Buying the right insurance is as important as buying the right car. There are a number of factors you need to consider to ensure you have the best product for you, so don’t shop around for the lowest price.
Types of insurance available.
There are 4 main types of insurance available in Australia for motor vehicles.
- Comprehensive – which covers damage to your vehicle and other peoples, including their property. In addition it will cover theft and on occasion includes legal costs. This type of policy is the most comprehensive policy type and offers peace of mind. Comprehensive insurance is by it’s nature more expensive, and therefore more suitable for higher cost vehicles and in a reasonable condition. Over insuring a vehicle is pointless, as in the event of a claim any payout would be aligned to the vehicle value but the premiums are set at the initially disclosed vehicle value. Additionally Comprehensive insurance often comes with additional extras such as windscreen cover and temporary replacement cars to use while yours is being repaired.
- Third Party Property – As the name suggests this covers damage to a third party’s vehicle or property along with legal costs only. You can’t claim for damage to your own vehicle. This type of policy is suitable for low cost cars, especially if they aren’t in great condition (but road legal), you may also get limited insurance for damage to your car in the event of a collision with an uninsured driver.
- Third Party Fire and Theft – this is the same as Third Party Property, but with the added benefit of coverage for fire damage and theft of your vehicle.
- Compulsory Third Party (CTP) – As the name suggests, this is compulsory insurance that insures you for any injury you may cause to someone else. It doesn’t replace other policy types, as it doesn’t cover your legal costs, or any vehicle related damages. This type of policy is also known by various names such as Green Slip in NSW or Transport Accident Charge in VIC. This type of policy is a legal requirement in all states and territories across Australia, so it’s illegal to drive a vehicle without it. While this policy offers some level of protection for third parties that sustain injury, as the policy holder you are still at significant risk for various costs such as legal, medical and vehicle damage; hence why a supplementary policy is required.
What policy is best for me?
To choose the most suitable policy for you, you’ll need to consider a number of factors.
- Value of your vehicle – is it worth paying the premiums for Comprehensive insurance, or would a lower type of policy be more suitable? Perhaps your car is used infrequently, and is kept for convenience, has low value and while road legal isn’t in great condition.
- Do you need to insure it for an agreed value, or at market value?
- Do you want to protect your no claims bonus?
- What excess, if any you’re willing to pay in the event of a claim?
- Do you need specialist insurance cover, such as off road driving?
What is an excess?
When a claim is made, you may need to pay an excess. The amount to pay is based on a number of factors. Standard excess will always be required, so for instance if you have an agreed $500 excess. For any claim you’ll have to cover $500 of the payment. So let’s say you have a fully comprehensive policy with a $500 excess, and have a minor bump in the local supermarket carpark. The cost of repair is $750, you’ll have to cover the $500 excess and the insurer will payout $250.
There are other forms of excess that need to be considered too, and will be dependent on a case by case basis but include.
- Named driver excess – where a names driver has a specific excess to pay
- Age excess – the excess may vary due to the age of a named driver
- Undeclared driver – when a driver involved with a claim isn’t named on the policy
- New Driver – if a driver has less than 2 years experience of driving and is under 25yrs old.
Your insurance policy should give you a clear view of any excess you may have to pay.
Things that may affect your Insurance costs.
There are a number of factors that may impact your overall insurance premiums. The include things such as
- Where you store your car. Parking on a public street may cost more than in a secure garage on private grounds.
- A poor driving record with previous claims may increase costs.
- Having a dash cam typically doesn’t impact your premiums but may help apportion blame in the event of an accident, so well worth the investment.
- Driving off road can increase your premiums and we strongly recommend discussing this with your insurer to make sure you have adequate coverage.
- Modifying your vehicle can also impact costs. Either due to the value of any changes you make, or the perception that they may increase the probability of a claim.