Young drivers

Car insurance for young drivers

Just got your Ls or your Ps? About to buy your first car? There are lots of things you need to do before you hit the streets. You need to set up a budget so you know exactly what it costs to run a car. You need to find a car that matches your needs. And you need to think hard about insurance.

The cost of car insurance for drivers under 25

The cost of insurance is determined by the level of risk your insurer is taking on. As more young drivers are involved in accidents than older drivers, most insurance companies charge a higher premium for drivers under 25.

Young drivers may also have to pay an additional 'age excess' when making a claim. Always check your policy carefully to see what excesses might apply.

If your parents are letting you use the family car, they will have to pay extra to insure you and the car. It's important that they inform their insurer when you start driving. Otherwise, the insurer might not pay for damage if you have an accident.

The table below shows the coverage offered by different types of insurance.

Type Damage to your car Damage to other people's property (e.g. other cars) Damage or loss caused by theft of your car Injuries or death to other people in an accident
Compulsory third party cross cross cross tick
Third party property cross tick cross cross
Third party property, fire and theft cross tick tick cross
Comprehensive tick tick tick cross

Get at least third party property insurance

Third party property insurance may seem like an optional extra, but if you cause damage to another person's car you will have to pay to fix it. Even if the other person has insurance that will cover their car, their insurer will charge you the repair costs if it's your fault. The average vehicle repair cost is around $3,000. Could you afford this if you had a crash?

No claim bonus

No claim bonus schemes are meant to reward safe drivers or those who don't claim on their insurance but a no claim bonus does not always reduce the cost of your premium. Don't just stick with your current insurer for a no claim bonus, as you could get a better deal elsewhere. Find out more about what a no claim bonus really gives you.

Add on insurance sold by car dealers

Here are some things to watch out for if your car dealer tries to sell you:

  • Finance to buy the car - Ask what the interest rate is. Even before you start going to car yards, find out what rates other lenders are offering. See car loans.
  • Comprehensive insurance - While lenders can insist you take out comprehensive insurance if they take a mortgage over the car to secure the loan, they can't tell you which insurer you have to take out the policy with. Shop around.
  • Gap insurance - If your car is written off, your insurer will pay off your loan if there is a gap between what the car is worth and what you owe on the loan. Gap insurance can be expensive and you're unlikely to need it if you have a small loan or pay a large deposit. You may be better off spending your money on agreed value insurance, or having a smaller loan.
  • Consumer credit insurance - Covers your loan repayments for a set amount of time if you can't work due to illness or unemployment. Check very carefully to see if you really need it.
  • Breakdown insurance - Covers the cost of repairs to your car and can be expensive. Again, think about putting this money towards a better car or building up an emergency fund. Check whether you get a refund if you cancel the insurance, as this is not always the case.

Case study: Dave crashed his car

Angry driver after crashing car and realising he had no car insuranceDave decided not to get any extra car insurance on top of his CTP, but he did get consumer credit insurance. Weeks later, he backed into his neighbour's garage door and caused $3,000 worth of damage.

Dave was shocked when he realised his consumer credit insurance didn't cover the costs of repairing the garage or his car. It only covered him if he couldn't meet some of his loan repayments due to a serious accident, illness, unemployment or death.

Getting insurance when you buy a car privately

If you buy a car privately, including through a car website, you still need to shop around for insurance and be sure that you're covered before you drive away with your new car. In fact, when you're buying privately it pays to be extra vigilant checking the details and doing all the appropriate paperwork and back checks.

Go to your state or territory roads and traffic authority for helpful information on what you need to do when buying a car privately. It's also very important to call your insurer before you buy to find out everything they need to know about the car. Always add on the cost of insurance when working out how much to borrow. Consider the cost of:

  • Registration
  • Compulsory third party cover
  • Additional cover, especially third party property

And always factor in the ongoing running costs of your vehicle including petrol, car parking, car washing and anything else you want to spend.

When you're buying a car privately you should always make sure it won't be repossessed because the owner still owes money on it. You can check this for as little as $2.00 on the Australian Government's Personal Property Securities Register (PPSR).

Case study: Hayden shops around and saves

Young man in his car after insuring it

Hayden bought his first car and wanted to insure it. His mum suggested he buy
the insurance from the same company she was with. Hayden rang the company and got a quote.

Instead of just accepting the quote, Hayden asked three other insurance companies to compare what cover he could get and how much it would cost. It turned out his mum's insurer charged high rates for young drivers. By shopping around, Hayden was able to get the level of cover he wanted at a cheaper price.

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Last updated: 06 Aug 2018