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Car Hire Insurance
To drive on any public road in the UK without a valid insurance policy, whether itís in a hire car or not, is illegal, and if caught you can be fined, have penalty points put on your licence, or even be banned from driving.
Car insurance is compulsory in the UK because when you are driving you could injure someone or cause damage to a personís property, and by law you must be able to compensate the third party. To ensure you can cover the cost of this compensation you must have insurance.
There are three types of insurance in the UK Ė Third Party Only, Third Party, Fire and Theft, and Fully Comprehensive, which are explained below.
Third Party Only is the minimum type of insurance required by UK law. It is also the cheapest but only actually covers the cost of damage and compensation to the other person (the third party). Therefore the insurance company will not pay out for repairs to your hire car, you must cover the cost of any damage to the hire car yourself. In addition, you will not be entitled to any compensation if you are injured and cannot work.
Third Party, Fire and Theft offers the same cover as above but also offers compensation for you if your hire car is stolen or damaged by fire. However, if you are to blame for an accident, you'll have to pay for the repairs to your own vehicle.
Fully Comprehensive Cover is the most popular type of car insurance in the UK as it offers the same as third party, fire and theft, along with cover for any damage to your hire car in an accident that is your fault. You will also be able to make a claim for compensation in relation to any injuries you may incur.
As part of your insurance policy you may be asked to pay an excess, which is a set amount you pay out if you make a claim for loss of or damage to your car. If the accident is not your fault you can usually reclaim the amount from the person at fault, while your insurance company may offer you the choice of voluntary or compulsory excess.
Compulsory excess is now fairly standard with a lot of insurance companies, who will only provide insurance if you agree to pay the first amount towards any claim. Young drivers sometimes have to pay as much as £500, but it is usually in the region of £100 to £200. There is typically a compulsory excess for fire and theft of £100 on every policy.
Voluntary excess on the other hand is an amount you agree to pay above the compulsory. These days a lot of insurance companies will offer you a discount if you agree to pay towards the cost of any claim.
If you are unfortunate enough to be involved in an accident that is either your fault or where the insurance company cannot recover costs from any other person in the accident, you will make what is known as a fault claim.
A fault claim can reduce your no claims bonus, which is awarded at the start of each insurance year if you have not made a claim in the previous 12 months. The no claims bonus, which goes up to a maximum of five years, keeps the cost of your insurance down.
However if you have an accident and have to make a fault claim, you can lose your bonus and the cost of your next insurance policy is likely to go up. If you have four years or more no claims bonus you can opt to pay extra (usually £50) to have your bonus protected, which means you are allowed to make up to two fault claims in a three or five year period without reducing your no claim discount.
In relation to hiring a car in the UK, most car hire companies have mandatory third party cover, damage waiver and theft waiver on all their hire cars, but some firms allow you, at an extra charge, to upgrade this to fully comprehensive cover.
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