Competition in the Car Insurance industry ensures there is huge choice for the car owner. Insurance is required by law and can cover costs incurred through accidents, damage and loss/theft of the vehicle. Insurance companies normally offer three kinds of cover and tailor their charges to the customer and the type of vehicle. The price of insurances varies dramatically and is based on many factors such as age and gender of the customer and where the car is kept at night.

The three kinds of cover are: Third party only, Third Party Fire and Theft and Comprehensive (Fully Comp). The categories often differ in price and this reflects their level of cover.

Third Party Only offers the lowest level required by law and insures against damage and injuries that a driver causes to an individual (third party) or their property should an accident occur. However it does not provide payment towards injury or damage to the insured person and consequently this is usually the cheapest level of cover.

Third Party Fire and Theft is similar to Third Party in that it provides coverage for injuries to others but it extends the policy and protects the owner's car should it be stolen or damaged by fire. Individuals with this cover would still have to pay for damage to their own vehicle that resulted from an accident.

The final level of cover is Comprehensive and is often the most expensive. This is because Comprehensive provides cover offered in the previous categories (coverage for third parties and if the vehicle is stolen or damaged) with the addition of coverage to the driver's car if it is damaged in an accident regardless of who caused it.

Comprehensive can also include insurance for loss or damage to personal items in the vehicle and for medical expenses resulting from an accident. Individuals taking out Comprehensive insurance would normally be insured to a third party level if they drove another car as long as it was insured and the owner gave permission. This has changed on some policies and it is wise to check the small print in case coverage does not extend to other vehicles.

Choosing which level of cover depends on the budget of the buyer. An insurance company will collect details from the driver and the price will be adjusted accordingly. Companies will consider: the make, model, mileage, and market value of car; address and postcode of driver; miles travelled per year; driver's name, age, job and whether there are any convictions such as speeding tickets; record of No Claims Bonus; if there are security alarms in the car; whether the car is parked off-road at night.

Generally the policy will cost less if there is a lower risk of injury, damage and theft of the car. However, drivers tend to pay less if they are female, over 25, the car has a small engine, parked off-road and no claims have been made. Savings can be made by attempting to haggle down prices with insurance companies, improving the security of the car, limiting annual mileage and paying more towards the excess that is offered. An excess is an obligatory sum of money paid when a claim is made but insurance costs can be reduced if the driver offers a higher excess.

Younger drivers can take a Pass Plus course after passing the driving test. The course involves motorway and night driving and some insurance companies will offer reduced rates if the driver has the Pass Plus certificate.

The No Claims Bonus also keeps insurance costs lower. Drivers are rewarded by a reduction in price of the policy if no claims are made because companies see this as proof of a lower risk customer. An additional factor in some policies is the protection of the No Claims Bonus. If owners pay to protect the No Claims they can still make a claim – sometimes two - in a year and not lose the Bonus.

When a car has been declared a “write-off” the policy will provide the owner with the market value of the car depending on their coverage. This is often less than what the driver paid for it and those owing repayments on loans can find the policy falls short of the amount to be paid back. Consequently some policies offer Guaranteed Asset Protection Policy which covers the shortfall between the amount given for the market value and the amount initially paid for the vehicle. This extra protection can also be used for those who did not use loans to buy their vehicle.

Most policies offer legal protection which has limits and covers legal fees incurred following a claim involving the death or injury of the driver and damage to the car or property.

Policies can be bought direct from the insurance company, online or through an insurance broker. Buying online can cost less though some prefer a broker who can find the best deal. Upon buying a policy the driver would be given a Certificate of Insurance and a Policy Document. The Certificate is the evidence of insurance and should be safely kept. The Policy Document details the terms and conditions.