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Are you Ready to know how car insurance works?


Congratulations! You have finally unlocked one of life's achievements. Are you excited about it? Oh, of course, you are... What a silly question to be asked from a person who has just bought a new car. Instead, we should have asked; have you insured your car with the best car insurance policy to cover your future damage in case of any accident? Not yet. Why not? The need for getting your car insured is of highly importance because your savings and future earnings are at a great risk if your car is not insured. Getting the best car insurance in Australia that best suits your needs is arduous and time taking process especially when you have limited knowledge about car insurance. 

To help you overcome this issue, we are here to provide you a complete overview on car insurance and discuss in detail the frequently asked questions that might also pop up in your head as a car owner i.e., how does car insurance works? How many types of car insurance are available in Australia and what kind of financial risk these policies cover and under what circumstances? How to choose a Car Insurance Policy? What extra features to look out in the policy? Does a car insurance policy differ in different states of Australia?

Let’s begin to address all these questions!

What is car insurance and how it works?

Insurance is about mitigating the financial risk that is why people often purchase it at the time of buying an asset like home, property, cars, boats etc. Insuring an asset transfers the financial risk to an insurer and guards them from future financial hardship. Similarly, car insurance is a legal contract between the car owner (insured) and an insurance company (insurer) that protects the insured against financial loss in case of an accident or theft. 

Car insurance provides coverage for the following:

  • 1- Property-damage to your car.
  • 2- Liability- cost you owes to others for property damage and bodily injury.
  • 3- Medical- covers the cost of treating injuries and other medical related concerns.

How many types of car insurance are available in Australia?

Every car insurer being licensed in Australia offers four types of car insurance policies that differ significantly in their coverage. We will discuss in detail the types along with financial risk these car insurance policies cover.

  • 1- Comprehensive Car Insurance: This form of insurance offers the highest level of protection amongst other types as it covers the repair and replacement cost of your own vehicle and other person’s vehicle that is being damaged by your vehicle whether you are at fault or not. Further, it covers the damage cost of your vehicle for events like collision, fire, theft, malicious damage and weather related damage. 

  • 2- Third Party Fire & Theft Cover: This type of insurance covers you for loss or damage to your car, up to a specified limit, if it is stolen or catches fire. In addition, it covers damage caused by your car to other people’s property.
  • 3- Third Party Property Insurance: Third Party Property Insurance covers damage or loss of another person’s vehicle or property caused by your vehicle. Unfortunately, this form of insurance does not provide cover for your own vehicle. However, some insurers in Australia cover a limited amount of damage caused to your vehicle if you have a collision with an uninsured driver. 

Regardless of the fact that the third party insurance does not provide coverage to your vehicle but it does not let you financially exposed (especially when you possess a low-value vehicle) to pay for the damage your car might do to a more valuable vehicle or other property that belongs to someone else 

  • 4- Compulsory Third Party Insurance (CTP): According to the Australia’s insurance law, all car owners must registered themselves for a compulsory third party insurance (CTP) which is called Green Slip in New South Wales and Transport Accident Charge (TAC) in Victoria. It is illegal to drive a vehicle in Australia that is not registered for this particular insurance scheme. CTP provides a protection to a person you have might injured while you are driving, however, it does not cover any damage to your vehicle, another person’s vehicle or property or theft of your vehicle. 

How to choose a Car Insurance Policy?

Now you have a clear understanding of the policy, it's the time to consider some questions to opt for a car insurance policy that best meets your requirements and needs.

  • Type of Car- You must look at different car insurance policies depending on the type of car you want to get insured. Is it a luxury car or a family car? Is the condition of the car is good or bad?
  • Driving Timings- How often do you drive the car? The greater the risk of having an accident, if you frequently drive a car. In this scenario, comprehensive car insurance will be best suited for you.
  • Parking Options- Where do you park your car? If you park your car at personal garage then it's completely fine but if you park your car on the street then third party theft and fire can provide you coverage. 
  • Your Age-Young drivers who are under the age of 25 face stiff premiums while taking out a policy while older drivers are eligible for lower premiums and depending on their driving history, they can receive significant discounts on taking out a new policy.
  • Value over Price-Remember the fact that no policy is a good policy if it doesn’t include the benefits you need when you have to make a claim. Your ultimate goal should be to look at the value you get against the money.
  • Comparing Premiums- Compare premiums offered by different insurers for the same type of cover.

What extra features to look out in the policy?

When you decide on the car insurance policy, make sure that it must have all the extra features you want against your money. 

  • Repairing guarantee- Many people prefer to have a lifetime repair guarantee by the insurance company.
  • Repairer‘s Choice- Some car insurers give the choice to repair your car from your own repairer.
  • Damage to Your Car- You might be happy to learn that some comprehensive insurance policies let you select the hazards you want to be protected against. 
  • Hiring a Car- People who hires car while waiting for their car to be repaired or replaced after damage or theft.
  • Personal Property Coverage- Some insurers offer limited cover in comprehensive insurance for personal possession store in the car.
  • Vehicle Replacement- If your car is written off before a certain number of years, your insurance company will replace it with a new one. Find the insurer who offers it for the most number of years.

Does a car insurance policy differ in different states of Australia?

Yes, different states of Australia may have different car insurance policies. You can have a comprehensive car insurance comparison by visiting the State Government for details as for example, the car insurance NSW (New South Wales) differs from car Insurance QSL (Queensland) in terms of purchasing your CTP insurance separately at registration time, with several different providers to choose from. This enables the insured to pick the right insurance provider that would meet his or her policy needs. Consequently, look out for the benefits of car insurance policy being provided in your state.

Get your car insured with the right car insurance policy and save yourself from any potential loss.

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