What are the different kinds of car insurance?

In Australia, as you may be aware, it is necessary to have a basic level of car insurance set up to protect yourself should you be involved in an accident.

This is called compulsory third party insurance (CTP). If you own your own car, this is a mandatory form of insurance you must have in all states and territories.

It provides coverage for bodily injuries caused by your vehicle to other drivers, passengers, cyclists of pedestrians.

Something you need to be aware of is that it will not cover you for any damage caused to property, be it your car or someone else's.

In most states, this will be included as part of your registration fees. However, in Queensland and New South Wales you have the choice to choose your own CTP provider.

When you look at insurance providers you might also want to take a look at the other forms of comprehensive coverage you could add that will give you more protection.

For most people, a car is the second most expensive product they will purchase during your life, after their home that is.

And, while nobody expects an accident, it can happen, so it is best to prepare. 

Car insurance removes the added stress of having to come up with thousands of dollars in order to pay for damage bills - it gives you some peace of mind that you will be covered should you need it.

Third party property 

This is the next step up from CTP and will provide you with additional coverage for other vehicles and property damaged by your car.

It won't cover any damage to your own car, however, so if you are involved in an accident, you may still need to pay for any repairs to your own vehicle.

People with lower value cars typically opt for this type of insurance as the cost of a premium may not be warranted when you take into consideration the cost to replace their own vehicle.

However, it does mean they will not face an out of pocket cost to replace or repair someone else's more expensive car.

Third party fire and theft cover

The next level of insurance will provide additional cover should your car be damaged by fire or theft. While it does not cover collisions, it gives you more protection than you would be entitled to under a third party property policy.

It still offers you compensation where damage to others' property is concerned.

An extension sometimes offered under this kind of policy is for uninsured motorists. This provides cover for damage to your vehicle up to a nominated amount if you are hit by an uninsured vehicle. This can only be claimed if you can show you were not at fault, and you will need to provide the uninsured driver's name and address.

Comprehensive insurance

This is the highest level of insurance you can have in Australia. It is worth bearing in mind that the policies between insurers can differ slightly in what they cover.

This means it is best to read the fine print and compare thoroughly before signing up to a contract.

However, in saying that, most comprehensive car insurance policies will cover damage to your vehicle from collision, theft, and weather-related damage as well as vandalism.

It can also cover the repair or replacement of other vehicles or property damaged by your own vehicle.

Most cars that are covered by this policy are those deemed to be in good condition as this kind of policy comes with a higher premium.

What is the excess?

Something else that can affect your premiums is the excess, which is the amount you will need to contribute if you do need to make a claim.

What is the no-claims bonus?

People who have not needed to make any claims against their insurance policy will be deemed a lower risk by their insurer and as a result will have lower premiums.

The size of the discount could depend on the individual insurance company, so this is something to bear in mind if you are thinking about switching to a new provider.

If you do make the switch, remember your no-claims record can be taken from your current insurer and may have an impact on your new premiums.

Other things to bear in mind

If you are under age 25 you may find you are subject to higher premiums and policy variances than other age groups, as drivers in this age bracket are more likely to crash and make claims. 

Those who have been on the road for longer and have a good driving history behind them will be entitled to better car insurance rates and may also be eligible for a no-claims bonus, resulting in lower premiums.

In order to make sure you are getting the best deal possible, make sure you have done an insurance comparison, as another company may be able to offer you better rates than you are currently receiving.

Posted by Richard West.