How To Insure Your First Car

Co-author: TJ Ryan
As a fellow student, I know how exciting the rite of passage to getting your license is. I also know how overwhelming it is when it comes to insuring your first car. There are lots of things to consider before hitting the streets; let us break down all the scary car insurance stuff so you don’t have to.

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.

There are four main types of car insurance:

  1. Compulsory Third Party (CTP)
  2. Third Party Property
  3. Third Party, Fire and Theft
  4. Comprehensive

For more information about the different types of car insurance, click here. As a brief overview though, this is how car insurance cover typically varies between different levels:

Type Damage to your car Damage to other people’s property (e.g. other cars) Damage or loss caused by theft of your car Injuries or death to other people in an accident
Compulsory third party (CTP)
Cross Cross Cross Tick
Third party property Cross Tick Cross Cross
Third party property, fire & theft Cross Tick Tick Cross
Comprehensive Tick Tick Tick Cross

As the name suggests, Compulsory Third Party (CTP) insurance is compulsory, so that’s the one you’re most likely to know about. But as the table above shows, there are some very, very good reasons to have more than just CTP cover.

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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. Car insurance, whilst it may seem like a luxury, is an important asset to your financial peace of mind.

Case study: Richie’s lack of insurance gets him into debtMost common types of car crashes

“Richie decided not to get any extra insurance on top of his CTP because his car was very old. A few months later, he hit a brand new sports car, which needed $20,000 worth of repairs. Because he was not insured for damage to other cars, Richie had to take out an expensive personal loan and work extra hours to pay off the debt over 5 years.”

Source: ASIC

What does comprehensive car insurance cost for young drivers?

These are just some of the data from CANSTAR’s 2016 Star Ratings Report that shows young males an d females (under 25) paying more than a grand over premium for a male and female aged 25-29.

Average premium per year for drivers (categorised by age) with an older car
  NSW QLD VIC SA TAS WA
Family $2,292 $1,442 $2,108 $1,622 $1,545 $1,538
45+ years old $780 $525 $669 $554 $511 $541
30-44 years old $903 $589 $796 $630 $563 $625
25-29 Female $847 $534 $723 $603 $538 $585
25-29 Male $909 $567 $779 $642 $570 $628
Under 25 Female $2,069 $1,302 $1,812 $1,483 $1,333 $1,365
Under 25 Male $2,353 $1,473 $2,029 $1,675 $1,512 $1,538
Source: CANSTAR, May 2016. Premiums for comprehensive car insurance based on quotes obtained by CANSTAR for 2016 car insurance ratings. Premiums rounded down to nearest dollar

Average premium per year for drivers (categorised by age) with a new car
NSW QLD VIC SA TAS WA
Family $2,345 $1,548 $2,174 $1,731 $1,624 $1,646
45+ years old $868 $579 $759 $608 $568 $606
30-44 years old $1,007 $648 $845 $687 $634 $677
25-29 Female $1,202 $784 $1,059 $831 $777 $823
25-29 Male $1,298 $839 $1,152 $885 $829 $883
Under 25 Female $2,310 $1,469 $2,082 $1,670 $1,511 $1,555
Under 25 Male $2,607 $1,646 $2,305 $1,876 $1,704 $1,741
Source: CANSTAR, May 2016. Premiums for comprehensive car insurance based on quotes obtained by CANSTAR for 2016 car insurance ratings. Premiums rounded down to nearest dollar

For more information about the average premiums of car insurance, click here

Why does car insurance cost young drivers more?

How much you fork out for car insurance depends on many factors. Some of the main things that affect your premium include:

Young Drivers
  • Your age
  • Your gender
  • Where you live
  • The type of car you drive
  • How your car is housed (e.g. garage or street)

Statistics show that as you age and gain more experience in driving, your risk of being involved in a car crash decreases every year. According to the Transport Accident Commission and the Australian Transport Safety Bureau (ATBS), drivers in their first year on the road are up to four times more likely to be involved in a serious or fatal accident. This is primarily why Under 25s typically pay more for their insurance than adults of other ages.

Sure, the premium you’re paying may seem hefty, but developing a safe driving record (i.e. not claiming on your insurance) is a great way of progressively lowering your insurance premiums long term. In addition to this, it’s important maintain a good driving history (e.g. don’t speed, or lose your license).

How to choose a car insurance policy

Overall, buying a car is an exciting time in your life. Ensuring you have the right insurance policy to suit your needs is key. Thankfully, we here at CANSTAR have done the hard work for you, comparing over 63 insurance policies in an easy to use car insurance comparison table.

Case Study for Young DriversCase study: Andrew shops around and saves

Andrew bought his first car and wanted to insure it. His mum suggested he buy the insurance from the same company she was with. Andrew rang the company and got a quote. Instead of just accepting the quote, Andrew asked three other insurance companies to compare what cover he could get and how much it would cost. It turned out his mum’s insurer charged high rates for young drivers. By shopping around, Andrew was able to get the level of cover he wanted at a cheaper price.

Source: ASIC

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