Car insurance is compulsory in many countries, at least third-party insurance. And, in many countries, you can’t finance a car without first getting insurance. From all this we can gather that insurance is quite important in the motor vehicle industry. People without insurance will attest to its importance, especially after an accident of some sort has set them back a couple of grand. But there are many different types of cover out there and it can be tricky to determine your needs. Obviously, your driving habits will affect the cover you require, but so will things like cost. We look at some of the types of cover available.
- Third party insurance
This probably the most important type of insurance; the one which is most often compulsory. In a nutshell, you’re covered for damage you cause to another vehicle. Say a dog runs into the street and the driver three cars ahead of you slams on brakes. You’re in a steep downhill and even though you apply your breaks you still end up bumping the car ahead. Legally speaking, you’re liable for the damage to that car. Third party insurance ensures that you don’t have to pay for it out of your own pocket.
You would also be liable for any medical injuries caused, such as whiplash or a broken nose. You can choose to add bodily injury to your third party policy, so that insurance covers the injured party’s medical costs.
- Third party fire and theft
Basically, third party insurance with the added security of fire and theft protection for your own car. Fire includes lightning and explosions and theft includes hijackings.
- Comprehensive cover
As the name suggests, you’re covered for just about everything; fire, theft, hail, vandalism, collisions, potholes, etc. It’s relatively expensive, especially when compared to plain old third party insurance, but if you drive a lot of highways and byways and you live in a place prone to extreme weather, it’s well worth considering.
- Uninsured insurance
Sounds odd, doesn’t it? In this case, your insurance will pay for injury, loss or damage caused by someone who doesn’t have insurance and doesn’t have the means to pay out of pocket. It also comes in handy in hit-and-run scenarios when the person who caused the damage scarpers and can’t be found.
Optional extras
These are more or less standard policies but there are bells and whistles that you can add – at an additional premium.
- Rental reimbursement, so that when your car is out of commission after a collision or has been stolen your insurance will pay the cost of a rental car until you get your wheels back.
- Breakdown, so that your policy covers the costs of call-outs, towing and roadside assistance.
- International, if you’re going to travel beyond your borders you’re going to need to extend your cover because your policy will be invalid once you leave the country.
It doesn’t matter how careful you think you are as a driver, there are plenty of nutters on the road who make car insurance an absolute necessity. 
This guest post was written by Sandy Cosser on behalf of Direct Axis, a personal financial services provider, specialising in vehicle insurance, debt consolidation and personal loans.