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What is car insurance
Car insurance is an insurance policy that covers damage to other people’s property or their car, harm to other people, or damage to your own car, depending on the type of policy you have.
How many cars are on the road in Australia?
According to the ABS 2015 Motor Vehicle Census, there are 18 million motor vehicles registered in Australia. This includes over 16 million passenger cars and commercial cars, around 3 million trucks, and over 807,200 motorbikes, and the number is growing at a rate of 2.4% every year. Over the past 12 months, 1.12 million new cars were sold in Australia.
Aussies are especially buying more motorbikes, light trucks, and campervans in 2015 than we were in 2010. Motorbikes and scooters are the fastest growing type of vehicle as our capital cities getting more crowded. No matter what vehicle you drive, whether you’re driving it every day, just for work, or just on the weekends, you need to make sure it is properly insured.
Road accident statistics in Australia
The annual economic cost of road crashes in Australia is a shocking $27 billion. The average age of vehicles registered in Australia is 10 years – around the time when your car starts to show some wear and tear and has an increased risk of getting in an accident.
Motor vehicle theft statistics in Australia
According to the National Motor Vehicle Theft Reduction Council, there were an average of 145 car thefts per day in Australia in 2014. An estimated 20 cars were stolen and exported from Australia every week.
All vehicles that are 25 years or newer are manufactured with immobilisers to prevent theft, but that?s no use if owners leave their keys in an obvious place, or even leave their car unlocked. People tend to assume that if their car is at home, it?s safe – but 47% of stolen vehicles are taken outside your own home or a friend?s home, according to the ABS. What?s more, 2.9% of Australian households lost valuable property they had left inside their vehicle when it was stolen in 2013-2014, such as wallets, jewellery, and electronic devices.
And it turns out that thieves love motorbikes, too, with only 43% of stolen bikes eventually being recovered – the lowest recovery rate for any stolen vehicle.
With statistics like this, you should make sure your vehicle is covered at least for accident or theft.
Types of car insurance
There are four main types of car insurance:
We’re used to spending a lot of time picking out which car we want to buy, but we should also spend as much time finding the right car insurance for that vehicle.
Choosing the car insurance that’s right for you will depend in part on your budget. Ideally, though, you should look for the best cover you can comfortably afford. Start your search by comparing car insurance policies on our website or downloading our free Car Insurance Star Rating Report.
1. Compulsory Third Party (CTP)
It is compulsory that you have CTP insurance in order to register your vehicle.
What it covers: CTP offers protection against claims for compensation if you injure or kill someone in a motor vehicle accident. The specific conditions on this type of insurance are different from state to state.
What it doesn’t cover: CTP doesn’t insure against the cost of repairs to your vehicle or property or anyone else’s.
CTP is the cheapest form of cover, but only having CTP insurance puts you at a significant financial risk if your car happens to damage someone else’s vehicle or property.
2. Third Party Property
This is the most basic form of optional insurance cover, and it is designed to prevent you from going bankrupt if you run into someone else’s expensive car, boat or caravan.
What it covers: Third Party Property covers the cost to repair damage caused by your car to other people’s property. It will also cover your legal costs if they sue you over that damage.
What it doesn’t cover: Third party property doesn’t cover the cost of any repairs or replacement of your own car, except under some limited circumstances through some insurers.
3. Third Party, Fire and Theft
This is the next option if you don’t want to pay for top-of-the-line insurance but you do want some protection for your own car.
What it covers: In addition to covering damage to the property of others, Third Party, Fire and Theft insurance also provides some limited cover for your own car if it is damaged or lost because of fire or theft. Some insurers will only cover the value of a vehicle up to a limited amount such as $5,000 – $10,000, while others will cover the car for its full market value or an agreed value.
What it doesn’t cover: This insurance doesn’t cover the cost of repairs to your vehicle if it is involved in a traffic accident.
The chances of your car being stolen: The 2015 NMVTRC figures above indicate that a vehicle is being stolen every 8.5 minutes in Australia, up from one theft every 10 minutes in 2010.
4. Comprehensive Car Insurance
This is the highest level of insurance cover and it will definitely give you the greatest peace of mind. Logically however, given that this type of car insurance policy covers the most things, these policies also tend to be the more expensive.
What it covers: Comprehensive insurance covers everything mentioned in the lesser insurance options above, and it also covers you for accidental damage to your own car, regardless of who caused the damage. Comprehensive also has a range of optional extras, including replacement vehicles while you can’t drive your own car, and no-excess windscreen replacement if you have a crash.
What it doesn’t cover: Comprehensive insurance won’t cover damage caused by someone else driving your car, unless you have listed them in your policy as an authorised driver or have a policy that allows anyone to driver your vehicle. It also won’t cover damage caused if the driver was over the legal alcohol limit or affected by drugs. This cover requires that your car is roadworthy and that you hold a valid driver’s license.
Roadside Assistance is one important optional extra that can be added to your comprehensive insurance coverage. If you have this cover, your insurer will help you if your vehicle won’t start or if it stops because of a mechanical or electrical failure. If they can’t fix the problem immediately, they will tow you to the nearest mechanic or to a mechanic within a certain kilometre range. They can also help you change a flat tyre or a flat battery, fill up your car if you run out of fuel, and help you get into your car if you lock your keys inside the car.
Some insurers cover the entire cost of this emergency help. Other insurers will arrange the help to get you off the side of the road, but you still have to pay some or all of the cost afterwards.
There are a number of providers of roadside assistance as a stand-alone product separate to your car insurance policy.
Loyalty schemes for car insurance
As the no claim discount is slowly being phased out in Australia, more loyalty schemes are now appearing on the market. Customers get rewarded with a discount on their premium based on how long they’ve been with the one insurer and the number of policies they have with that insurer, rather than whether or not they’ve made a claim. Having your car, home and contents, and more insured with the one insurer can pay off – although you still need to assess and compare every insurance policy carefully to ensure that it’s the right insurance cover for your needs!
Which type of car insurance should you have?
For most people, the choice between different types of insurance policy comes down to your budget. You have to weigh up whether the premium charged by different insurance providers is more or less than the bill you would face if your car was in an accident, or the cost of replacing your car if it was stolen.
When a car is new, comprehensive insurance is likely to make sense because the vehicle is worth a lot of money and it would be expensive to repair or replace it. If a car is under finance, some car loan providers require the owner to get comprehensive cover. If a financed car was written off in an accident, the insurance pay-out would go to the finance company, with any remainder going to the owner of the car.
As a car gets older and its market value decreases, some drivers may choose to opt for a third party policy. If a car got totalled when it was quite old, it wouldn’t cause quite as much out of pocket stress for the owner.
There can be some great discounts for buying car insurance policies online, so it pays to shop around and compare car insurance options. Out of 53 insurers we rated most recently, 17 offer discounts ranging from 10-25% when you buy online, while 8 insurers offer a discount of $50-$100 off your first year premium for buying online.
Just make sure that you’re not buying online solely because of the price. You also want to make sure you’re covered for what you need, so read the fine print in the product disclosure statement (PDS).
Is car insurance cheaper in different states in Australia?
The following average premiums come from the data in our latest Car Insurance Star Ratings report and is based on the car insurance policies surveyed in our report according to our methodology.
What affects the cost of your car insurance?
There are a few obvious factors that change how much your premium will cost, such as the type of insurance you take out, which optional extras you sign up for, and how much your car is worth. But there are many other factors that affect the cost of a car insurance policy.
How to reduce the cost of your car insurance
Car insurance is essential, but there are some ways to save money. No matter what car you drive, we have a few great tips to potentially reduce the cost of your car insurance:
Remember, the most important thing is to choose a car insurance policy that suits your own needs. You can compare car insurance products here.
Please note that these are a general explanation of the meaning of terms used in relation to car insurance policy cover. Your insurance provider may use different wording and you should read the terms and conditions of your insurance policy carefully to understand what you are and are not covered for. Refer to the product disclosure statement from your provider.
Accident: An event or incident which you didn?t intend or expect.
Accidental damage: Damage caused by an accident.
Account-keeping fee / Ongoing fee: A monthly account-keeping fee that is charged by the lender to cover the administration cost of maintaining your policy. Alternatively, you may be charged an annual fee rather than an ongoing account-keeping fee.
Anti-lock braking system (ABS): Also known as anti-skid brake system. A safety system that stops the wheels from locking up when you brake. This decreases the risk of skidding.
Agreed value: The sum for which your car is insured, which has been fixed by agreement between the insurer and the car owner.
Comprehensive: The highest level of insurance policy, which covers your car for damage to the property of others, some limited cover for your own car if it is damaged or lost because of fire or theft, and accidental damage to your own car, regardless of who caused the damage. Comprehensive also has a range of optional extras, including replacement vehicles while you can?t drive your own car, and no-excess windscreen replacement if you have a crash.
Compulsory Third Party: A compulsory insurance policy that covers you if you injure or kill someone in a motor vehicle accident. The specific conditions on this type of insurance are different from state to state.
Excess: The excess is an amount that you pay towards the cost of your claim. Different excesses might apply to different types of claim, so you should check your policy for details. You may be able to pay a lower premium if you have a higher excess, but you need to be sure that you could afford to pay the excess unexpectedly in an emergency.
Exclusions: Anything that is not covered by your policy. Exclusions may vary between insurance providers, but common exclusions include accidents where the driver was intoxicated, racing another car, or not registered as a driver on the policy, as well as damage caused by general wear and tear (e.g. rust).
Forced entry: Illegal entry into your car which includes illegally using keys or picking locks. It does not include entering your car through an unlocked door, window or skylight.
Inclusions: Anything that is covered by your policy. When a particular event is listed as being included in your policy, the insurer will cover the whole expense or a listed percentage of the cost involved.
Market value: An amount that is what it would cost to replace your vehicle with one of the same make, model, age and condition as your vehicle was in before the loss or damage.
No claim bonus: A discount on your premium for drivers who have not made any claims so far on their insurance. Some insurance providers have a ?protected no claim bonus option?, where they will let you keep your no claim bonus after you make your first claim in any one period of insurance, under certain conditions.
Nominated driver: When you sign up for insurance, you advise the insurance provider who will be driving your vehicle, usually yourself and someone else. These people are the nominated drivers. People drive your car but are not nominated drivers would be required to pay additional excesses if they were in an accident.
Premium: The premium is the amount you pay for the cover your insurance policy provides. The premium includes any compulsory government charges or taxes. Your premium must be paid on time for your car to be covered.
Third Party Property: This is an insurance policy that covers the cost to repair damage caused by your car to other people?s property. It will also cover your legal costs if they sue you over that damage.
Third Party, Fire and Theft: This is an insurance policy that covers damage to the property of others, and some limited cover for your own car if it is damaged or lost because of fire or theft.
What are the features we look for in a great car insurance policy?
We assessed the following for the Car Insurance Star Ratings and Award:
For more information, see the Methodology of our Car Insurance Star Ratings Report.
The Claims Satisfaction ratings and award uses a customer satisfaction survey covering more than 1,200 Australian drivers across all demographics that have made an insurance claim in the last 3 years. You never really know how good your insurance company is until you have to make a claim. You?re not at your best when you have to deal with someone after you?ve just been in an accident or had your car stolen. How quickly and kindly the company deals with your claim can make a world of difference.
We assessed the following in terms of claims satisfaction:
The good news is that across the country, insurers are largely doing the right thing, with at least 70% of customers saying they were satisfied with how their claim was handled. Drivers aged over 25 were more likely to be ?very satisfied? with how their claim was handled, probably due to lower excesses. In 2015, 21% of drivers aged 18-24 said they were ?very satisfied?, compared to 67% of drivers aged 65 or older.
Who offers car insurance in Australia?
CANSTAR endeavours to research and rate the majority of product providers on the market and to compare the product features most relevant to consumers in our ratings. In 2015, we rated 53 providers in our Star Ratings Report:
Our Ratings & Guides
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