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Car insurance before buying a used car

Jodie Humphries avatar
Jodie Humphries
- 4 min read
Car insurance before buying a used car

When you’re buying a used car, gathering information about its finance and insurance status is just as important as checking it has all the features you want. 

As a buyer, you need to remember that all car owners in Australia are required to have CTP (Compulsory Third Party) insurance, otherwise known as the TAC charge or a green slip, depending on where you live. The CTP policy is linked to the car, not the owner.  When you finalise the purchase and transfer the ownership and registration, the CTP policy will also be transferred to you. 

For other types of insurance, if you have an existing policy, you can consider transferring it to your new car to ensure you’re protected in the event of an accident. This can also ensure you maintain any insurance advantages that you've accumulated over the years, like a no-claim bonus. Your insurer should be able to help you to do this.

Choosing the right car insurance before buying a used car

A wide range of insurance providers and types of cover are available, so ensure you do your research well before buying coverage. If you’re purchasing the car from a registered vehicle dealer, your sale may include insurance. But if you’re purchasing a used car from an individual, you may have to enquire about existing insurance or take out a new policy.

All vehicles are covered by CTP, but you may consider buying additional car insurance that offers more coverage. If you need a quote or a new policy, you’ll have to choose between a third-party property or a comprehensive policy. A third-party property policy covers you for any damage you do to property, like if you accidentally run into a house. A comprehensive policy is the highest level of cover you can get. It covers any possible event, including the cost of replacing your car if it’s deemed unrepairable. Getting car insurance before buying a used car may be a smart investment, as many features in the car would have begun wearing out. 

Types of car insurance for used cars

CTP insurance

You’re required to have Compulsory Third-Party (CTP) insurance before registering your car in Australia. Some states and territories include it in the registration fees, so check how your state or territory handles it. 

CTP insurance covers the costs if any bodily harm and even death occur to a third party when your car is involved in an accident. 

If the vehicle you're buying has registration still active, the CTP insurance will be transferred to you along with the rego and ownership. This is because CTP policies are issued to the vehicle and not to the owner. Once a transfer of ownership occurs and your details are attached to the car with your state or territory’s roads authority, the CTP will also be transferred. Make sure to check the rules and requirements of CTP insurance in your state or territory, as inadequate coverage can lead to fines. 

Third-party insurance

While CTP covers any possible injury to third parties if you’re involved in an accident, third-party property insurance covers your costs if you damage another's vehicle or property. If you only take out third-party property insurance your car isn’t covered at all. Another aspect you should consider is including uninsured motorist coverage when you’re getting car insurance while buying a used car. To a limited extent, this gives coverage against damage to your car caused by an uninsured driver. 

Third-party fire and theft insurance is another form of third-party insurance that also covers damage to your vehicle. You can read the policy booklet and the product disclosure statement to understand the specific insurance policy to decide if it’s right for you. There may be conditions such as who can drive the car you are insuring which are usually specified in these documents.

Comprehensive insurance

Comprehensive insurance is the highest level of cover you can get with car insurance. It provides coverage against all kinds of loss or damage to you, your car and other people. 

The premium is the most expensive of the types of car insurance we’ve discussed. It’s determined by several factors mostly related to the driver’s age, claims history, and even where the car is parked. These policies aren’t able to be transferred between owners but can be transferred between cars. So if you currently have a comprehensive policy, you can transfer it to your newly purchased car or add the new car as an additional car to the policy. 

Make sure to read all the policy details and compare policies from different insurers before choosing which one is right for you.

Disclaimer

This article is over two years old, last updated on December 22, 2021. While RateCity makes best efforts to update every important article regularly, the information in this piece may not be as relevant as it once was. Alternatively, please consider checking recent car insurance articles.

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Product database updated 28 Mar, 2024

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