What is a Car Insurance?
Vehicle insurance covers cars, trucks, motorcycles, and other road vehicles by providing financial protection in the case of an accident.
Insurance covers physical damage to a car (yours or a third party’s), bodily injury and property damage resulting from traffic collisions.
It may also cover theft, depending on the type of car insurance policy you take out.
Car insurance policies can be paid monthly or annually in the form of a premium (The amount of money paid for an insurance policy and usually involves an excess payment should an accident occur.
Australian car insurance companies offer 4 levels of insurance:
1. Compulsory Third Party (CTP)
Compulsory Third Party is the only insurance that is mandatory in Australia. Without CTP, you cannot have your car on the road. This insurance only covers injuries to other people and legal liabilities. It will not cover any damage to your car or the car involved in the accident with you.
2. Third Party Property Damage
If you want a little more protection than the Compulsory Third Party policy, you can get Third Party Property Damage insurance. This insurance cover will pay out any damage you cause to someone else’s car but it will not cover any damage to your car.
3. Third Party Fire & Theft
The next level up is Third Party Fire and Theft insurance. Third Party Fire and Theft policies cover you in case your car is stolen or damaged by fire.
Comprehensive car insurance is the highest cover you can get. It covers your car and another car you may have damaged, property damage, injury, damage due to severe weather or fire just to name a few. We will look at this type of insurance in more detail shortly.
How to apply for car insurance?
Applying for car insurance is quite easy these days.
It’s a matter of finding an insurer online and applying via their website.
Once you have researched the insurance companies and decided on the one you would like, fill out the quotation form on their webpage.
You will need to provide some information such as your name, address, the type of car, age of the car and any other questions they may have. Once you have done this, you should receive a quote within a matter of minutes.
If you are happy with this quote, you will move onto the next stage which is where you give any documentation they may require to complete your application and you pay for your insurance policy.
The policy will start from the date that you nominate.
How much will car insurance cost?
Car insurance prices vary not only from provider to provider, but also according to your cover. The less you are covered for, the less your insurance premium will be. If you select top cover, you will be paying the highest premium.
Factors that determine how much your car insurance will be include:
Age of driver
Drivers under the age of 25 are considered young drivers. Young drivers are seen as a risk on the road and, therefore, having a young driver on your policy will increase your premium. If you do not have a young driver driving your car and can’t see that occurring in the foreseeable future, make sure it isn’t a cover listed on your policy.
The vehicle you drive
The type of car you drive will have a large impact on the price you will pay for your premium. For example, expensive cars are expensive to insure. Cheaper cars are cheaper to insure. High powered cars are charged a higher premium as these cars are associated with risky driving behaviour.
Where you park your car at home
Where your car is parked at night is a very large determining factor of what your premium will be. Some areas are listed as high risk areas for theft and fire. If you live in one of these areas, you will find that your insurance premium will be higher. If you are able to lock your car away in some form of secure parking whilst at home, you could save a little off the price of your premium.
Your insurance excess
Whenever you have an accident, you need to pay an excess in order to submit an accident for the insurer to fix your car. Some insurance policies allow you to select how much excess you will pay and this in turn affects your premium price. If you select a higher excess, you can pay less on your premium. Alternatively, you can choose a lower excess, meaning you will pay a higher premium.
Market value or agreed value
The price of your premium will also be different if you select market or agreed value. Market value usually means you pay a slightly lower premium as the insurer assesses what your car is worth at the time of your claim. If you have agreed value, your premium is likely to be higher. People with expensive cars or those that have special modifications usually choose agreed value. This allows you to select exactly how much you would like to receive in the event that your car is stolen or written off.
The type of driver you are
The type of driver you are can affect your insurance dramatically.
If you have a good driving history with no accidents and no speeding or parking infringements, you will most likely pay less on your insurance. So too, if you don’t drive many kilometres as the less time on the roads means less chance of accident.
The types of insurance policy you select
Your insurance premium will be largely affected by the type of policy you choose. For instance, there is a pricing tier for car insurance.
Compulsory Third Party (CTP)
This is compulsory throughout Australia. This only protects you for medical and legal liability;
- Third Party Property Damage
Potentially the cheapest of all car insurances it covers any property you may have damaged.
- Third Party Fire and Theft
Slightly more expensive than Third Party, but covers you for all of the above as well as fire and theft.
- Comprehensive insurance
Slightly more expensive than Third Party, but covers you for all of the above as well as fire and theft. This is the top of the range, most expensive insurance you can get as it also covers damage to your vehicle in the event of a collision or other incident.
It is important to note that evaluating our car insurance premiums isn’t something we often do. Most people roll their policies over from one year to the next. However, it is likely you can find a better deal elsewhere.
Yet, as explained above, the cost of insurance isn’t always transparent, as how much your premiums will be are generally based on your personal and other circumstances.
While we need financial protection against an accident or crash, you shouldn’t just settle for any policy, or the one you have had for years.
Not only does the cost of car insurance vary based on your personal circumstances, it may also vary based on your state, suburb or regional area.
According to the Australian Prudential Regulation Authority (APRA), in 2019 the average cost of comprehensive car insurance was $640.
Choosing an insurer
When it comes to car insurance, you aren’t locked into one policy for the life of your car. You are able to shop around and swap to another insurance policy, or even a new provider if you aren’t happy with your current policy. Here are some tips on getting the most out of your insurance policy:
1. Do an annual review of your policy
When it’s time to renew your policy, don’t simply sign up for auto renew. Firstly, establish if you need to change the amount of cover you have. You may be on a lower coverage policy and decide it’s time to become comprehensively insured, or it might be the opposite and you decide to downgrade. Once you have established that, it’s the perfect time to look around and see what other insurance providers are out there. You might find a similar cover to what you have or want but for a lower price.
InfoChoice can help you compare a range of car insurance providers and policies across the comprehensive, third party, third party fire and theft categories.
2. Do you need to be with a brand or can you go with a budget insurer?
A lot of brand name insurance policies, think AAMI or RACV etc., offer more expensive policies. This is partly due to the fact that they need to cover their advertising costs. However, you might see that a budget brand such as Budget Direct can offer you a very similar product for a lesser fee. Always check with the different insurers to see what they can offer.
3. Start comparing and use autofill
Autofill is helpful when filling out numerous quotes as it fills in commonly entered information for you. Comparing is easier when you have less work to do.
4. Understand your Product Disclosure Statement (PDS)
It’s very important to understand what you are covered for. Read the fine print and make sure your non negotiables are listed.
How do I compare car insurance policies?
When comparing car insurance policies, you need to take into consideration how much insurance you will need.
If you have a brand new, expensive car you will probably want to make sure it is fully insured with a comprehensive insurance policy.
On the other hand, if you are buying a very old second hard car, you might choose to only have the compulsory third party insurance.
The amount you pay in insurance will depend on a number of things such as your age, gender, driving experience and your claims. The amount can also be affected by where you live and where you travel to.
Making a car insurance claim
If you have had an accident, you will need to make a claim. In order to make a claim you will need to have a list of specific information to submit such as:
- The date and time of the accident
- Location where it occurred
- Other driver’s phone number, license details and registration number
- Details of anyone else involved
- If there were any witnesses you will require their statements.
- Any photo evidence
- Police report if applicable
In this day and age, it’s easy to put in a claim relatively quickly as most insurance companies allow you to do that online. A claim can even be made be via your insurance provider’s website or via an app on your mobile if your insurer has one.
When you make a claim on your insurance, your car will not be fixed until you have paid your excess.
Some insurance policies offer a no claim bonus. This means for every year you don’t make a claim you might be eligible for more discounts and pay less on your premium. You may lose this benefit if you put a claim in.
What is an excess?
If you need to make a claim, the excess is the amount you pay your insurer to take on this claim. Many times the insurer will give you the option to pay a higher excess and lower monthly/annual premium or you could choose a lower excess with a higher monthly/annual premium.
There may be some different excesses listed on your policy such as:
Age excess: Your excess will be determined by the age of the driver at the time of the accident. Most policies have a higher excess for young drivers under the age of 25 years old. If they are under 21, the excess might be even higher. Their excess can range from $400-$2000 depending on your policy.
Unlisted driver excess: If you lend your car to someone who is not listed on your policy and they have an accident in your car, you may have to pay an unlisted driver excess. This could be quite pricey with some insurance companies charging as much as $1500 for this excess.
Windscreen excess: Some policies list windscreen as a separate and cheaper excess. You will usually find the windscreen excess to be around $100.
Are there ways to save money on my insurance policy?
There are a number of ways you can save on your premium. Here is a list of some discounts that you may be eligible for.
Some insurance providers don’t just offer car insurance. They may also offer life insurance or home insurance. If you bundle your insurance policies together, you may be eligible for a discount.
A lot of insurance providers are moving to an online format so as to eliminate having to have a shop front. They may offer a discount if you select to take out your insurance online rather than in a branch.
Restricted driver discount
Restricting the amount of people who will be driving your car is a good way to get a discount. So too is having an age limit on your policy. If you have an 18 year old son and he will not be driving your car, make sure to let the insurers know. This will most likely lead to a discount in your premium.
Some insurance companies offer a discount to loyal customers, so if you have been with them for a while, ask if you are eligible.
Fuel efficient discount
A lot of insurance providers are becoming increasingly environmentally conscious. If you have an eco-friendly vehicle you may be eligible for certain discounts.
Changing insurance providers
There will be times in your life that you decide you would like to change insurance providers. There could be a number of reason to want to do this. You may find a cheaper policy elsewhere, you didn’t like the customer service at your current insurer, some providers even offer discounts to new clients.
Whatever the reason, when changing providers there are a few things you should not forget:
Take out a new policy before you close your old one
This is the most important step to making sure your car is insured at all times. Always make sure the new insurance policy is valid before you close your old policy.
Close your old policy
There is no point in having your vehicle insured by two places at the same time. As soon as your new policy is up and running, don’t forget to close your old one.
What you need to know about Comprehensive Car Insurance
What is Comprehensive car insurance?
Comprehensive car insurance is the highest possible cover you can have for your car. It is the most extensive cover available and usually includes everything from the other types of car insurances plus more. It is also the most expensive form of car insurance that you can get
If you have comprehensive car insurance, this will include the mandatory third party cover as well as property, fire and theft cover. You have the additional cover in case you accidentally damage your own car, regardless of who is at fault.
Comprehensive cover means you will also have access to some extra cover options that you might like to consider. These are options such as windscreen repair and selecting your repairer just to name a few.
It may be possible for you to select between market value or agreed value for you policy. This means you could determine how much you would like to receive for your car should it be written off or stolen. Keep in mind, that selecting agreed value might affect your premium price.
There are certain things you might not be covered for, no matter how high your insurance policy is.
If you are under the influence of drugs or alcohol, when you have an accident you will most likely not be covered. You may also not be covered if you let someone else drive your car who isn’t on the insurance policy.
Comprehensive car insurance can be very pricey. In some cases it could be over $2000 per annum, that’s why it’s important to compare policy prices before locking into one.
The basics that you are covered for with comprehensive insurance are:
- Accident or collision
- Severe weather damage such as flood, hail or storm damage
- Fire and theft
- Malicious acts
- Damage to third party property
InfoChoice offers a range of comprehensive car insurance policies to compare. Have a look at the comparison table for a list of products and policies.
What are some of the additional extras to consider with comprehensive car insurance?
Comprehensive car insurance policies offer an array of extras that you could choose to purchase. The more cover options you select, the higher your premium will be. Here are some extra options available:
Windscreen cover: Windscreen cover will cover any damage done to the windscreen or other windows on your car. This sometimes has its own excess, but it is usually lower than the excess for any other claims on your policy.
Choice of repairer: Some comprehensive insurance policies allow you to choose your own repairer. Some people prefer to use their own trusted repairer.
Rental cover: If you have rental cover, that means the insurer will cover any rental vehicle you may need during the time that your car is unavailable to you due to damage.
Personal property: If you tend to leave your valuables in your car, you may want to select personal property cover. This way, if your car is broken into and any of your property is stolen, your insurance policy will cover that.
Roadside assistant: If your car breaks down and you need roadside assistance, some comprehensive insurance policies offer this at no extra cost. Some other options for cover are towing, legal liability and lock and key replacement.
Do I need comprehensive insurance?
For most people, having comprehensive insurance is a good idea. It gives you the peace of mind needed when dealing with such expensive repairs that come with a car or any car damage. It’s not just an accident that is covered. You will be covered for damage such as hail and other severe weather events too.
Comprehensive insurance isn’t for everyone though. If you drive a really cheap car, it may not be worth paying so much for a comprehensive policy.
How can I save money on my comprehensive car insurance?
There are a few ways you can save money on your comprehensive car insurance.
Compare policies: There are many insurance providers with different types of policies. Do some research and see which ones suit your needs best.
Increase your excess: In some cases, you can chooses to increase your excess and reduce your premium.
No-claim bonus discounts: Some insurance providers will give substantial discounts if you make no claims each year. If you have a good driving record, this could save you a lot of money.
Nominating drivers: Some providers will give you a discount if you only let nominated drivers drive your car.
Bundling your insurance: Bundling your insurance policies is a great way to save some money. If you have a number of different insurance policies such as life insurance, and home and contents insurance you could bundle these together and benefit from a multi-policy discount
Agreed value vs market value
When you apply for a car insurance loan, you may be asked if you would prefer to have agreed value or market value on your car if it were to be written off or stolen.
There’s advantages and disadvantage to both so it’s worthwhile considering a few things before deciding.
What is market value?
‘Market value’ is a term in the insurance industry that refers to how much your car is worth on the market at the time of making a claim.
So if your car is insured for market value and it is stolen or written off, you will only receive what the insurer estimates the price will be.
It’s important to know that it is not the cost of replacing your car with a brand new one, or the trade-in value of your car.
The insurer will take into consideration a number of factors when determining what your market value will be. These factors include the age, condition, make and model of the vehicle, it’s kilometres travelled, and its service and accident history.
Important things you need to know about market value are:
- Your insurer will estimate what your car is worth at the time of the accident
- Insurance premiums are usually lower than if you were to insure for a high agreed value
- You can never be sure what compensation you will receive for your vehicle should it be written off or stolen.
What is Agreed value?
‘Agreed value’ is a term in the insurance industry that refers to the amount that you and your insurer agree upon in the case that your car is stolen or written off.
This type of car insurance policy usually has higher car insurance premiums, as the agreed value you have decided on is likely to be a lot higher than market value for your car.
Important things you need to know about agreed value car insurance:
- You and your insurer will agree on an amount that you will receive
- Agreed value will have higher premiums than market value
- You know the exact amount you will receive for your car should you put in a claim.
Deciding whether to get agreed value or market value car insurance can sometimes be tricky. You need to assess the information and make a decision that suits your circumstances.
If you have a relatively new car that has some expensive modifications or additions, you may want to select agreed value as that way you are more likely to get paid the money you think it will cost to replace it.
However, if you drive an older car, you may want to save money on your premiums and only go for market value
What is a No Claim bonus
Also known as a no claims discount, this is a safe driver reward that gives you a discount on your car insurance. You usually need comprehensive car insurance to have the No Claim Bonus.
Your no claim bonus is calculated by the insurer looking at the following:
- How long you and any nominated driver have been driving
- Your claims history. This includes any claims other drivers have made on your policy
- Your rating from your previous car insurance provider
- You can find your rating by checking your current car insurance policy.
- Ratings usually start at 6 for the lowest and 1 being the highest. You can usually achieve rating 1 status by having no claims in 5 years
When you make a claim or someone makes a claim against you, your rating will drop.
Some insurance providers offer No Claim bonus protection.
This is extra cover, usually at an additional cost, that protects your rating. With No Claims Bonus Protection, you are able to make a certain number of claims before your rating is affected.
Each insurer is different, so check with yours to see how many claims you can make before your rating starts to drop.
Are Learner drivers covered by insurance?
Each insurer is different, so it’s always important to check your policy or call them to ask if your learner is covered. In some policies, learners are automatically covered as long as they are accompanied by a fully licenced driver sitting in the front passenger seat.
Learner drivers and Comprehensive car insurance
Learners are usually covered under comprehensive car insurance policies provided they are accompanied by a fully licenced driver who is seated in the front passenger seat beside them.
However, many comprehensive insurance policies will charge an excess for learners and inexperienced drivers. The different categories could be:
1. Learner driver excess: An excess charged if your learner driver has an accident.
2. Young driver excess: An excess that is charged if your driver is under the age of 25 years old.
3. Inexperienced driver excess: An excess charged if the driver who caused the accident has not had their licence for a long period of time.
4. Undeclared driver excess:An excess charged if the driver who had the accident isn’t listed on your policy.