Car insurance cover notes explained

Cover note insurance was once common for car buyers in Australia, but it’s now almost completely unavailable in the market and rare to find. While insurance companies no longer offer cover note insurance, most insurance policies offer immediate purchase and have cooling-off periods instead, which have effectively replaced cover note insurance as they’re used similarly.

To check that your car is properly covered by your existing policy, read your policy documents including the Product Disclosure Statement (PDS) for all inclusions and exclusions that may apply to you, as well as the Target Market Determination (TMD) to see whether the policy is suitable for you.

While both ensure that your car is protected from the point of purchase with the option to swap or cancel the policy at no cost (provided no claims have been made), there are some key differences between cover note insurance and cooling-off periods.

Cover note insurance was a short-term cover until you purchased a more permanent policy. You didn’t have to pay upfront costs for cover note insurance and it was designed to give you time to weigh up your insurance options.

Conversely, a cooling-off period isn’t something you purchase; it’s included when you take out car insurance. If you change your mind and haven’t made a claim during the agreed time frame (typically 14-21 days), you can cancel or switch the policy and receive a full refund for the cost of your insurance, provided you haven’t made a claim.

Cooling-off periods differ between providers and car insurance products. Some have a 21-day cooling-off period, whereas most offer 14 days which is the legal minimum required.

You can view the details of your cooling-off period in your policy’s PDS. You’ll also find other policy information such as payout limits, exclusions, definitions, terms and conditions, so it’s always a good idea to read this policy document when considering a product.

Most car insurance policies will have a waiting period for specific events where you won’t be covered if you make a claim. For example, you typically can’t claim for fire, storm, cyclone or flood damages that happen within a certain period of purchasing a new car insurance policy. Details of any waiting periods applicable to your specific car insurance policy can be found in the PDS.

If you make a car insurance claim during your cooling-off period, you’ll still go through the claim lodgement process as normal. However, you’re unlikely to receive a full refund of your premium if you choose to cancel your insurance after making a claim.

Comprehensive insurance covers the cost of damages to both your vehicle and others involved in an accident, regardless of who is at fault. It’s the broadest level of car insurance available and also usually covers your car if it’s stolen or damaged by vandalism, fire, storm, hail and more. Depending on your policy, it can offer new car replacement for a brand-new vehicle that’s a total loss and written off within a year or two of purchase if you’re the first registered owner. It’s best to read the PDS for any terms and conditions that may apply.

You can also add optional extras to comprehensive cover like windscreen excess reduction cover and personal effects cover.

Third Party Fire and Theft covers the damage you cause to another vehicle or someone else’s property if you’re at fault for an accident, as well as the costs if your vehicle is stolen or damaged by fire or theft. Keep in mind that it won’t usually cover the damages to your own vehicle in a collision.

If you cause damage to another vehicle or property, Third Party Property Damage is designed to cover those repair costs (subject to limitations and exclusions). Note that it won’t usually cover the costs of repairs to your car or property except in very limited circumstances.

As the name suggests, CTP insurance is compulsory for all registered vehicles in Australia. This insurance is designed to cover your liability for the death and injury of other people if you cause an accident while behind the wheel.

Car insurance providers in Australia typically don’t offer cover for periods less than 12 months, meaning it’s difficult to find short-term car insurance. However, some insurers may allow you to pay your premiums fortnightly or monthly until you no longer need cover.

You also have the option of cancelling your policy at any time. In most cases, if you haven’t made a claim, you’ll be entitled to a pro-rata refund of your unused premiums. Just keep in mind that you may be charged cancellation fees if you cancel after the cooling-off period.

If you’re driving a hire car for a short time, the insurance is usually organised by the hire car provider, which may come at an additional cost to you.

If you buy a new car, some insurance providers let you transfer your car policy if you still have a period of insurance left on your current pay cycle. That way, you don’t have to go through the hassle of finding a new policy for your new set of wheels.

When transferring your policy to your new car, your car insurance premiums may change depending on the circumstances, which could include:

• The level of cover you have (e.g. a comprehensive car insurance policy or Third Party Property Damage)
• The market value of the new car
• Any changes to your driving history
• If you park or use the car differently.