It pays to know a little bit about car insurance. Why? Because in a country as vast and inviting as ours, we’re bound to spend plenty of time on Australian roads. An ABS report states we travel an average of 13,800 kilometres per year (as of 2014). That’s roughly 8 return trips from Sydney to Melbourne!
With all that driving, if pays to have protection and peace of mind, and finding a great car insurance policy that will provide you exactly that. We’re here to answer any pressing car insurance questions you have, which is why we’ve assembled this FAQ.
Do I really need car insurance?
By law, every car owner in Australia must have Compulsory Third Party (CTP) insurance (also called Green Slip insurance in NSW), a bare minimum level of cover. You are not required by law to hold more extensive cover than this (e.g. comprehensive cover), but it’s a good idea to consider these types of policies as they provide greater protection overall.
If you’re unsure of whether or not you’ll get any value from this type of cover, consider the following: the Insurance Council of Australia states that Australians are claiming on their comprehensive insurance policies more than they have in years, and the size of these claims (i.e. the cost to insurers) is increasing.
Source: Australian Insurance Council, General Insurance Industry Trends, January 2015
N.B. According to the AIC, “The numbers in the series do not represent dollar values or frequencies. They represent the percentage change in the index numbers between two consecutive or distant quarters. This provides an indication of the underlying trend change in premiums, claims frequency, claims size and cost per policy.”
It would seem an increasing number of us as policyholders actively use comprehensive cover when needed … but you can’t claim if you don’t have cover.
What is compulsory third party (CTP) insurance?
CTP insurance covers your liability against personal injury caused by you in a motor vehicle accident or incident. So, if you are in an accident, and are at fault, and someone gets injured, your CTP protects you. It does not cover damage to vehicles or property, which is why it’s important to have comprehensive car insurance to protect you if your car is damaged, stolen or if you damage a third parties vehicle or other related property .
Which cover offers the greatest protection?
- Third Party Property provides cover for damages caused by you to other people’s cars or property, plus a limited amount of cover (it varies from insurer to insurer) for your vehicle if it’s damaged in a no fault accident with an uninsured vehicle.
- Third party with fire and theftcovers you in the same way Third Party Property does, with the addition of cover in cases of fire damage and theft to your vehicle. Third Party Fire and Theft cover may also cover repairs to your vehicle (up to a specified limit) if you are involved in an accident with an uninsured driver and they are at fault.
- Comprehensivecar insurance covers you for damage to your vehicle and the vehicles and property owned by others, as well as fire damage and theft. It will cover you for the cost of repairs regardless of which party is responsible for the damage. Depending on the circumstances, comprehensive car insurance will cover you if your car is completely written off, allowing you to replace your car and get back on the road.
Comprehensive car insurance provides you with the highest level of protection available, and insurance premiums are reflective of this. If you have taken out a loan to purchase your vehicle, you may be required to take out comprehensive car insurance as a condition of the loan.
Many car insurance policies offer optional extras, usually at the expense of a more expensive premium. Some common optional extras are windscreen cover, the leasing of a rental car if your vehicle is being repaired, and complimentary roadside assistance.
What does it mean when I insure my vehicle for ’market value’?
What it costs for your insurer to replace your car with one that is of similar make, model, age and condition as your own. As your car’s value changes over time (notably due to depreciation), its market value changes. If you write off your vehicle, you cannot receive a payout or new car replacement in excess of this market value – if you car was worth $10,000, you won’t receive anything more than that (minus the excess you pay).
What’s an ‘excess payment’?
An excess payment is the amount you will need to pay if you make a claim on your car insurance. Your excess can vary depending on your needs and your policy. Some policies allow you to have a higher excess in exchange for a lower premium, or no excess at the expense of a more expensive premium. Excesses may only need to be paid in claims where you are deemed to be at fault by your insurer or when there is no third party.
How are car insurance premiums calculated?
Your car insurance premiums can be calculated according to a range of policy information, , including (but not limited to):
- How old the driver is. Some insurers offer aged driver options, in which you can select, an option of aged groups (for example over 25, over 30 or in some cases even over 40). The more experienced the driver (usually representative of age), the more competitive the premium.
- Your vehicle. How much your car is worth has a huge impact on your insurance premium (i.e. expensive to replace usually means it’s expensive to insure).
- Where and how your vehicle is stored overnight and during the day. Parking your car in a garage or a secure car park will mean a lower premium than parking on the street, or in an unsecured car park.
- Driving and claims record. If you have an incident-free driving history, it is likely your premiums will cost less. The opposite is also true – if you have a history of claims against your insurance, your premium can be more expensive. This can also include you own driving history such as loss of licence and number of driving offences.
- Private or business vehicle use. Business vehicle use can carry a higher insurance premium because of the nature of their use.
Much of the above depends on the insurer and the individual policy.
What’s a ‘no claim’ bonus? Do I qualify?
For Comprehensive policies, insurers may allow a No Claim Discount (or bonus) which rewards drivers based on a good driving history. This NCD can be carried between policies, and is represented as a rating (e.g. rating 1, if you haven’t claimed in five years or more).
I’ve been in an accident! How can I claim?
Claiming on your car insurance is a simple process. Make sure you store your insurance details in your car at all times – your glove box is an obvious spot – so they are always at hand in case you’re involved in an accident. Exchange insurance details with other parties involved in an incident, and then contact your insurer. If necessary it may pay to take pictures on the location of the accident and the damage.
Most insurers provide a 24/7 claims lodgement and assistance over the phone while others also offer online claim lodgement. Give them a call and they’ll talk you through the next steps to lodge a claim.
Assessing the damage to your car?
The severity of the damage may determine how your car is to be assessed. If the incident is minor, you may be asked by your insurer to take your vehicle to one of several nominated repairers who will undertake repairs.
If the incident is more severe, your vehicle may need to be assessed by your insurer’s assessor. If your vehicle is not in a driveable or roadworthy condition due to the nature of the damage, your insurer may arrange to have it towed directly to their facility for a claims assessment.
Always read the insurers Product Disclosure Statement (PDS) which outlines the conditions of cover including information about:
- What your policy covers you for and your responsibilities to met these conditions.
- Your duty to disclose all information that is asked of you both at a policy purchase and renewal level
- Understand your policy benefits, features and entitlements.
How do I choose a policy?
Choose a policy that best matches your individual circumstances. When considering car insurance, the biggest question to ask yourself is: if your car were severely damaged or written off, could you afford to replace it? If not, you’re probably best off considering a comprehensive policy. As its name suggests, comprehensive insurance provides a high level of protection when it comes to coverage.