in an attempt to reduce the premium.

Find out more: What is fronting and why does it affect car insurance?

Insurance Premium Tax (IPT)

IPT is simply a government tax which is included in the price of your insurance.

Main driver

This is the person who drives the car the majority of the time (see 'Named driver' below).

Market value

The cost of replacing your car with one of a similar make, model, year, mileage and condition based on values at the time of the loss.

Modifications

Anything that changes the way your car looks, behaves or performs that isn’t factory standard. The list can include engine enhancements, spoilers and alloy wheels.

Motor proposal confirmation

These documents are a record of the information you provided at the start and renewal of your policy. The information on these forms must be correct.

Named driver

An extra driver who uses the car less often than the main driver. This might be a partner or son/daughter (also see 'Main driver' above).

Non-fault claim

A non-fault claim is where the insurer is able to recover all their costs from someone else, usually the person who’s to blame for an accident (see ‘Fault claim’ above).

No claims bonus (NCB)

A no claims bonus is a reward for motorists who don't make a claim on their policy. The discount is applied to the premium at renewal.

Owner

The owner of a vehicle is the person or organisation holding legal title to the car. For instance, if you're leasing a car, it's likely to be a finance company.

The owner is sometimes confused with the registered keeper, the person or organisation recorded by the Driver and Vehicle Licensing Agency as being the legal keeper of the car.

Period of insurance

The length of time the insurance applies for is known as the period of insurance.

Penalty points

If you're convicted of a motoring offence such as speeding, points will be added to your licence. You must tell your insurer about any driving convictions as soon as possible.

Policy excess

This is the amount you must pay towards any claim. There are two main types of excess:

• Compulsory excess: the amount set by your insurer that you have to pay in the event of a claim
• Voluntary excess: an optional amount on top of the compulsory excess that you can choose to pay towards any claims. A higher amount can result in a lower premium

Policy schedule

The policy schedule document notes the car that is being insured and the level of cover (eg third party or comprehensive).

Policy term

A policy term is the length of time your car insurance is valid for (generally 12 months).

Policyholder

The person whose name is shown on the schedule and the certificate of motor insurance. It’s not necessarily the main driver.

Premium

The premium is the amount you pay for your insurance, either on an annual basis or by monthly instalments.

Private motor car

For insurance purposes, a private motor car is a car made to carry up to eight passengers, designed solely for private use and hasn’t been manufactured or adapted to carry goods or loads.

Protected no claims bonus

This can prevent you from losing your no claims discount (see ‘No Claims Bonus’ above) if you make a claim, but there will be a limit to how many claims you can make within a set number of years.

Quote

When you contact an insurer and share your details you’ll be given a quote outlining the premium and terms and conditions for insuring your car. It’ll be valid at that price for a certain number of days.

Registered keeper

A registered keeper is usually the person who uses a car on a day-to-day basis. 

Broadly speaking, it's the person who is recorded with the Driver and Vehicle Licensing Agency (DVLA) as being the legal keeper of the vehicle and who is responsible for taxing it. 

The keeper will be notified of any traffic offences. This might be different if your vehicle is under a lease or finance agreement. If you are unsure, please check your V5 Certificate

Renewal notice

You’ll receive a renewal notice from your insurer around three weeks before your policy is due to expire, advising you of the price and terms for the coming year.

Road Traffic Act (RTA)

Sometimes known as the Road Traffic Law, this act came into force in 1930 and introduced compulsory third-party insurance (see below) which compensated the innocent victims of accidents. 

Offences for dangerous, reckless and careless driving and driving under the influence of drink or drugs, were also introduced.

Schedule

This document identifies the policyholder and sets out details of the cover provided (i.e. the sum insured, the discount if applicable, the period of insurance, the premium etc).

Settlement

This is the amount your insurer pays out for a claim.

Territorial limits

Some car insurance policies have a clause which states you’re only covered when driving within "territorial limits". It will also define those limits. 

Excluding Essential tier, Admiral policies cover you for driving in EU countries, plus Norway, Switzerland, Iceland, Andorra, Liechtenstein and Croatia.

Read more in our guide to driving in Europe.  

Third Party, Fire and Theft (TPFT)

Third Party, Fire and Theft cover insures you against fire or theft damage to your own car if it’s stolen, or any damage you cause to other people and their property.

Third Party Only (TPO)

Third Party Only cover is the lowest level of protection available. 

You’re covered for any damage you cause to other people and their property but your car isn’t covered for any type of loss or damage.

Total loss

Also known as a write-off, a total loss is when the cost to repair a car is too high when compared to the actual cash value of the vehicle.

Type of use

You must tell your insurer what you'll be using your car for so that they can assess the risk. Admiral has four main types of use:

1. Social, domestic and pleasure: visiting friends and families, shopping and generally going out and about
2. Commuting: driving to and from your workplace
3. Business: using your car to travel to places for work (eg visiting clients or different premises). Business use is divided into two categories: Policyholder only, and All drivers (the policyholder and any named drivers)
4. Carriage of goods for hire and reward: This covers anyone who’s on the road a lot working as a courier or delivery driver, with increased mileage and a lot of stopping and starting.

Voluntary excess

If you choose to pay more towards the cost of a claim, this is known as voluntary excess. It often results in a lower annual premium.

Windscreen cover

Many car insurance comprehensive policies include windscreen cover, but check with your insurer. 

If your car insurance doesn't have specific windscreen cover, you may be liable to pay the full excess in the event of a claim and you could lose your no claims bonus. 

Windscreen repair and replacement cover is included in Admiral’s comprehensive policies (excluding Essential tier) as standard and can be purchased as an optional extra on other policies.