Motor insurance is mainly about covering your liability to other people who may suffer loss as a result of your negligent driving. You are required by law to have that minimum insurance cover. It is a criminal offence to drive without it or to allow your car to be used by somebody else without the necessary insurance cover.

Most policies provide more than the legal minimum including varying amounts of cover in respect of losses that you may suffer to your own car; or certain limited benefits if you are injured in an accident.

The price you pay depends on a wide range of factors. Individual policies differ greatly from one another and it is difficult to compare them. To get the best value it is important to be clear about what you want and on what you are being offered.

The first step is to consider which sort of insurance you need. There are three basic types:

• Third party
• Third party, fire and theft
• Comprehensive.

Types of motor insurance
All motor insurance policies are taken out on specified cars. Often you are only covered when driving that specified car (generally your own). Limited third-party cover (for damage you do to somebody else or their car) may also apply when you are driving a car not owned by you, but this would not usually cover damage to that car.

Cover may also extend to other people driving your car. It may be limited to people named on your policy or it may extend to all drivers, usually with a restriction limiting cover to those aged over 25.

Many policies include an 'excess' clause under which you must pay the first portion of any loss or damage to your own property, up to perhaps a few hundred euro.

These general provisions may apply to any of the three basic types of policy.

Motor insurance - what determines the premium?

A wide range of factors determines how much you pay for car insurance.

The type of car

Engine capacity and condition may all be taken into account. There may be a discount for having an approved alarm or immobiliser system.

The age of the car

The value at which you insure your car generally has a modest effect on the amount of your premium. However, there is no point in insuring your car for more than it is worth, as you will only be paid the market value if it is destroyed.

Your age and gender

Young drivers pay more and in the case of male drivers "young" can mean up to age 30. Insurance companies take into account risk factors associated with certain age groups or genders. Premium loadings are generally lighter for young women.

Where you live

Premium levels can vary depending on the area in which you live. There may also be a reduction if you keep the car in a garage at night.

Driving experience

This includes not only whether you have a full or provisional licence but also the number of years you have been driving. See also 'no-claims bonuses'.

No claims bonuses

These give you a percentage reduction in the cost of your insurance premium depending on the number of years you have without making any claims.

It can take five years to get a full no-claims bonus. Driving experience as a named driver on someone else's policy may or may not be included in the calculation. Advanced motoring qualifications may be taken into account.

For an extra premium you may be able to protect your no-claims bonus, in other words you retain it even though you make a claim.

The question of who was to blame for an accident is not relevant in the loss of your bonus.

Your discount may be lost once a claim is made against you even if a court held that you were not at fault because your insurers will have incurred costs in defending the claim made against you.

Occupation

People in some jobs are deemed to be more prone to motor accidents and may be charged extra.

What you use your car for?

Premiums are lowest if use is restricted to social, domestic and pleasure purposes (this includes driving to and from work). If you use your car for business purposes you must declare this fact or you risk invalidating your insurance.

Who is covered?

Extending the cover to named drivers may not result in an increase in premiums. It depends on the drivers named, their age and driving experience. Extending the cover to unnamed drivers, even when restricted to those aged over 25, will always cost more.

'Open driving'

This means that anyone driving your car is covered by your policy, and was more common in the past. Such "open driving" is now rare in the Irish market.
Driving other cars 'extension'

It may cost more if you want to have insurance cover when driving cars owned by other people. The cover is usually restricted to third-party liabilities (for damage you do to somebody else or their car) and does not include cover for damage to the car that you were driving.

Convictions and penalty points

If you have been convicted of a serious motoring offence such as dangerous or drink driving you can expect to pay more for your insurance.

Speeding offences and the incurring of penalty points may or may not affect your premium level depending on the circumstances and the insurance company.

Do not try to reduce your premium by concealing such relevant information or you risk invalidating your insurance and breaking the law.

Excess

Premiums are lower if you have the type of policy where you pay the first portion of any claim for damage to your own car. This amount, known as the 'excess', varies. The higher it is the lower you pay for your insurance.

Insurance companies gain in two ways:

They reduce the amount they have to pay out; and
They save the administration costs on claims below the excess level - since there is no point in making them.

Extras

Insurance Companies may pay for some ‘extras’ without you having to pay any excess. These are things such as:

Cover for windscreen breakage;
Car hire expenses if your car is off the road;
Extended cover for property in the car;
Small amounts of cover for personal injury to yourself; and Some cover for medical expenses.