Car insurance is a legal requirement to drive on UK roads — driving without at least third-party cover is a criminal offence, even if the car is just parked on a public road (unless you've declared it off-road with a SORN). This page covers the basics of how cover levels and pricing work.
The three levels of cover
Third-party only is the legal minimum, covering damage or injury you cause to others but nothing on your own car. Third-party, fire and theft adds cover if your car is stolen or damaged by fire. Comprehensive cover is the most complete, typically covering damage to your own vehicle as well — and despite the name, it's very often not the most expensive option, since insurers use overall risk profiles rather than cover level alone to set price.
What actually affects your premium
Insurers price risk based on factors including your age and driving experience, where you live, the car's make, model and security features, your claims and conviction history, annual mileage, and how you use the car (commuting versus social use, for example). A black box (telematics) policy, which tracks driving behaviour, can lower premiums for lower-risk drivers.
Excess: compulsory and voluntary
Your excess is the amount you pay towards a claim before the insurer covers the rest. Policies usually have a compulsory excess set by the insurer, and you can often choose to add a voluntary excess on top to reduce your premium — just make sure the total excess is still an amount you could actually afford if you needed to claim.
Renewal isn't automatically the best deal
UK insurers are required to show your previous year's premium alongside the renewal quote, but that doesn't mean the renewal price is competitive — comparing the market at renewal time regularly saves money for many drivers. Cancelling mid-term usually carries a fee, so it's worth timing any switch around your renewal date where possible.