Whilst advisable it is a matter of personal choice whether or not you take out life cover or house insurance. You will not be arrested for failing to protect the contents of your home or neglecting to set up provisions for your loved ones in the event of your death. You may regret not putting these things in place but it is not illegal.

Car insurance, however, is a different matter. Motor vehicles are put in dangerous, potentially deadly, situations every day not to mention being highly prized by thieves and vandals. The risk of something happening either to a car or a human being is simply too high to make car insurance anything other than compulsory.

This means it is even more vital that you understand the various types of policy available, as you will have to take one out if you own a car. There are three main types of car insurance: Third Party Only, Third Party Fire and Theft and Fully

Comprehensive. The first and second parties are the insurance company and the driver; the third party is the person affected by the claim either through personal injury or damage to their property.

Whilst you have a degree of choice as to which type of insurance you take out it is also dependent on the cost of your car. For example, cars valued at under £1,000 will most likely have Third Party, Fire and Theft while vehicles over £5,000 have to have Fully Comprehensive.

Third Party Only is the most basic form of insurance and covers you for so little that it is rarely issued. The Road Traffic Act specifies the obligation of the party responsible to cover damage incurred to either the third party themselves or their property in the case of accident. This ensures that any victim of a car accident will not lose out financially, and this policy satisfies that law but does little else. There is no provision for damage to the policyholder's car; for example, should you plough through somebody's wall the policy will cover the cost of the wall but any damage to your vehicle is excluded. Third Party Only leaves the holder wide open to claims without any guarantee of compensation themselves and is generally only taken out where the driver's record is so bad that they are unable to get any more extensive form of cover.

Third Party, Fire and Theft Insurance will cover you if your car is stolen or burned out, which is desirable considering the high national average of car theft. The low cost of premiums involved in this type of policy is seductive to many, although it is worth thinking about how great the cost of repairs and new parts will be should your car be involved in a bad accident. However, if you have a cheap car Third Party, Fire and Theft is the most likely type of insurance that you will get.

The wisest, and most expensive, move is to take out Fully Comprehensive car insurance. Only with Fully Comp do you get Accidental Damage cover, which means that your car will be insured in the event of accident. Fully Comp is the most common form of car insurance in the UK and is compulsory for cars over £5,000. The policy will not cover you for quite every eventuality although different firms tack on different perks to woo the customer. As well as Accidental Damage (which includes Malicious Damage) there may be cover for personal injury and medical bills, loss of or damage to property inside the vehicle and glass replacement, which covers the cost of a new windscreen without affecting your no claims bonus.

One group of drivers who can find it very difficult to obtain affordable car insurance is those under 25. Statistically they have more accidents and make more claims, which pushes the cost of their premiums through the roof. The problem with this situation is that too many young drivers try to avoid taking out insurance, which just lands them in legal hot water. But there are companies, particularly Internet based ones, that recognise that not all young drivers are irresponsible and specialise in getting them better deals.

Car insurance is a fact of life, an obligatory charge to ensure that the nation's roads are safer and that people have a vested interest in not causing accidents or injury. If you flout these regulations then you will find it even harder to get affordable cover in the future and thus get locked into a vicious circle of illegality and debt. It may be yet another outlay that you would rather not have to pay but car insurance is there to help and protect everybody and that is why it is compulsory.