With over 100 insurance companies offering motor insurance in England, Wales and Scotland, it is no surprise that motor insurance has become a fiercely competitive business.

Motor insurance is often assumed to protect the policy holder’s property, their financial investment against loss due to theft or traffic accidents. The true purpose of motor insurance is in fact to protect the policy holder against any legal costs they may face should they be involved in an accident which may cause financial, physical or property damage to another person.

Motor insurance is compulsory in Britain. The Law currently requires all motorists to be insured so that they can meet their legal liabilities if they injure another person or damage another person’s property. Anyone caught driving without motor insurance in the UK may face an IN10 conviction which could lead to a driving ban, a possible 6 points on their license, a minimum £180 fine and in some cases a jail sentence.

Motor insurance is generally split into 3 categories, or types of policy: Third Party Only (TPO), Third Party Fire & Theft (TPFT) and Comprehensive (often referred to as fully comp). Third Party Only policies are the most basic and hence usually the cheapest. Comprehensive, like its name suggests, includes near enough everything and hence tends to be the most expensive.

So what policy is right for you? Third Party Only covers the policy holder against damage to a third party’s property or to the third party themselves. This basically means if you are involved in an accident with another car and cause damage to that car or to the occupants of that car, you TPO policy will pay for the repair to that other vehicle and will pay for any medical expenses of the occupants of that other car and any passengers in your car (this does not include you!). Your TPO policy does not cover the costs of repairing your own vehicle nor any medical expenses should you be injured. Nor does it cover any costs should your car be stolen or set on fire (fire & theft).

Third Party Only polices are often taken out by people with inexpensive cars, especially young or first time drivers. If you are a young driver (under the age of 25) you may find your motor insurance quotes to be a lot higher than for people aged over 25. If you are a young driver with an inexpensive car then TPO may be your best option. However should you be a young driver with a more expensive car you may want to look at Third Party Fire & Theft or Comprehensive policies.

Hint: Imagine yourself driving in your current vehicle and you are involved in an accident in which your car is damaged and you yourself are injured. Do you mind that the costs of repairing your vehicle are down to you? Does it bother you that your motor insurance company is not going to give you any money towards your own repairs? Are you going to suffer any financial loss (e.g. loss of earnings, medical expenses etc) due to your injury? Do you want your insurance policy to help compensate you for this financial loss? If you have answered ‘yes’ to any of these question then Third Party Only policies are probably not for you.

Third Party Fire & Theft (TPFT) as its name suggests is exactly the same as TPO except that a TPFT policy will pay out in the event that your vehicle is stolen or sets on fire (unlike TPO).

Comprehensive car insurance tends to be the most expensive policy however it covers more things that TPO or TPFT. Fully comp insurance is often taken out by more experienced drivers, drivers with more expensive cars, or those with an amount of no claims bonus (which may lower the cost of fully comp). However anyone can take out a fully comprehensive policy, it is up to the driver to decide if this is right for them, is it a good financial move in relation to the value of their vehicle and their budget etc.

A comprehensive policy includes all the features of TPO and TPFT; it will pay out for all third party damages and injuries, and in the event of your vehicle being stolen or set on fire. But it will also pay for any damages to you or your vehicle (regardless of whose fault the accident was). Comprehensive also covers you should you incur an injury. Some fully comp policies will cover medical expenses up to a certain amount (value of which may vary between companies).

When browsing for car insurance you need to keep in mind what will be best for you. Most companies will offer additional extras to their policies such as Motorist Legal Protection (MLP), a free courtesy car should your vehicle need to be repaired (this are usually available on fully comp only), windscreen repair (so if you should ever need to repair/replace a windscreen this will not affect your no claims bonus), no claims bonus protection (protecting your no claims bonus should you make a claim) among others, it is always interesting to see what additional options are available when you purchase motor insurance but be aware that any additional cover may increase your insurance premium. Some if these options are sometimes included in fully comp insurance but it does depend on the insurance company themselves. Before you take out any motor insurance be sure you understand exactly what you are getting for your money and what is covered.