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Can I buy short-term car insurance?

Peter Terlato avatar
Peter Terlato
- 6 min read
Can I buy short-term car insurance?

You may need to buy temporary car insurance for various reasons, such as when you’re renting a car. You may also require a short-term policy when your current car insurance is about to expire, and you want more time to search for a new policy.

As these situations and the name suggests, temporary car insurance or short-term car insurance is a stop-gap measure. Most Australian insurance providers do not necessarily offer temporary car insurance policies, which means you’ll have to research the options you do have to fit your preferred situation.

Short-term car insurance for rental vehicles

It is a legal requirement that all registered vehicles in Australia possess compulsory third-party (CTP) insurance (a green slip), and this includes rental vehicles. However, it’s worth double-checking the registration papers for any vehicle you’re hiring to ensure that the registration has not expired, which would nullify any insurance claims.

Although you’ll be covered for injuries sustained to other drivers if at fault in an accident, you’ll need to have additional insurance for further coverage. When you rent a vehicle in Australia, most rental companies will offer optional comprehensive car insurance.

These insurance products come at a cost and can seem expensive. This is because it’s a short term policy and you generally won’t be given an option to choose between insurers. You’ll simply have to go with the rental company’s preferred insurer.

It’s important to carefully read the insurance policy’s product disclosure statement (PDS) to understand exactly what you’ll be covered for, the excess costs - which can be starkly higher than typical excess charges - and how to make a claim if you’re involved in an accident.

Can you purchase short-term or temporary insurance for your own vehicle?

Most Australian insurers offer annual comprehensive policies but it is possible to find coverage for a short duration.

You could search for a car insurance policy which offers a suitable level of coverage with flexible payment options. You may be able to pay a weekly, monthly or quarterly premium for the policy and cancel when necessary. You’ll need to research the terms and conditions around cancellation for such a policy or see if you can negotiate with the insurer to minimise costs. If you opt for a more flexible premium payment plan insurers may charge extra administration fees to cover the shortfalls of a temporary car insurance policy.

An insurer may be more willing to offer temporary car insurance if you’re an existing, previous or potential long-term customer.

You might also consider purchasing a ‘pay as you drive’ policy. The cost of the policy is typically calculated based on the distance and frequency that you drive, rather than a lump sum payment. If you’re sure about the amount of driving you’ll be doing, or not doing, this policy may be a convenient option. However, if you end up driving a lot, a ‘pay as you drive’ policy can prove to be an expensive option. Insurers may require to regularly check your odometer and increase costs based on additional driving.

Alternatively, you could simply buy an annual car insurance policy and cancel when you no longer need it. This may be more cost-effective and convenient if you buy a policy that offers free cancellation. Also, since insurers will generally refund the unused portion of your premium, pro-rata, so you don’t have to worry about losing money after paying the annual premium upfront. This way you can take advantage of any discounted rates offered by taking out an annual policy. However, you’ll need to confirm with the insurer that you are able to cancel the policy at any time without incurring any additional charges.

Can you buy car insurance for one day?

Maybe you don’t drive often but need to get behind the wheel for a short time, say a week or even just a day. It could be because you might need to pick something up, or perhaps you’re planning a weekend getaway and need to borrow a friend’s car. Perhaps you simply need to use a family member’s car while yours is getting repaired.

In all these scenarios, you’ll need car insurance for the vehicle that you’ll be driving. While most car insurance providers in Australia don’t provide one-day temporary car insurance, there are ways to get around it.

Remember that taking out a temporary car insurance policy may be handy at the time but can put you at risk of driving without coverage if the policy expires and you forget to renew or switch insurers.

How much is temporary car insurance likely to cost?

When you buy temporary comprehensive car insurance, you may pay a smaller amount compared to the cost of an annual policy. However, beyond a month or two, a short-term policy is likely to be a more expensive option. It’s also tougher to compare short-term policies, making it difficult to know if you’re getting a good deal. You’ll want to consider how long you’ll need the insurance policy and decide if it makes more sense to buy an annual policy and cancel at a later time.

How do you compare temporary car insurance policies?

You may not be able to use the usual tools to compare temporary car insurance policies. But with a little work and some personal research, you can still compare policies. Suppose you find an insurer offering a car insurance policy that you can sign up for temporarily, meaning you can cancel when you need to. The first thing you should measure is the cost of the policy - compare the cost of the temporary period to the annual cost of the policy.

For example, if the insurer offers you a policy with an annual premium of $1,200 and the monthly premium for your temporary policy is $150, this is a significant difference in cost. Theoretically, the $1,200 annual premium divided by 12 should equal a monthly premium of $100. This difference in cost means you may be making the trade-off between getting a discount for paying an annual premium and buying what you envision as a temporary policy.

In addition to charging a higher monthly premium, the insurer may also charge you an administration fee for providing a flexible payment option. There may also be more fees you have to pay when you decide to cancel the policy before the year is complete. Ideally, you should ask the insurer for full disclosure regarding any extra fees or charges before you agree to buy the policy.

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Product database updated 21 May, 2024

This article was reviewed by Personal Finance Editor Mark Bristow before it was published as part of RateCity's Fact Check process.

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Youi Pty Ltd

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Comprehensive

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Comprehensive

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product data updated on

Product data updated on 21 May 2024