1 - Motor Insurance

Question 1

What are the main four levels of standard policy cover available?

Answer 1

1. Road Traffic Act only (RTA only)
2. Third Party only (TPO)
3. Third Party, fire and theft (TPFT)
4. Comprehensive

Question 2

What is the minimum cover REQUIRED to comply with the Road Traffic Act 1988?

Answer 2

• an unlimited amount for bodily injury or death caused to third parties, including passengers;
• £1.2m for loss of or damage to property belonging to third parties;
• claimants’ costs and expenses of handling the claim;
• charges for any hospital or emergency medical treatment;

Question 3

What are the requirements of the Third EU Motor Insurance Directive?

Answer 3

1. Where a vehicle is used in another EU country, the insurance must extend to provide the MINIMUM legal requirement of cover in that country or in the UK, whichever is greater.
2. Cover for liability to those employed by the insured when travelling as passengers in the insured’s vehicle, but not the driver, must also be provided.

Question 4

What is the minimum level of cover that is normally PROVIDED by UK motor insurers?

Answer 4

Third party only cover

Question 5

What cover is provided with Third party only?

Answer 5

In addition to providing RTA cover, a third party only policy provides:

• cover for vehicles while not on a road or in a public place within the UK, the Isle of Man or the Channel Islands;
• a higher limit of third party property damage cover (£20m compared to £1.2m of RTA cover);
• cover for anyone driving or using the vehicle with the insured’s permission and permitted to drive by the policy (may be restricted to named persons);
• indemnity to passengers, employers or business partners of the insured, should they be held responsible for an accident;
• legal costs for defending a claim;
• limited legal representation costs following a prosecution for a motoring offence which may give rise to a claim; and
• cover for the insured while driving another car that does not belong to them;

Question 6

What is specifically excluded in Third party only cover?

Answer 6

• Damage to the insured’s own property (incl. the vehicle)

- Liability covered by any other insurance policy.

Question 7

What cover is provided for Third party, fire and theft (TPFT)?

Answer 7

In addition to the cover provided by third party only policies, third party, fire and theft policies provide cover for the cost of repairs, or compensation if the insured vehicle is:
• damaged by fire, lightning or explosion;
• damaged during attempted theft, or whilst stolen; or
• stolen and not recovered.

Question 8

What is excluded in Third party, fire and theft (TPFT)?

Answer 8

In addition to the two exclusions contained in third party only cover, fire and theft cover specifically excludes ‘LOSS OF USE’ (i.e. to use taxis whilst their car is being repaired)

Question 9

What cover is provided for Comprehensive?

Answer 9

In addition to the cover offered under a third party, fire and theft policy, comprehensive policies also cover ACCIDENTAL & MALICIOUS DAMAGE to the insured’s car;
Small amounts are also likely to be included as standard for:
- personal belongings and clothing (cover for around £250),
- personal accident cover and medical expenses.

Question 10

List the common extensions in addition to the standard motor policy cover:

Answer 10

1. Glass breakage (included in standard comprehensive policy but for fairly modest sum)
2. Personal belongings and clothing (included in standard comprehensive policy but for fairly modest sum)
3. Young additional drivers
4. Loss of use
5. Personal accident benefits (additional to those provided as standard in the comprehensive policy)
6. Foreign use
7. Elections
8. Racing, competitions, rallies and trials
9. Caravans and trailers
10. Breakdown cover
11. Motor legal expenses (This provides cover following a motor accident or incident where the insured is not to blame)
12. Joint policies
13. Multi car policies

Question 11

List the main exclusions under a private motor policy:

Answer 11

1. Use of the vehicle outside the scope of cover (e.g. using a car for business when the policy only covers social use);
2. Driving by unlicensed drivers or drivers who are not insured by the policy;
3. Contractual liability;
4. War, radioactive and nuclear risks, sonic bangs, pollution and contamination (unless from a single identifiable event); and
5. Riot and civil commotion in Northern Ireland

Question 12

What is meant by the term ‘No claims discount’

Answer 12

All insurers offer a no claims discount (NCD) as standard. Rates vary, but are normally in the region of 12% for one year free of claims, up to 50% for five or more years.

Question 13

What happened with no claim discount if there is a claim?

Answer 13

The entitlement normally steps back by two years if a claim is made.

Question 14

On what basis would you expect motorcycle insurance to be arranged?

Answer 14

Cover is arranged for a specified motorcycle

Question 15

What are the levels of cover for motorcycle insurance?

Answer 15

It covers any type of mechanically propelled cycle, including mopeds.
The options for the four levels of cover are the same as motor:
Road Traffic Act (RTA) only;
Third party only (TPO);
Third party fire and theft (TPF&T); and
Comprehensive.

Question 16

What are the differences between the cover provided under a motorcycle policy and the cover provided under the private car policy?

Answer 16

1. Theft of accessories or spare parts is not covered unless the motorcycle itself is stolen at the same time;
2. The liability section generally indemnifies the insured, others permitted to drive the motorcycle and users of the motorcycle for social domestic and pleasure purposes;
3. There are no personal accident benefits, medical expenses (other than RTA emergency treatment fees) or personal effects cover.

Question 17

What are optional extensions for motorcycle insurance?

Answer 17

1. Trailers (subject to additional premium)
2. Riding other motorcycles
3. More than one cycle insured
4. Invalid carriages (mobility vehicles)

Question 18

What are the main types of vehicles for commercial motor insurance?

Answer 18

1. Goods-carrying vehicles
2. Passenger-carrying vehicles (buses, hire cars, coaches)
3. Agricultural and forestry vehicles
4. ‘Special types’ which include ambulances, cranes and fork-lifts.

Question 19

What is commercial motor insurance primary concerned with?

Answer 19

Risks attached to to the vehicle themselves while being driven, left parked or being carried by sea or air between different parts of the UK. Cover does not extend to any goods being carried by the vehicle (this is subject to different cover ‘goods in transit’).

Question 20

What is the range of cover for commercial polices?

Answer 20

The range of cover for commercial polices is the same as for private motor policies, however, the scope of the third party liability cover differs.

Question 21

What are the main differences between the commercial motor policy and the private motor policy?

Answer 21

1. Whereas a private motor insurance policy provides a £20m limit, commercial policies usually have a limit of £5m. For general haulage, this may be as low as £1.2m. This can usually be increased on payment of an additional premium.

Question 22

Why is a limit of liability necessary?

Answer 22

A limit is necessary because of the nature of some commercial vehicles which, due to their size and weigh and the type of property they might be carrying, could cause considerable damage.

Question 23

What is covered under a commercial vehicle policy?

Answer 23

1. Loading or unloading (In the case of the driver or attendant this extends beyond the boundaries of the carriageway.)
2. Indemnity to driver
3. Indemnity to user (The insured may allow someone to use (but not necessarily drive) the vehicle for social, domestic and/or pleasure purposes.)
4. Indemnity to passengers (This is included as standard in a commercial policy and covers negligent acts by passengers (e.g. opening a door into the path of a passing vehicle).
5. Legal expenses
6. Loss of or damage to the vehicle (spare parts and accessories to while they are on or in the vehicle.)
7. Trailers

Question 24

What are the optional extensions to commercial motor insurance?

Answer 24

1. Windscreen cover (is normally included automatically. If it isn’t, or if it is of limited value, it can usually be added as an optional extension)
2. Medical expenses, personal accident benefits and personal effects
3. Indemnity to hirers
   a) Without an additional premium - insurers will cover loss, damage or liability arising from the negligence of the insured or their employees while the vehicle is in the custody or control of a hirer.
   b) Subject to an additional premium - insurers will cover the hirer for loss, damage or liability arising from their negligence or that of their employees.
4. Indemnity to principal
5. Carnivals
6. Sheets and ropes (These items are used to secure loads and may be stored on the vehicle when not in use; Sheets and ropes may be covered under a goods in transit policy, rather than a motor policy.)
7. Loss of use (Up to 80% of leasing or hire charges if the insured is without their vehicle following accidental damage, fire or theft anywhere in GB or Western Europe.)
8. Loss of tools in transit

Question 25

What are the limitation for commercial motor policies?

Answer 25

The exclusions under a motor cycle insurance and commercial motor policy are basically the same as for a private motor policy.
However, under a commercial policy’s ‘use of the insured vehicle’ exclusion the insurer will not be liable if the vehicle is:
- used in any way not stipulated in the policy schedule
- engaged in racing, pace-making, reliability trials or speed testing