The move will remove a major obstacle for the nascent industry. Self-driving car introduction has been hampered by legal hurdles in several countries as insurers and legislators try to establish who would ultimately be responsible in the event of an accident.
Transport Minister Chris Grayling said the public needed to be protected in the event of an incident and the framework to allow insurance for these new technologies will be out this week.
A single insurance product will be available to cover a driver when a vehicle is being used conventionally, as well as when the car is being used in autopilot mode, the transport ministry said in a statement.
The Blighty government wants to encourage the development and testing of autonomous driving technology to build an industry to serve a market it reckons could be worth about $1.1 trillion worldwide by 2025.
Japanese carmaker Nissan is due to test autonomous cars in London later this month after initial tests on public roads in the southern English town of Milton Keynes late last year.
The UK will also set out plans to improve infrastructure such as charging points for electric vehicles, the fastest growing sector for new car sales in the country and key to meeting environmental targets.