When you’re looking at taking out car insurance, it’s important to know exactly what you’re getting. With all the different types of insurance available and the terms you’ll come across that may be unfamiliar, choosing the right insurance can seem tricky. To help you make sense of it all, here’s a brief look at the basics that you’ll need to understand and make decisions about when you’re choosing a car insurance policy.
Types of car insurance
There are four main types of car insurance available in Australia, each providing different levels of cover.
Compulsory third party (CTP)
As the name suggests, CTP insurance is compulsory. It covers people for death and injury caused in a car accident, but does not provide any cover for damage to vehicles. The rules for CTP insurance vary between each state/territory and you can find out more about the rules where you live by contacting your local transport authority.
Third party property
This covers damage you cause to other people’s property in an accident but does not cover any damage to your own vehicle.
Third party fire and theft
As with third party insurance, this covers damage you cause to other people’s property, and it also covers your own vehicle for damage or loss due to fire or theft.
Comprehensive
Comprehensive insurance can cover you for loss or damage to your own vehicle regardless of who was at fault, as well as damage to another person’s property.
Excess
Excess is the amount of money you’ll need to contribute if you make a claim on your insurance. The amount of excess on your policy can also affect your premiums – generally the lower your excess, the higher your premiums will be. With some insurers or policies, there may be an additional excess for young or inexperienced drivers.
Agreed or market value
Some insurers offer you the option to either cover your vehicle for market value or an agreed value.
Market value means the insurer will determine the value of your vehicle based on a number of factors including the make, model, age and condition of the vehicle.
Agreed value allows you to agree on a set dollar value of the vehicle with your insurer at the time of taking out your policy. Agreed value is often higher than market value.
Car insurance premiums
Premiums are the amount of money you pay to an insurer for coverage. There are a huge range of factors that affect insurance premiums, including:
- Your age
- Your driving and insurance history
- The value of your vehicle
- Your intended use of the vehicle eg. business or private use
- Where your car is stored during the day or overnight
- The level of cover, excess and any other options you have chosen
- The make and model of your vehicle
With an understanding of these basics that you’ll come across when looking at car insurance policies, making sense of what you’re looking at should be much easier. Make sure you check the specifics with the insurer/s that you’re looking at though so you’re fully aware of what you are and aren’t covered for and the other terms that they offer.