Why must a vehicle be insured, what types of cover exist, and what affects the premium?
The legal requirement for motor insurance, the three main types of cover (third party; third party, fire and theft; comprehensive), and the factors that affect the premium and the no-claims discount.
A CCEA GCSE Motor Vehicle and Road User Studies answer on motor insurance: why it is a legal requirement, the three main types of cover, and the factors that raise or lower the premium including the no-claims discount.
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What this dot point is asking
CCEA wants you to know why motor insurance is a legal requirement, the three main types of cover, and the factors that decide the premium (including the no-claims discount). The specimen materials specifically mention "calculating the cost of insurance", so both the cover types and the premium factors are examined.
The answer
Why insurance is a legal requirement
It is a legal requirement to have at least third-party motor insurance to drive on a public road. Insurance protects people who might be injured or whose property might be damaged by your driving, by guaranteeing that money is available to pay for it.
Driving without insurance is an offence that can bring a fine, penalty points and seizure of the vehicle. A certificate of insurance is one of the documents you may be asked to produce.
The three main types of cover
Factors affecting the premium
The premium is the amount you pay. Insurers set it by assessing risk:
- Age and experience - young and newly qualified drivers pay more (higher risk).
- The car - a more powerful, expensive or high-performance car costs more to insure (insurance groups).
- Where it is kept - a garage or low-crime area lowers the premium; on-street parking in a high-crime area raises it.
- Annual mileage and use - more miles, or business use, means more risk.
- Driving record - past convictions or claims raise the premium.
- Voluntary excess - agreeing to pay more of any claim yourself lowers the premium.
Worked example: lowering a young driver's premium
Examples in context
Example 1. A garaged car. Moving a car from on-street parking to a locked garage can noticeably cut the premium because theft and damage risk falls.
Example 2. Building a bonus. After five claim-free years a driver may earn a large no-claims discount, so the same cover costs far less than for a brand-new driver.
Try this
Q1. What is the legal minimum type of motor insurance? [1 mark]
- Cue. Third party.
Q2. Which type of cover protects your own car even if a crash is your fault? [1 mark]
- Cue. Comprehensive.
Q3. Give two factors that increase a driver's insurance premium. [2 marks]
- Cue. Any two of: young/inexperienced driver, powerful/expensive car, high-crime area, high mileage, poor driving record.
Exam-style practice questions
Practice questions written in the style of CCEA exam questions on this dot point, with worked answer explainers. The year tag is the paper they imitate, not the source.
CCEA style4 marksDescribe the three main types of motor insurance cover and state which gives the most protection.Show worked answer →
- Third party - the legal minimum. It covers injury to other people and damage to their property (and their vehicle), but not damage to your own vehicle.
- Third party, fire and theft - covers the third-party items plus loss of or damage to your own vehicle by fire or theft.
- Comprehensive - covers all of the above plus damage to your own vehicle, even when the accident is your fault. This gives the most protection.
Markers reward a correct description of each type and that comprehensive gives the most cover.
CCEA style4 marksExplain four factors that an insurance company uses to decide the cost (premium) of a young driver's car insurance.Show worked answer →
Any four of:
- Age and experience - young/new drivers pay more because they are statistically higher risk.
- Type/size/value of the car - a powerful or expensive car costs more to insure.
- Where the car is kept - a higher-crime area or on-street parking raises the premium; a garage lowers it.
- Annual mileage / use - more miles or business use means more risk.
- No-claims discount - years without a claim reduce the premium.
- Driving record - convictions or past claims increase it.
- Voluntary excess - agreeing to pay more of any claim lowers the premium.
Markers reward four genuine, distinct factors.
Related dot points
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A CCEA GCSE Motor Vehicle and Road User Studies answer on calculating fuel consumption (mpg or litres per 100 km), the fuel cost of a journey, and the running costs of owning a vehicle.
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Sources & how we know this
- CCEA GCSE Motor Vehicle and Road User Studies specification — CCEA (2017)
- nidirect - vehicle insurance — nidirect (NI Government) (2024)