Car insurance covering injuries or damage you cause to another person or their property – the third party – is a legal requirement in the UK if you drive on the roads. Insurers have to pay out that third-party liability in almost all circumstances. If you have bought car insurance, almost nothing you do can invalidate that third-party pay-out.
Many other types of insurance are able to exclude claims caused by your bad behaviour. Take part in a reckless vacation activity, or get drunk on holiday, and your travel insurer can decline any claim. But not with car insurance.
The government does not want to pick up the bill for road accidents so wrote watertight legislation making insurers pay. And it would be unfair, wouldn’t it, if you were hit by a drunk driver and the drunk’s insurer didn’t have to pay out to repair your car or treat your injuries?
Car insurers have to pay out for any damage you cause to a third party even if you were:
With no MOT
In a car unfit for the road
Driving for a purpose not declared to your insurer (such as commuting or for business when you only had social, domestic and pleasure cover)
Using a mobile phone or eating/drinking at the wheel, and other minor offences
Driving without due care and attention, or any other major motoring offence
Driving when your doctor has advised you not to
Wilfully driving into somebody/something to cause harm
In terms of third-party liabilities, insurers have a pretty tough time of it. It’s no wonder premiums are so high – we’re all paying for the idiots on our roads.
Just because insurers must pay out for third-party injuries or damages does not mean they must pay out to you if you caused the claim. They may also take legal action against you to recover their costs if they believe you have acted improperly.
While insurers cannot usually refuse to cover the third-party liabilities if you are at fault in an accident, they can sometimes refuse or reduce their pay-out to you.
If you have the wrong cover in place or you have behaved negligently, your insurer may reduce how much they pay to you or refuse to pay out at all.
This can be as simple as telling your insurer you always garage your car but leaving it on the street one night and finding it stolen or damaged the next morning. In this case, your insurer might reduce the pay-out. They might try to refuse completely but they would be unlikely to get away with that if you took them to the Financial Ombudsman’s Service (FOS).
If you had never had a garage, or rarely kept your car in it, but had told your insurer you did, that would be misrepresentation. Your insurer would be able to cancel your policy and refund you entirely and refuse to pay out.
But if you left your car out for one night only and it just happened to be the night vandals scraped all the cars in the street, the FOS would likely side with you. The insurer might reduce the pay-out slightly, but could not refuse.
If you have been reckless or fraudulent your insurer can refuse to pay out any costs to you. Not only that, your insurer could begin legal proceedings against you to recover any money they paid out to third parties.
Fronting is a crime. It’s fraud. Fronting is when a low-risk driver who benefits from low premiums puts their name down as the main driver of a policy and adds a higher risk driver as a named driver, when really the high-risk driver will mainly drive the car. Usually this is a parent trying to help their child get cheaper insurance.
If the higher risk driver has an accident and the insurer can prove fronting has happened, it can sue those who have defrauded it to recover every penny it has paid out.
Several pieces of legislation combine to mean that you must have a minimum level of car insurance if your car is on the road. Your car insurance must cover you for whatever you use your car for.
Social, domestic and pleasure (SDP): covers home and recreation use, such as shopping, visiting friends and holidays/trips away.
Commuting: covers a regular drive to a single place of work, including a daily drive to a station to travel to work by train.
Business use: covers driving to more than one place of work, and higher levels can cover visiting clients, carrying samples or even transporting goods for sale.
If you get the wrong level of cover or misrepresent your risks to an insurer, you may find yourself uninsured. Although your insurer might pay out for any third-party liabilities, either because they must under the Road Traffic Act or under their agreement with the Motor Insurers’ Bureau, they can then sue you to recover their costs.
If you have avoided buying the right insurance, not truthfully answered an insurer’s question, failed to provide any evidence request (such as of a previous no claims discount) or deliberately misrepresented the facts, you can be declared uninsured.
Your insurer can refund you the entire premium and refuse to cover you. You will then risk finding it hard – and expensive – to get car insurance ever again.
The police regularly carry out spot checks with experts from the Motor Insurance Database on hand. They often do more than just check a policy is in place but delve into where you are going and what you are using your car for. They then check with the insurer while they make you wait.
If any details do not match, they can seize your car, fine you £300 and issue you with six penalty points.
A trainee debt collector on his way from college to his sponsor employer had the previous day passed his final exam and had become qualified. This meant he was no longer covered for going to work as a student, which is included within SDP cover. He needed to add commuting/business use. As he hadn’t, he was declared uninsured, fined £300, given six penalty points and his car was seized.
A van driver had business insurance but was carrying fresh fruit and veg, which was not the cargo he had told his insurer he would be carrying. This left him uninsured. He had to unload the cargo and arrange for another van to come and collect it. His van was seized and he received a £300 fine and six penalty points for being uninsured.
One driver thought he was insured, had a certificate and had paid his premium in full, but he had not passed on evidence of the no-claims discount he had claimed, as requested by the insurer. The insurer had subsequently suspended the policy and withdrawn cover, leaving the driver with no insurance, six points, a £300 fine and his car seized.