Car insurance for foreign licence holders
In most cases when you start driving in the UK on a foreign licence, it is usually because you have come here for work or study and plan on becoming a resident. If you are, then car insurance is much easily obtained whereas if you are here temporarily, on a holiday for example or if you intend on driving on another foreign licence, then insurance is harder to get and can be extremely expensive.
Car insurance for an EU licence holder
Many insurance companies will accept your EU licence until you exchange it over for a UK licence but as it is only valid for 12 months, it's worth doing sooner rather than later. When you buy a car, you will need to get adequate insurance cover and as an EU/UK licence holder you shouldn't have any problems. Just make sure they take into account the period of time you have had your licence for so that your annual premiums are less than having a completely new driving record. There are many insurance companies that will take this into consideration for you whilst some do not, so it is worth shopping around.
Getting insured on a foreign licence
If you come from the US, Australia and India, you will have to exchange your licence for a UK one and will not be able to drive (there are some exceptions so check state) until you've done so. When you have exchanged your foreign licence for a UK one, you will be able to get insurance for your vehicle. There are some insurance companies that do not take previous driving history into account when they give you a quote. So if you have been driving for 20 years in your country and come here with no previous record, your insurance will be sky high! To avoid this, you should find an insurer that will take into account previous driving history as it's not fair to disregard it because it was held in a different country.
You may also want to look for temporary insurance cover as a foreign driver if you do not want to get tied up to a yearly contract.
Renting a car with a foreign licence
There are not many short term or temporary car insurers that are willing to insure a foreign national. This is because of the check they will need to carry out before accepting you for cover; in this case you will have no other choice than to go with the hire company's insurance policy. It might be slightly more than going with other mainstream companies but at least you will be covered for insurance purposes. It is a legal requirement to be insured in all cars that you drive whether abroad or in your home country.