Getting to grips with car insurance terms

When buying car insurance, it is very important to understand what you are getting.

The cover offered by different policies can vary widely as, of course, can the price.

However, unless you are an expert, some of the terms used by car insurance providers can seem confusing and irrelevant - making it difficult to get to grips with the small print.

Fortunately, MoneySupermarket is here to bust even the most oblique car insurance jargon right out of the water and help you to make an intelligent and informed choice.

Jargon buster

ABI group - The Association of British Insurers (ABI) ranks all vehicles according to the risk being taken on by the insurer that offers cover. And the group into which it puts your car will have an impact on your premiums. Smaller, cheaper to repair cars are placed in the lower ranked car insurance groups, while valuable, high-powered sports cars are placed in group 50 - the highest-risk group.

Approved repairer - Many insurers prefer for repair work to be carried out by a garage that they know and trust. These are known as approved repairers.

Comprehensive - A comprehensive policy is the most complete level of car insurance cover that you can currently purchase. It is also often called "fully comprehensive", but that is a slight misnomer - each company has a different idea of what "comprehensive" actually means. You can compare fully comprehensive car insurance deals on MoneySupermarket, but remember to check what each insurer includes in this level of protection so as to be sure that you are getting what you expect.

DOC cover - DOC stands for Driving Other Cars. If this is stated as included in the terms and conditions of a policy, you are therefore covered to drive cars other than the one mentioned in the policy.

Fault/no-fault claim - When a no fault claim is made, this is a situation where you are not at fault, meaning that your insurer can claim back the costs from a third party. A fault claim, on the other hand, is one in which the company cannot claim expenses back from the party at fault, often because he or she was driving without insurance.

Fully Comprehensive - See Comprehensive.

Indemnity - An indemnity payment ensures that the policyholder is in the same financial situation after an incident as he or she was directly beforehand.

IPT - This is tax which is paid on all insurance policies and is usually charged at a base rate of about 6% for the vast majority of insurance types. However, this can be at a higher rate of 20% for certain forms of motor insurance.

Loss adjuster - A loss adjuster is an insurance company employee who investigates claims. It is his or her job to ensure that they are legitimate and that the insurer is not paying over the odds.

Material fact - A material fact is one that could invalidate a policy should you fail to disclose it when taking out a policy. A driving conviction would be an example of a material fact that you must inform an insurer about - even if you know that it will increase your premiums.

Quote - A car insurance quote is the price that an insurer puts on offering you cover.

SD&P - Stands for Social Domestic & Pleasure. This refers to what the car will be used for. If you are only going to driving for non-work purposes, SD&P is the cover you need. However, if you drive are going to be using the vehicle to drive to work you will then have to add commuting onto this. You are also required to inform the insurer if driving is a part of your job.

Settlement - A settlement is the end result once a claim has been dealt with. In most cases, the settlement will be the payment that you receive from your insurance company.

TPFT - Third party, fire and theft (TPFT) cover insures you against the theft of or fire damage to your own vehicle, as well as any damage or injury you cause to third parties while driving your car. Read more about third party, fire and theft car insurance cover in our dedicated guide.

TPO - Third Party Only cover is the lowest level of cover that you can legally have when driving on the UK's roads. It covers you for damage to other people's property and personal injury claims. However, any loss suffered by you personally is not included in cover of this kind. You can compare third party car insurance quotes on MoneySupermarket.

Underwriter - An underwriter is an insurance company employee who decides whether or not the company should take you on as a customer and, if so, how much it should charge you. He or she does this by evaluating the risk involved in covering you and your vehicle.

Under-insurance - When a car is insured for less than what it is worth, this is known as in the industry as under-insuring. It may result in a cheaper initial premium, but this could well prove to be a false economy if you need to make a claim as the pay-out from the insurer will not cover the actual value of the vehicle. So if, for example, your car is worth £10,000, but was only insured for £8,000, your insurer could refuse to pay 20% of any claim.

ULR - Uninsured loss recovery cover, more commonly known as legal expenses cover, allows you to make a claim for any money spent on legal representation should an incident end up in the courts.

Uninsured losses - Uninsured losses are items not covered by your car insurance. These generally include car hire charges and legal costs.

Source: MoneySupermarket