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
personality and your needs. And you need to think hard about
Drivers under 25
Buying a car, getting a loan and paying for insurance are three
separate things. Always shop around. You might be better off
getting each of these services from three different places.
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
When working out how much cover you need, as a minimum, you
should get third party property insurance so you're covered if you
wreck someone else's car.
Insurance and finance
from a car dealer
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
- 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
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.
Insurance if you buy
If you buy a car privately, including through an internet site,
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:
If you're driving a used or old car you might save a lot of
money and hassle by becoming a member of a roadside assistance
- 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 do a REVS
check. REVS stands for Register of Encumbered Vehicles. REVS is a
free service run by State and Territory governments which can tell
you if the car you're thinking of buying is carrying a debt, and
could be repossessed.
Case study: Mandy shops around and saves
Mandy bought her first car and wanted to insure it. Her mum
suggested she buy the insurance from the same company she was with.
Mandy rang the company and got a quote.
Instead of just accepting the quote, Mandy asked three other
insurance companies to compare what cover she could get and how
much it would cost. It turned out her mum's insurer charged high
rates for young drivers. By shopping around, Mandy was able to get
the level of cover she wanted at a cheaper price.
Last updated: 17 Oct 2013
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