A Glossary of Car Insurance Terms

Key things to know

1. Quotes offer three levels of cover: third party only, third party fire and theft, and comprehensive, which covers your car even when the accident is your fault.
2. Social, domestic and pleasure cover does not automatically include commuting, and driving to meetings or multiple sites needs business use.
3. The excess is the part of a loss you pay yourself, usually split into a compulsory amount set by the insurer and a voluntary amount you choose.
4. The Certificate of Motor Insurance is the legal evidence of your cover, and the IPID summarises what the policy includes.
5. Driving without valid insurance can mean a £300 fixed penalty and 6 points, or an unlimited fine and 6 to 8 points if the case goes to court.

Car insurance quotes, policy documents and renewal notices come with a vocabulary of their own. Abbreviations such as SDP&C and IPID sit alongside words like excess and liability, and guessing at their meaning is a poor way to choose cover. This glossary explains the terms drivers meet most often, in plain English. Where insurers differ, your own policy documents have the final word.

Levels of Cover

Quotes ask you to pick one of three levels of cover. The label changes what the insurer will pay for, so it is worth knowing exactly what each one means.

• Third party only. The most basic of the three. It covers damage or injury to other people involved in an incident; it generally does not pay for damage to your own car.
• Third party, fire and theft. Third party cover with the addition of a payout if your car is stolen or damaged by fire. The policy wording sets the exact terms.
• Comprehensive cover. Covers your vehicle as well as any other vehicle or injured person involved, even when the accident is your fault. The name does not mean everything is included; every policy has exclusions, and what the policy does not mention will not be covered.

Drivers and Classes of Use

Named driver. Anyone added to your policy as someone who drives the insured car, as distinct from the main driver. Adding one changes the risk on the policy and can move the premium up or down. Our guide to adding a named driver explains the process and the paperwork.

Social, domestic, pleasure and commuting (SDP&C). The class of use that covers everyday driving, such as shopping, visiting family and holidays, plus the journey to and from your usual place of work. Plain social, domestic and pleasure cover does not automatically include commuting, and commuting cover only stretches to your usual workplace; a meeting, conference or seminar during the working day needs business use. If you are unsure what your policy includes, check your certificate and policy documents, then ask your insurer to confirm.

Watch for: Driving without valid insurance is an offence. The police can issue a £300 fixed penalty and 6 penalty points, and if a case goes to court the fine is unlimited with 6 to 8 penalty points. Police can also seize the vehicle.

Business use. Covers using the car as part of your job, such as driving to several sites in one day. Moving your own stock or your employer’s goods is typically included, but courier and delivery work is not. Definitions vary from insurer to insurer, so check before you buy.

Carriage of goods for hire and reward. The class of use for delivering other people’s goods, such as parcels or food, for couriers or online retailers. It does not cover carrying passengers for payment, such as through a ride-hailing service, and it does not cover the goods themselves. Your employer may already provide this cover, so ask before paying for it twice.

Excess, Premiums and Discounts

Excess. The part of any loss you must pay yourself before the insurer contributes. Policies usually split it into a compulsory amount set by the insurer and a voluntary amount you choose, and a higher voluntary excess generally lowers the premium. Our guide to compulsory and voluntary excess shows how the two parts work together.

ABI insurance group. Every car make and model sits in a group from 1 to 50, where 1 is the cheapest to insure and 50 the most expensive. The group reflects the risk the car represents, including its value, its acceleration and how likely it is to be stolen or crashed.

No-claims discount (NCB). A discount built up by going years in a row without making a claim. A claim can reduce it, which is one reason some drivers pay to protect it. Our article on how the no-claims discount works explains the rules and the trade-offs.

Policy Documents and Mid-Year Changes

Certificate of Motor Insurance. The document that proves your cover is legally in place and shows the dates it runs from and to. Check that everyone who should be covered appears on it.

IPID. The insurance policy information document you receive when you take out a policy. It summarises your cover, the length of the policy and other key details in a standard format.

Declaration. Your statement of correct and truthful information about yourself and the policy details. If the declaration does not match how the car is actually used, the cover may not hold up when you claim.

Mid-term adjustment. Any change to your original policy during the year, sometimes called an amendment. Changing your address, your name or your vehicle all count, and you should tell your insurer straight away.

Cooling-off period. The window after you take out a policy in which you can cancel it for any reason. Cancelling at other points in the policy year can bring charges, which your documents should set out.

When You Claim

Claim. A formal request to your insurer for a payment or repairs after a loss or incident, such as a car accident.

Liability. Who is found to be at fault and therefore responsible for the claim. Liability matters most after a collision involving two or more vehicles.

Approved repairer. A garage approved by the insurer to assess, repair or store damaged cars. Because repair costs are agreed between the insurer and the garage in advance, using an approved repairer usually means the insurer covers the full cost of the repairs.

Act of God. An event caused by nature with no driver to blame, such as a flood or lightning strike. Whether these events are covered depends on the policy, so read the exclusions section of your documents.

Broker. A firm that arranges cover from a range of insurance companies rather than being tied to one. A broker is separate from your insurer, but often provides services connected with your policy.

If a Term Is Still Unclear

Start with your own paperwork. The certificate and policy documents answer most questions about who is covered and for what, and insurers must set out what the policy excludes as well as what it includes. If the wording still leaves you unsure, contact your insurer and ask them to clarify the term before you rely on it. The Financial Conduct Authority’s website also carries a glossary of insurance terms.

If a disagreement with your insurer cannot be resolved by talking, some contracts specify arbitration, a formal alternative to going to court, as the route for settling disputes. Where a claim has been turned down and you believe the decision was wrong, our guide to challenging a rejected claim sets out what you can do next.

Before you accept your next quote or renewal, read it alongside this glossary and ask the insurer to explain in writing anything that does not match the definitions here.

Questions answered

Does social, domestic and pleasure cover include the drive to work?
Not automatically. You need a class of use that includes commuting, and even then it usually only covers travel to your usual place of work. Check your certificate and policy documents, and ask your insurer if you are unsure.

What is the difference between compulsory and voluntary excess?
The compulsory excess is set by the insurer, while the voluntary excess is the amount you choose to add. A higher voluntary excess generally lowers the premium, but it also means paying more yourself if you claim.

Is comprehensive cover always the most expensive option?
Not necessarily, so compare the cover provided and not just the price. A cheaper quote can leave gaps, and what a policy does not mention will not be covered.

What happens if I drive without insurance?
It is an offence to use a motor vehicle on a road without insurance. The police can issue a £300 fixed penalty and 6 penalty points, and if the case goes to court the fine is unlimited with 6 to 8 penalty points. The police can also seize the vehicle.