Choosing car insurance

Getting the best protection to match your needs, with your car insurance.

Types of car insurance

Being without your car can be a huge inconvenience and damaging another car can be very expensive, so car insurance is a plan for when things go wrong. When you’re buying car insurance, take time to compare the cost and understand what is (and is not) covered by different policies.

When deciding which type of insurance will suit you, think about whether you can get by without your car if it's written off or stolen. Also consider if you can afford to pay for the damage to someone else's car if you have an accident.

1. Compulsory Third Party (you have to have this insurance)
2. Third party property damage
3. Third party property damage, fire and theft
4. Comprehensive
5. Add on car insurances

1. Compulsory Third Party (CTP)

This covers injuries to people caused by your car. Does not cover damage to cars or property (which can be expensive). You must have CTP to register your car. In some states, CTP is included in your car registration costs so you don’t need to buy it separately.

2. Third party property damage

This does not cover damage to your car but covers damage to other people’s cars or property caused by your car. Some policies allow you to pay extra to protect your car if it’s stolen or damaged by fire (see below).

3. Third party property damage, fire and theft

This includes the same cover as third party property damage (above), plus it covers your car if it’s stolen or damaged by fire.

4. Comprehensive

This covers damage to your car and other people’s cars or property, even if you caused the accident. Also covers your car if it’s stolen or damaged by fire or weather events. It won’t cover everything though – make sure you check what the exclusions are. With comprehensive insurance, you can choose how your car is valued. The value is the amount you'll get if your car is written off or stolen:

• Agreed value — a fixed amount that's decided by you and your insurer. As your car gets older, your insurer may reduce the agreed value every year. Always check the agreed value when you renew your policy.
• Market value — the amount your car would have sold for, at the time of the accident. The market value of your car is decided by your insurer, based on industry information. It is not the amount you think you could sell it or trade it in for.

If you use the market value, you don't know how much you'll get if you claim, and you can't change the amount. If you use an agreed value, you'll pay a higher premium.

5. Add on car insurances

There are some other car insurance products that cover specific things, like tyre and rim insurance. These are generally offered by car dealerships as ‘add ons’ to a car purchase. Be careful with these kinds of insurances as they can often be hard to claim on, or expensive compared to just fixing the problem yourself.

Car insurance questions to ask

To help you choose the type of insurance that’s right for you, here are some questions to ask yourself:

• Can I afford to be without my car if it’s damaged, stolen or written off?
• Can I afford to repair or replace my car without insurance?
• Can I afford to pay for the cost of other cars or property that I accidentally damage?
• Is my car parked on the street, or at higher risk of theft or vandalism?
• Do I have a car loan on this car, and could I afford to repay that loan if I also have to pay for another car?
• Do I want to know exactly how much my insurer will pay if my car is written off?
• If my car is financed, is there a minimum level of insurance the lender requires?

Cost of car insurance

The amount you pay each year for the insurance policy is called a premium. The insurer works out your premium taking into account the type and value of the car you’re insuring, who will be driving it, how often and far you’re driving it, where you live and where you’ll be keeping your car (e.g. in a garage or on the street).

And it’s also based on the type of insurance you choose and the excess (the amount you pay when you make a claim).

How to choose the right car insurance policy for you

The things covered and cost of the policy can vary a lot between different insurers. Once you’ve decided on the type of car insurance you need, work through this checklist to help you get car insurance cover that meets your needs:

check_box Compare the exclusions of different policies, to see what isn’t covered.

For example:

• mechanical failure, depreciation, rust, or wear and tear
• intentional damage (for example, vandalism)
• damage caused by an unlicensed, drunk, or drug-affected driver
• storm damage

check_box Compare the inclusions of different policies, to see what is covered.

For example, some extras may be:

• free roadside assistance if you break down
• free towing, on-the-spot repairs, taxi fare, accommodation and car hire
• cover for personal items that are stolen from the car

check_box Ask what discounts you’re entitled to.

For example:

• No claim bonus
• Multi-policy discount
• New customer discount

check_box Check if the insurer always charges an excess.

• Even if an accident isn't your fault.

check_box Decide what excess you can afford.

• Weigh up the difference between having a higher premium and lower excess, versus the opposite.
• You may be able to save on your premium by increasing your excess.

Insurance words to know

There’s a lot of words used in insurance policies that have a specific meaning. Here’s the basic meaning of some common ones.

 

Not sure where to start? Try the Insurance Council’s ‘find an insurer’ service to make a shortlist to compare.