Getting The Right Insurance For Your Car

You’re about to hit the road with some new wheels – but are you protected if you have an accident? What about if you are at fault? What happens if you damage someone else’s property?

We all make mistakes, and that’s why we have car insurance. Car insurance is a must-have (and in some cases, compulsory) policy that covers us in the event of accident, theft, fire, and other mishaps. We pay a monthly or yearly fee known as a premium to help cover – or in some cases, completely cover – the cost of getting damages repaired, or to even cover legal costs.

So, what is the right insurance for you and your car? We take a look at the common options and how you can save more by following some simple tips so you can learn about car insurance and make a better decision.

The two main types – comprehensive and third-party insurance

In Australia, in all jurisdictions, you will have to take out what’s called Compulsory Third Party (CTP) insurance. This is either bundled into your registration fee or offered by the market, as is the case in New South Wales (the “green slip.”) This only covers compensation if you injure or cause a fatality in a car accident.

As for property, there are two main types of insurance – comprehensive and third-party insurance.

If you are involved in an accident, comprehensive car insurance covers both parties’ repair costs, regardless of who is at fault. It also covers damage to your own vehicle by fire, flood, vandalism, or if it’s self-inflicted. It also covers the cost of replacing a stolen vehicle.

Third-party insurance only covers the other person’s costs in an accident. If you incur damage to your own vehicle, you’ll need to pay to fix it yourself.

There is an option for third-party fire and theft, which covers fire damage and if your car is stolen.

Insurance policies cover the agreed value (a fixed amount you and your insurer both agree on) or market value (the amount your car would have sold for at the time of the claim) of your car. This is the cash amount you’d get if your car was deemed a total loss (written-off.)

Agreed value premiums are usually more expensive than market value premiums, as the insurer will likely only cover the lowest possible market value.

Lower excess – higher premiums

Premiums are determined by the age of the driver, sex of the driver, and your excess.

The excess is the amount you must pay when you make an at-fault insurance claim. If the other party is at fault, they must pay the excess. A higher excess payment means a lower premium; and vice versa.

Premiums may also include extras such as roadside assistance, access to a hire car while yours is being repaired, emergency accommodation, windshield or glass replacement, new for old replacement, and choice of repairer. Of course, these extras cost more.

What should you choose?

Ideally, when shopping around for an insurance company you should look at reviews online and see if they are reputable. Compare policies by looking at their value proposition – do they offer extras others don’t? Do you get a “no claim bonus,” – lower premiums if you haven’t claimed for a while? Can you bundle other insurance premiums such as home and contents for an overall discount?

For new cars under finance, it’s sometime a condition of your loan to have comprehensive car insurance for the entire loan term. For older vehicles, third party insurance is “good enough” to protect you in the event of an at-fault accident.

Remember to consult an insurance broker for professional advice.