Car Insurance: Do you understand your cover?

Overseas research suggests that 60 per cent of consumers don’t understand how their car insurance works – do you?

You get the renewal notice each year but how long is it since you had a close look at your car insurance policy? Do you really know what is covered and what’s not? Knowing exactly what protection your policy offers will make it much easier to claim successfully if you need to.

Level of cover

The highest level of cover available is comprehensive insurance, which will cover you for theft,vandalism, natural disasters and accidents whether it’s you at fault or the other driver. Comprehensive policies cost more but give you peace of mind

The next level down is third party property insurance or “bomb” insurance. If your own car isn’t worth much it will cover the costs of repairs for damage you cause to another car but doesn’t usually cover the cost of repairing your own vehicle. Some third party property policies will cover your car for theft, fire or limited damage caused if you’re hit by an uninsured vehicle.

And, of course, all cars must have compulsory third party insurance as a condition of their registration. This covers you against compensation claims if you have a car accident and someone is killed or injured.

Agreed of market value?

If you have a market value policy the insurer will decide how much your vehicle is worth at the time you make a claim. Your level of cover generally decreases with the condition and age of your car. With an agreed value policy the insurer and you set the value of the vehicle each time you renew the policy. Check the value of your cover on each renewal notice and if you think your vehicle is worth more than the stated value discuss this with the insurer.

Exactly what’s covered

Most comprehensive car insurance policies provide standard coverage for theft, vandalism and accidents. Natural disasters can also be covered. Then there’s an array of other features and benefits that are really matters of personal preference. Some important features to check you are covered for might include full cover if you write off a car that is less than three years old; legal liability cover including your legal costs, if you damage other people’s property (if you car runs through someone’s front fence, for example); and emergency towing and repairs can also be useful if you’re involved in an accident some distance from home.

How to avoid claim rejection

Keep your car roadworthy and well maintained at all times. Even if you have an agreed value policy the insurer may review the insured amount when you make a claim if your car has been poorly maintained is rusty or in need of repair.

Renew your driver’s licence and registration on time. Some insurers will exclude claims if you’re even a couple of days late with your licence renewal, for example.

Maintain an impeccable driving record. Some companies have been known to reject ‘at fault’ claims if you were charged with negligent driving and all insurers will reject claims if you are driving under the influence of alcohol or drugs.

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Learn more about car insurance

Can you insure your car for 6 months?

Most Australian insurers won’t offer you a 6-month car insurance policy, so you may need to buy a policy that covers your car for damages and cancel it after six months. You will need to purchase comprehensive car insurance to protect your car from accidental damage, theft, vandalism, or natural disasters.. 

Consider checking whether your 6-month comprehensive car insurance will cost more if you pay monthly or six-monthly premiums instead of a one-time annual premium. Another question to ask the insurer is whether you’ll need to pay administration or cancellation fees when you cancel the policy.

Alternatively, you can look for a suitable ‘pay as you drive’ car insurance policy, which usually offers you the coverage of a comprehensive car insurance policy but only requires you to pay for the distance driven. Such a policy may not be the ideal 6-month car insurance plan as it is based on how much you drive rather than for how long. If you need to drive a lot, you may end up paying more than you’d pay for regular car insurance. 

Does insurance cover a stolen car if keys were in the car?

A car insurance policy that covers the theft of your car, such as third party fire and theft insurance, usually covers a stolen car, even if the keys were in the car’s ignition.

However, your insurer may deny the claim if you live in an area where there have been several car robberies reported recently. They will see you leaving the keys in the car as a case of negligence. In such cases, your insurance provider may even expect you to have installed anti-theft security measures in your car. 

You may need to confirm whether or not you left your keys in your car, and if they had been stolen or misplaced, before filing your car insurance claim. The loss or theft of your car keys may be covered by a comprehensive car insurance policy, but usually as an optional item.

If you can confirm that your car keys were stolen, mention this in your claim as this will help establish that your car was not stolen as a result of your negligence.