Get App
Â
What is car insurance?
Car insurance is a kind of insurance policy that you can purchase to protect you against financial loss in the event that your vehicle is involved in an accident, gets stolen or catches fire. There are various different kinds of car insurance, from policies that cover for damage you may cause to third parties’ cars and property, through to those that cover you for damage to your own vehicle. Car insurance can also come with a variety or extras, as well as exclusions.
How does car insurance work?
This is how car insurance typically works at each major stage:
1. Buy insurance:
The car owner signs up for an insurance policy. It is an agreement that explains the circumstances in which the owner is covered. It states:
a. for a certain period of time
b. if something happens to the car that’s in that agreement
c. the owner will receive help from the insurance provider.
2. Pay premiums:
The car owner – now called the policyholder – pays premiums, which are payments made (usually monthly or yearly) to the insurance company.
3. If necessary, make a claim:
If something happens that’s covered by the policy, the car owner can make a claim – they can ask the provider to honour their agreement to provide help (typically money or a service). Usually, the car owner also has to contribute something towards the cost, called an insurance excess.
4. Renew policy:
The policy usually only lasts for a certain period of time, such as a year or six months. The car owner can then renew the policy, which is extending the cover for another set period of time. The price of the premiums can change at the time of renewal. Or, the car owner could decide to go to another insurer or change their level of insurance cover.
What does car insurance cover?
What car insurance covers depends on the type of policy purchased, and the terms and conditions of the actual policy. As a general guide, car insurance can cover the car, the driver and occupants of the car, property in the car, as well as other people and property, depending on the type of policy purchased.
Before signing up for insurance, it’s important to understand exactly what you would be covered for and under what conditions, and what is excluded from the policy. Read important documents, such as the Product Disclosure Statement (PDS) and the Target Market Determination (TMD), before considering a car insurance policy.
What are the different types of car insurance?
There are several different types of car insurance that you can take out, depending on the type of insurance cover you need:
- Compulsory Third Party (CTP) insurance: protects you financially if you injure or kill someone in an accident, and is mandatory for Australian drivers in every state and territory.
- Third party property damage insurance: covers you if your car causes damage to someone’s property (e.g. their car or home).
- Third party fire and theft cover: covers your car if it’s damaged by fire or stolen, and includes the cover provided by third party property damage insurance.
- Comprehensive car insurance: the most extensive (and generally most expensive) form of cover. Provides a degree of cover for damage to your own car in an accident, as well as the types of cover provided by third party property and fire and theft insurance.
How do you choose the best type of car insurance?
Choosing the type of insurance that’s best for you could depend in part on what you can comfortably afford, so it may be worth considering the type of cover that suits your needs and your budget. For example, would you prefer the high level of cover generally offered by a comprehensive policy, or would a lower level of cover be enough?
If you decide that comprehensive cover is right for you, you can start your search by comparing policies with Canstar or view our latest Car Insurance Star Ratings and Awards report and Most Satisfied Customers report before getting quotes online.
Guide to choosing car insurance
Here’s a series of articles which may help you when researching car insurance:
- Save 15%^ on your first year’s premium when you purchase a new Car Insurance policy online.
- 24/7 Phone & Online Claims.
- Budget Direct - Insurance Solved.
- Insurance that's a bit more you-shaped.
- Canstar's 2024 Most Satisfied Customers Car Insurance - National Award.
- Lodge a Claim 24/7 with our Advisors
- Flexible cover before, 24/7 claims after.
- Save $75 on new Comprehensive car insurance online.
- Conditions apply.
- Choose base insurance or add on optional extras. Select from a range of excess options. Lifetime guarantee on repairs authorised by Bingle.
Cover image source:lassedesignen/Shutterstock.com
