Buying a car is a huge investment. Next to a house, a car will likely be the biggest bulk financial investment you will make, albeit several times over, during your life. So of course, you’ll want to think about insurance but where to start? With so many types of car insurance, some compulsory and some not, it can be hard to understand what you need, let alone decide what you want. Enter our Car Insurance FAQ – answering your top ten car insurance questions to help you decide which policy is best for you. Remember that every policy does vary, so it’s important to get your head around the basics. Fasten your seat belts and start your engines…!
1. What Is Car Insurance?
Depending on your level of cover, car insurance can protect you and your car against damage sustained in accidents and incidents, such as theft, fire, or malicious damage. There are a few different types of car insurance, including Comprehensive, Third Party, Third Party Property Fire & Theft, and Compulsory Third Party.
2. Do I Need Car Insurance?
Yes. By law, every car owner in Australia must have a minimum level of cover, referred to as Compulsory Third Party (CTP) insurance or Green Slip (if located in NSW). However, there are additional types and levels of car insurance that will protect you beyond the minimum cover of CTP.
3. What Is Compulsory Third Insurance?
Compulsory Third Party (CTP) insurance is the minimum level of insurance required for any vehicle registered in Australia. By law, CTP covers your liability against personal injury caused by you in a motor vehicle accident or incident. This means that you will be covered when you are held financially liable for any injuries or fatalities caused by you in a motor vehicle accident. However, CTP does not cover damage to vehicles or property, which is why it’s important to have additional insurance to protect you if your car is damaged or if you damage another vehicle.
4. Do I Get Insurance With My Car Registration?
It depends on the state in which you register your vehicle. You will automatically get Compulsory Third Party Insurance with your vehicle registration if you live in Victoria, Western Australia, or South Australia. In Queensland, New South Wales, the Northern Territory, and the ACT, you have a choice of insurer but CTP is a mandatory part of vehicle registration. In Tasmania. all registered vehicles must hold CTP through the Motor Accidents Insurance Board (MAIB). To find out more about CTP for your state, head over to our CTP page on comparethemarket.com.au.
5. What Types Of Non-CTP Car Insurance Are Available?
- Third Party Property insurance covers you for damage, legal costs and repairs to other (third party) vehicles in an accident. It does not cover you for the cost of repairs or replacement to any damage sustained to your vehicle, and it does not cover you for the cost of replacing your car if it is stolen. Third Party Property Insurance cover may also cover repairs to your vehicle (up to a specified limit) if you are involved in an accident with an uninsured driver and the uninsured driver is at fault for the incident.
- Third Party with Fire and Theft covers you in the same way Third Party Property does, with the addition of cover in cases of fire and theft. Third Party Fire and Theft cover may also cover repairs to your vehicle (up to a specified limit) if you are involved in an accident with an uninsured driver and the uninsured driver is at fault for the incident.
- Comprehensive car insurance covers you for damage to your vehicle and the vehicles and property owned of others, if you are involved in an accident or any car-related incident, including fire and theft. Comprehensive car insurance will cover you for the cost of repairs regardless of which party is responsible for the damage. Comprehensive car insurance provides you with the most protection, so it does carry the highest premium. If you have taken out a loan to purchase your vehicle, you may be required to take out comprehensive car insurance as a condition of the loan.
Depending on the circumstances, comprehensive car insurance cover will cover you if your car is completely written off, allowing you to replace your car and get back on the road. However, be aware that there are two different types of ‘car replacement’ terms – agreed value and market value. Market value means that your insurer will pay you whatever the current value (based on depreciation and condition) is of your car on the day it was written off. Agreed value is an agreed figure that doesn’t change over the period of your car insurance. The agreed value is usually displayed on your insurance certificate and is subject to change during the renewal process.
Remember that what you can claim will depend on the type and level of car insurance that you choose, so make sure you consider your personal circumstances and shop around for the policy that best suits your needs.
Some policies offer optional extras for an additional premium and it may be worth considering adding these to your policy.
Some common optional extras include lower windscreen and glass replacement excess, temporary vehicle replacement/hire car if your car is unavailable to you due to being repaired, pet cover and roadside assistance cover.
6. What’s An ‘Excess Payment’?
An excess payment is the amount you will need to pay if you decide to make a claim on your car insurance. Your excess can vary depending on your needs and your policy. Some policies will allow you to have a higher excess in exchange for a reduced premium, and vice versa. Depending on your insurer, some claims may not attract an excess.
7. How Do I Choose A Policy?
Choose a policy that best matches your individual circumstances. When considering car insurance, the biggest question to ask yourself is: if your car were severely damaged or written off, could you afford to replace it? If not, you’re probably best off considering a comprehensive policy. As its name suggests, comprehensive insurance is comprehensive, providing you with thehighest protection possible when it comes to car accidents or incidents.
8. How Are Premiums Calculated?
Your car insurance premiums will be calculated according to a range of factors, including but not limited to:
- Age of drivers. Drivers under the age of 25 are considered higher risk and their insurance premiums are significantly increased. Take note of who your car insurance covers as a driver – some policies will cover anyone driving your car whilst others will only cover you for drivers over a certain age.
- Where and how your vehicle is stored overnight and during the day. Parking your car in a garage or a secure car park will allow for a lower premium than parking on the street or in an unsecured car park.
- Driving and claims record of the insured. If you have an incident-free driving history, it is likely that your premiums will be lower. This will also work in the reverse – if you have a history of claims against your insurance, your premium will be higher.
- Value of the vehicle. Usually, the less expensive your car, the less expensive your insurance will be (although it does depend on the insurer and the individual policy). Repairs and replacements may cost less on lower original value cars.
- Private or business vehicle use. Business vehicle use can carriy a higher insurance premium because of the nature of their use.
9. What’s A ‘No Claim’ Bonus?
If you have no prior claims on your car insurance, with some insurers you may qualify for a No Claim bonus. A No Claim bonus is basically a recognition of your ‘low-risk’ status to the insurer and may entitle you to a reduced premium, as long as your car insurance record remains claim and incident-free.
10. How Can I Claim?
Luckily, the hardest part about car insurance is understanding what you need and then selecting a policy, whereas actually claiming on your car insurance is usually quite a simple and painless process. Make sure you store your insurance details in your car – your glove box is an obvious spot to keep these details so they are always at hand in case you’re involved in an accident. Exchange insurance details with other parties involved in an incident when necessary, and then contact your insurance provider. Most insurance providers offer 24/7 claims assistance on the phone, so give them a call and they’ll talk you through the next steps to lodge a claim. The severity of the incident may determine the next step in the process. If the incident is minor, you may be asked by your insurer to take your vehicle to one of several nominated repairers who will undertake repairs. If the incident is more severe, your vehicle may need to be assessed at your insurer’s assessment facility or by a designated assessor to determine the level of damage and subsequent claim. If you are unable to drive your vehicle away from the scene of an accident, your insurance company may arrange to have it towed directly to their facility for claims assessment.
Remember that insurers will not pay out on a claim where the driver has operated the vehicle under the influence of alcohol beyond the legal limits or under the influence of drugs. Please read your policy’s Product Disclosure Statement (PDS) carefully to understand what features and benefits are included and what exclusions may apply.
The Final Word: Protect Your Vehicle And Your Safety
Cars are essential to everyday life but they need to be operated with care and skill. Unfortunately, sometimes accidents do happen. You might be running late to work, be distracted by difficult family news, or just feeling fatigued. You may be caught up in severe weather events, including hail or flood. Your car may even be stolen or wilfully damaged. Car insurance provides you and your car with a safety net against accidents, damage, or theft, and luckily it comes in many shapes and sizes to suit every life situation. If you’re buying a new car or renewing the policy on an existing vehicle, make sure you compare your options for cover to ensure you are financially protected if you are ever involved in a car-related incident or accident.