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
||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
|Third party property
|Third party property, fire and theft
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
Add on insurance sold by car
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.
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 study: Dave crashed his car
Dave 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
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:
- 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
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.
Last updated: 06 Aug 2018