21 common car insurance terms explained
Caoimhe Bermingham
Staff Writer

To remove any confusion surrounding car insurance, we have explained the most common car insurance terms you will meet when selecting cover for your car.

This article is the sixth guide in our eight-part series on how to get the best value car insurance on bonkers.ie. It will help you understand the most important and complicated terms you may come across while searching for an insurance policy for your vehicle. 

All the definitions provided will be explained in a simple and easy to understand manner so you can become an expert in car-insurance related jargon. 

You can find the rest of the guides in our car insurance series linked at the end of this article.

1. Additional extras

When you purchase a car insurance policy, you’ll often be given the option to add additional benefits for an extra cost.  Add-ons available to you will depend on what kind of policy you’re taking out; third-party-only (TPO), third-party, fire and theft, or comprehensive.

Take a look at this guide to see what optional extras are available for car insurance.

2. No claims bonus protection

This car insurance add-on protects you from losing your no-claims bonus should you make a claim, or if one is made against you. 

Certain exclusions or limitations can apply but they will be outlined in your policy documents. 

3. Step-back bonus protection 

This add-on protects you from losing your entire no claims discount if you make a claim or someone makes a claim against you. The amount that you lose on your no claims bonus discount will depend on your policy and the ‘step back rate’ you agree to. 

4. Personal accident cover 

Personal accident cover will compensate you if an accident occurs while driving that results in serious bodily injury or death.

If the accident was the fault of a third party, then the third pay and their insurer will compensate the injured driver. 

5. Breakdown assistance 

This provides you with 24-hour roadside assistance if your vehicle breaks down. If the roadside assistance isn’t successful, your insurer will bring your motor to the nearest garage capable of fixing the issue. 

This optional extra is included in comprehensive cover, but may not be included in the cheaper policies. 

Home start breakdown protection is another form of breakdown assistance, which covers you if your car breaks down at or near your home. 

6. Accidental damage cover

This type of cover protects you when you need to make a claim for any accidental damage made to your car when no other vehicle was involved.

If you don’t have comprehensive cover, you should consider adding this to your policy for an extra cost.

7. Compulsory excess

When you take out car insurance, you’ll be subject to a compulsory excess fee. This set fee determines the amount of money you must contribute towards repairing your car should you make a claim. The balance will then be paid by the insurer.

If you don’t pay this, you won’t receive any payout from your insurance company. 

8. Voluntary excess 

This allows you to increase the excess amount you pay if your car is damaged. It is added to the compulsory excess fee you must pay. 

Increasing your excess can lower the cost of your insurance premium. Therefore, the higher your excess, the lower the cost of your premium, and vice versa. 

9. Class of use

Insurers will require you to state what you use your car for. The class of use you select will have an impact on the cost of your car insurance premium.

Class of use options will be:

  • Domestic purposes
  • Commuting and domestic purposes
  • Business purposes 

10. Fault claim vs. non-fault claim

A fault claim is when you claim for an accident or loss where you are to blame ( i.e. you are liable), or where you or your insurer can’t recover costs from somebody else.

On the other hand, with a non-fault claim, your insurer can recover the cost of the claim from someone else.

11. Indemnity 

Indemnity offers protection or security to a car insurance policyholder against any loss experienced that may come from their car being damaged. The insurance company will have to compensate the policyholder for these costs. 

12. Insured value

The insured value of your car helps to calculate your car insurance premium. When you are taking out your policy, you’ll be asked what the value of your vehicle is. This is what you could reasonably expect to pay for the car today.

Vehicle value should take into account relevant factors such as the car’s age, mileage, and general condition.

13. Black box 

A black box is a small electronic device that is fitted into your car by your insurance company to monitor your driving habits. A black box uses telematics technology to track your speed, rate of acceleration and what time of day you drive. 

Adding a black box to your car is popular amongst younger and more inexperienced drivers as it can help to reduce the cost of your insurance premium.

14. Penalty points 

Penalty points are used to enforce the rules of the road and indicate whether a driver has committed driving offences. 

Having penalty points on your licence will cause the price of your premium to increase or you may be denied car insurance altogether. 

Check out our guide to discover 6 reasons why you may be refused car insurance.

15. Fronting 

This type of insurance fraud occurs when a driver falsely informs an insurance company that they are the main driver of a car when actually somebody else is. 

This is usually seen when a more experienced driver ‘fronts’ as the main driver of a vehicle, for a less experienced driver, so they can avail of a cheaper car insurance premium.

To avoid making this mistake and others, read our guide on the 10 most common mistakes people make when purchasing cover for their car. 

16. Geographical limits 

Geographical limits refer to the territorial areas or locations in which your insurance policy does not cover your car if you were to be in an accident. For instance, your insurer may provide you with cover in Ireland and the UK, however, if you were to drive your vehicle elsewhere your policy would not be valid. 

The geographical limits of your car insurance will depend on the insurance company and your policy. 

17. Modification

Newly manufactured vehicles must meet strict safety standards. When a change is made to the original design, it is known as a modification. Examples include changing the engine or suspension system.

Modifications must be carried out to an appropriate safety standard. If you modify a vehicle, it may be more difficult to insure. 

18. Immobiliser

An immobiliser is an electronic security device that prevents a vehicle from starting unless the correct key or key fob is used. Having an immobiliser can help lower your motor insurance costs.

19. Uninsured losses

An uninsured loss is an item that is not covered by your insurance policy. Whether a loss is covered by an insurance policy depends on the terms of your policy and local law.

Uninsured losses occur when you’re not at fault for a motor accident. You have a legal right to claim back your losses from the person who caused the accident.

Uninsured losses may include your policy excess and personal injury damages.

20. MIBI Levy

The Motor Insurers' Bureau of Ireland (MIBI) Levy is in place to compensate victims of road traffic accidents caused by uninsured and unidentified vehicles. 

The MIBI is also liable for third party motor insurance claims in the event that an insurance company goes into liquidation.

21. ​​New for old replacement

In the event of making a claim, new for old replacement means you’ll be given a vehicle with the equivalent value of your car that has been damaged, lost, or stolen. 

The value of your car will be assessed based on its state before any incident occurred. However, many insurers will only do this for cars less than one-year-old.

Find the best value car insurance on bonkers.ie

At bonkers.ie, our car insurance service helps you find the best cover for your car within minutes. 

Simply head over to our car insurance page and tell us about your driving history and your vehicle. 

To learn more about the ins and outs of this easy and free-to-use tool, read our step-by-step guide on our car insurance service. 

But why stop there? bonkers.ie offers a range of comparison services across energy, broadband, banking, and other insurance products that will help you find the best deals on the market and reduce your household costs. 

Get familiar with car insurance 

It’s important to be knowledgeable about car insurance if you’re looking to renew your policy or purchase it for the first time. We have compiled a list of helpful guides that cover everything you need to know when looking for cover for your car.

Take a look at our other blogs and guides to stay up to date on insurance-related information and advice.

Contact us today

Are you still unsure about the terms surrounding car insurance? If so, get in touch with our team today. You can message us on Facebook, Twitter, and Instagram