Written by IN THIS GUIDE
In the market for a new car insurance policy?
Car insurance is a critical part of owning a car, so it's essential to have the right coverage to protect yourself, your vehicle and your finances in case of an accident or damage. However, with so many options available, finding the right car insurance isn’t always as simple as picking the first offer you find.
Regardless of whether you’re in the market for third party property damage or comprehensive car insurance, you can compare instant car insurance quotes from some of Australia’s leading insurers in one place online and filter policies by premiums, inclusions, exclusions, excesses, optional extras and more to help you select the most suitable option for your needs.
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How to buy car insurance
How does car insurance work?
Car insurance provides financial protection for drivers in case of accidents, theft or damage to their vehicle. Without it, these incidents could set you back thousands of dollars, particularly if your or another driver’s car sustains significant damage or ends up being written off.
When you purchase car insurance in Australia, you'll pay either a monthly or annual premium to your provider. In the case of an accident, you must file a claim with your car insurance company, which will assess the damages and determine the amount of compensation you’re eligible for. Depending on your level of coverage, your insurance company may pay for the repairs to your car or cover the costs of any damage or injury you caused to others.
Keep in mind that most claims require you to pay an excess, which is an upfront contribution to the repair or replacement costs. For instance, if you had a $200 excess and claimed for $2,000 worth of damage, your insurer could cover $1,800, with the remainder to be paid by you. The amount of your excess can vary depending on your policy and can influence the cost of your premiums. Higher excesses often result in lower premiums and vice versa.
It's important to carefully consider your options when choosing car insurance in Australia to ensure you have the coverage you need in case of an accident. You should assess your individual needs and budget then compare different policies from various providers, looking at factors like the level of coverage, premium costs, excesses and the fine print in the product disclosure statement (PDS) before making a decision.
Types of car insurance you can choose from
What does car insurance cover?
Here's an overview of events you you may be covered for, depending on the level of cover you choose:
| Does the provider cover you for: | Comp. | TPPD | TPFT |
|---|---|---|---|
|
Damage to your car due to an accident?
|
✓ |
✖ |
✖ |
|
Damage to another car due to an accident?
|
✓
|
✓
|
✓
|
|
Damage to your car due to theft/theft of your car?
|
✓
|
✖ |
✓
|
|
Damage to your car due to fire?
|
✓
|
✖ |
✓
|
|
Damage to your car due to a weather-related incident?
|
✓* |
✖ |
✖ |
|
Injury or death caused by you in an accident?
|
✖ |
✖ |
✖ |
*Not all weather-related incidents are covered under a comprehensive car insurance policy. Check your PDS to find out what's covered and what isn't.
However, it's important to note that compulsory third party (CTP) is also available in Australia. Also known as Green Slip insurance in New South Wales and Motor Accident Injuries (MAI) insurance in the ACT, it's mandatory in Australia for all registered vehicles. This insurance provides cover for personal injury or death caused by a vehicle's owner or driver to other road users.
It doesn’t cover any damage to property or other vehicles, nor does it cover the driver or owner of the vehicle for any injury or damage caused to themselves or their vehicle. Each Australian state and territory has its own regulations for CTP insurance, and the cost and coverage of CTP insurance can vary depending on the state or territory in which the vehicle is registered.
What does car insurance not cover?
While car insurance provides valuable protection, certain situations and events typically aren’t covered by standard policies. These exclusions may vary depending on the insurance provider and policy terms, but common ones include:
- Wear and tear: car insurance doesn’t cover regular maintenance and repairs due to normal wear and tear.
- Mechanical or electrical breakdown: if your vehicle experiences a breakdown due to mechanical or electrical failure, it generally isn’t covered by car insurance.
- Intentional damage: deliberate acts or damage caused by illegal activities aren’t covered by your policy.
- Racing or reckless driving: car insurance doesn’t cover incidents that occur during racing or reckless driving.
- Driving under the influence: any damages or injuries that occur while driving under the influence of alcohol or drugs typically aren’t covered.
It’s important to carefully review the terms and conditions of your car insurance policy to understand the specific exclusions that apply.
How are my car insurance premiums calculated?
There are many factors that can impact the cost of your car insurance premiums. These can include:
- Age and driving experience: younger and less experienced drivers generally have higher insurance premiums, as they are considered a higher risk to insure due to their lack of driving history.
- Type of vehicle: the make, model and year of your vehicle can also impact your insurance premium. More expensive or powerful vehicles may have higher premiums, as they are often more costly to repair or replace in the event of an accident.
- Location: your state, city or town and postcode can also affect your insurance premium, as some areas may have a higher incidence of accidents, thefts, extreme weather events or other risks. For instance, car insurance in Queensland will likely be different than in Victoria.
- Driving history: your driving record, including any previous accidents or traffic infringements, can also impact your insurance premium. Drivers with a history of accidents or traffic offences may have higher premiums.
- Insurance type and coverage: the type of insurance you choose and the level of coverage you require will also impact your premium. For instance, comprehensive insurance typically has higher premiums than third-party insurance, as it provides more extensive coverage.
- Usage: how you use your vehicle can also affect your premium. For example, if you use your vehicle for business purposes or if you drive long distances frequently, you may have a higher premium.
- Discounts and bonuses: some insurers may offer discounts or bonuses for safe driving, no-claim periods or other factors which reduce your level of risk. Other insurers may also offer sign-up discounts as an incentive to purchase a policy.
- Car parking: if your car is parked on the road, you’ll likely pay more for your insurance than if it was able to be parked in a driveway or garage. This is because of the greater inherent risk of damage when your vehicle is exposed to the elements and other drivers on the road.
- Excess: in many cases, the higher your excess, the lower your car insurance premiums are likely to be. This is because you’ll be taking on a greater portion of the cost of replacement or repair if you make a claim, which insurers often reward with reduced premiums.
It's important to note that each insurer may have its own formula for calculating premiums, so it's a good idea to compare different insurance policies and providers to find the best deal for your needs and budget.
Car Insurance Top Tips
How do I make a claim on my car insurance policy?
The process of submitting a car insurance claim follows a few simple steps:
- Review your policy's coverage: before making a claim, it's important to review your car insurance policy to understand the coverage you have and whether the incident can be claimed for. This includes the amount of excess you will need to pay, the maximum limit of coverage and any exclusions or limitations on the policy.
- Gather relevant information about the incident: it's essential to provide accurate and detailed information about the incident. This includes the date, time and location of the accident, the names and contact information of any witnesses and the other driver's insurance and contact details if relevant. It's also a good idea to describe the incident in detail, take photos of the damage and get a police report if necessary.
- Submit your claim: once you’ve gathered all the necessary details, you can submit your claim to your car insurance provider. Most companies will have an online claims process, but you may also be able to make a claim over the phone or by filling out a paper form. If you aren’t submitting your form online, you’ll still need to send any supporting documentation or photos to your insurer.
- Receive an outcome: after submitting your claim, your insurer will assess the damage and determine the outcome. This may involve an inspection of the vehicle and the insurance company may request additional information or documentation. Once the assessment is complete, the insurer will provide you with an outcome, which may include repairs, a payout or a denial of the claim.
If you’re not at fault, you’ll still need to provide your insurer with all the relevant details of the incident and the at-fault party’s information. If you and the other party are unable to agree to who was at fault for an accident, your insurer will assess the evidence and determine who they believe was the responsible party. If shared fault is found, your insurer may try to work with the other party’s insurer to determine another solution, such as splitting liability between the two.
It's important to note that the car insurance claims process can vary between insurers and policies, so it's always best to check your policy documents and contact your insurer for specific information.
What optional extras are available with car insurance?
Most insurers offer a range of optional extras that can be added to a policy for an additional premium. These extras can vary depending on the insurer, but some common ones include:
- Roadside assistance: roadside assistance provides immediate help to drivers during breakdowns or unexpected incidents while on the road. This can include emergency towing, fuel delivery, jump-starting, lockout assistance and flat tyre repair.
- Windscreen cover: this can cover the cost of repairing or replacing a damaged windscreen.
- Excess-free glass cover: additionally, you can often choose to have the cost of repairing or replacing any glass on your vehicle covered without you having to pay an excess.
- No-claim bonus protection: no-claim bonus protection can keep your no-claim bonus discount intact even if you make a claim. Without this protection, your premium may increase if you make a claim.
- Hire car cover: this can provide you with a temporary replacement vehicle if your car is damaged or stolen.
- Lifetime repair guarantee: with this extra, you can ensure any repairs made to your car are guaranteed for the life of the vehicle. This is often included as part of comprehensive car insurance automatically.
It’s important to note that these optional extras will increase the cost of your premium, so it’s essential to consider whether they’re worth the extra cost. It’s also important to read the fine print of each extra to understand exactly what it covers.
How do I compare car insurance?
Understand your needs
Before you start comparing policies, it's important to consider your individual needs and budget. Do you need comprehensive coverage or just basic third party insurance? How much excess are you willing to pay in the event of an accident? Knowing your needs can help you narrow down your options.
Consider the inclusions and exclusions
When comparing car insurance, it's important to pay attention to the inclusions and exclusions of each policy. For example, some policies may include coverage for windscreen damage or emergency roadside assistance, while others may exclude coverage for drivers under a certain age or for certain types of vehicles. By understanding the inclusions and exclusions of each policy, you can choose the policy that best meets your needs with more confidence.
Look at the cost of different policies
Of course, one of the most important factors to consider when comparing car insurance policies is the cost. While it's important to choose a policy that provides the coverage you need, you also want to make sure you're getting good value for your money. When it comes to car insurance, it’s often about striking the right balance between cost and coverage, rather than simply choosing the cheapest policy available.
Check for discounts and bonuses
Many insurers offer discounts or bonuses for safe driving, no-claim periods or other factors that reduce your level of risk. Check to see if any insurers offer discounts or bonuses that you may be eligible for. It’s important to bear in mind that discounts shouldn’t necessarily dictate your choice, as they may not last forever, so consider how they factor into the long-term cost of coverage.
Think about your excess
Excesses are an important part of car insurance, as you’ll need to pay one whenever you go to make a claim. As such, it’s worthwhile comparing different insurers based on the excess you’ll be required to pay or their options if you’re able to select one. As mentioned, excesses can impact the cost of your policy, so it’s crucial to consider how this will affect your premiums.
Case studies: market value vs. agreed value car insurance
It’s important to understand the difference between market value and agreed value in car insurance before you buy.
Market value means you’ll receive the estimated value of your car in the current market if it’s written off or stolen. Your insurer will consider factors such as your car’s age, condition and kilometres driven when calculating this cost. This is the most common method used by insurers to determine the value of your car and is the cheaper of the two options.
Agreed value, on the other hand, is a value you and your insurer have negotiated and agreed upon before the policy begins in the event your car is stolen or written off. This value must be within a reasonable market value and your car may be required to meet other criteria, such as being below a certain age and having no major damage.
Case study #1 – market value insurance policy
Lauren, 25, wants a new insurance policy for her ten-year-old sedan. She decides to take out a market value comprehensive car insurance policy, which means the amount she can receive from her insurer is based on the vehicle’s current market value at the time it’s written off or stolen. The fact she’s elected to insure it at market value also means her premiums will be lower than if she’d agreed an amount with her provider.
Nine months later, Lauren is involved in an accident which writes off her car. She makes a claim to her insurance company, who determines that her car’s market value directly before the accident was $7,500 due to its kilometrage, wear and tear and working condition. This suits Lauren, as she knew she wouldn’t realistically receive a big payout for her car and didn’t think being covered for a few thousand dollars more was worth the extra cost. The payout will be enough to cover most of her next car purchase, with the rest funded by her savings.
Case study #2 – agreed value insurance policy
James, 36, is looking to insure his brand-new sports car, which he just bought for $70,000. He wants to ensure he gets adequate coverage in case it’s stolen or written off, so he decides to get some quotes for an agreed value comprehensive car insurance policy. This means James can ask his chosen insurer to agree to insure the car for the amount he just paid for it, $70,000. He accepts his premiums will be higher under this agreement as a necessary cost for covering his car.
Three months later, James’ car is stolen. He goes back to his insurance provider and makes a claim, after which he’s paid the agreed $70,000 sum. In this instance, James receives more than what he would’ve under a market value policy, as his car’s value would’ve dropped over the three months he’d owned it.
Frequently asked questions about car insurance
There’s no one answer to which car insurance company or policy is the best, as each individual will have different needs. To find the best car insurance for you, it's important to compare policies from multiple insurers, taking into account the coverage options, premiums, excess and any additional benefits or discounts offered. Also, be sure to read the PDS carefully and ask any questions you may have before making a decision.
If you’re looking solely at the cheapest option overall, paying annual premiums is less expensive than monthly payments. This is because they’re easier to process, as it’s one payment compared to 12. While monthly premium payments ensure that the cost is much more manageable in smaller chunks, they tend to attract more service fees as a result of their frequency.
However, whether you should pay for one or another depends on your situation and whether you can afford to make a lump sum payment towards your insurance or would be more comfortable paying in monthly instalments.
Most car insurance policies will last for 12 months before they have to be renewed. However, if you wish to cancel your policy early and you’ve paid your premiums in advance, you may be able to receive a refund for the unused part of your policy (minus any administration fees or government charges).
Yes – while car insurance won’t cover you if you make an accident claim while your licence is suspended, it’s still important to insure your car if you want cover for fire damage or theft. In this instance, you may wish to take out a Third-Party Fire and Theft insurance policy to cover your car.
Yes – not including your child in your policy and allowing them to drive your car could result in a lack of coverage from your insurer if they get in an accident. However, you won’t have to include your child as a driver if they’re still a learner, as this only really comes into effect once they obtain their provisional license. It’s important to note that an accident with a learner at the wheel could result in you being charged an additional excess.
No – insurers won’t look at your credit score when processing your policy, so a bad credit rating won’t directly result in you having to pay more expensive premiums.
A car insurance excess is an administrative fee you must pay upon making a claim. For instance, if you had a $200 excess and claimed for $2,000 worth of damage, your insurer could cover $1,800, with the remainder to be paid by you. A basic excess can apply to all claims (though some insurers may allow you to avoid paying an excess by paying a higher premium), while an additional excess may apply to other factors such as window damage or drivers under a certain age.
A rating is a risk assessment based on how often you claim on insurance. In most cases, your rating will start at 6 and decrease with each year you haven’t made a claim. Rating 1 means you haven’t claimed for over 5 years and are often eligible for a no-claim bonus. No rating is a provisional rating, attracting a higher price due to bigger risk. It's important to consider whether seeking out a policy with a no-claim bonus is worth it before buying your insurance.
Many insurers will let you choose your own repairer when making a car insurance claim. This can provide greater peace of mind that your car is being serviced and repaired by someone you trust. However, not all policies will offer the choice of repairer, so it’s important to check with your insurer if you’re unsure about whether you can select where your car is able to be fixed.
Helpful guides on car insurance
Compare car insurance policies with Compare the Market
Disclaimer:
Savvy (ABN 78 660 493 194, ACR 541 339) provides readers with a variety of car insurance policies to compare. Savvy earns a commission from our partnered insurers each time a customer buys a car insurance policy via our website. All purchases are conducted via our partners’ websites. The integrity of our comparison service is unaffected by our partnerships with those businesses and our effort remains to bring further brands that do not already use our comparison service onboard.
Savvy’s comparison service includes selected products from a panel of trusted insurers and does not compare all products in the market. Any advice presented above or on other pages is general in nature and doesn’t consider your personal or business objectives, needs or finances. It’s always important to consider whether advice is suitable for you before purchasing an insurance policy. We always recommend readers to consult the Product Disclosure Statement (PDS) of different policies before purchasing your car insurance.
