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How to choose car insurance coverage?

How to choose car insurance coverage?

Car insurance provides protection against financial loss if you're involved in an accident or your vehicle is stolen or damaged. If you damage someone’s car or your vehicle is damaged due to an accident, the financial costs can be significant, and an insurance policy covers a major part of these costs.
Compulsory third party (CTP) insurance is mandatory but provides less coverage than a comprehensive insurance policy, which gives you the highest coverage level. Choosing the right car insurance depends on how much you can afford as premium. You should consider the type of coverage that best suits your budget and requirements.

What are the types of car insurance policies available in Australia?

Insurers offer four types of car insurance policies, which are as follows:

Compulsory third party insurance

CTP insurance offers financial protection if you injure or kill someone in an accident. This insurance is mandatory in all states and territories across Australia.

Third-party property insurance

It covers damages to third-party properties, including their vehicles, if the accident is your fault. However, it doesn’t include any repair or replacement costs for your car.

Third-party property, fire, and theft insurance

This insurance covers any damage to your car due to fire or theft and also covers damages to third-party properties. However, it doesn’t include any damages to your vehicle due to an accident or storm.

Comprehensive car insurance

It is the highest form of cover and protects against all risks covered by third party insurance. Additionally, comprehensive policies cover damage to your vehicle due to fire, theft, or accidents.

How to choose the right car insurance policy?

Car insurance is important to protect yourself from an unexpected incident. Here are some factors to consider when choosing car insurance:

  • Know how your car is valued
    If you opt for a comprehensive policy, you can choose how your vehicle will be valued. This is the amount you’ll receive if your car is stolen or written off. It can be an agreed value decided by you and the insurer. Alternatively, it can be the market value, which is the price at which the car would have been sold at the time of the accident. If you opt for an agreed value, the premium cost may increase.

  • Insurance cost
    The annual amount paid for continued insurance coverage is known as the premium. The insurance company considers several factors, such as your age, gender, type of car, driving history, the likelihood of claims, and others, to determine the premium amount.

  • Coverage required
    The basic coverage as per the regulatory guidelines is CTP insurance. However, there are several other types of covers you can choose from. How to choose car insurance coverage limits depends on your requirements. Consider factors like how often you drive your car, location, and others.

How to buy affordable car insurance?

Understanding how to choose comprehensive car insurance is important to ensure maximum benefits. Here are some ways in which you can reduce the premium amount:

  • Opt for a higher excess
    Excess is the amount you’ll pay while making a claim. Higher excess reduces the premium. Increasing the excess can save money but ensure you can afford it in the future if you have to make a claim.

  • Check out no claim bonus (NCB) discounts
    Most insurers offer NCB benefits when you don’t make a claim during the policy period. The amount varies from one company to another and can be up to 70 per cent if you don’t file a claim for five years. NCB can help in reducing the premium cost.Some insurers may offer discounted premiums if you choose an annual payment or buy an online policy. Shopping around and comparing multiple quotes from different insurers can help maximise the value of your money and get a higher coverage.

Questions you may have

Can I get a refund on car insurance?

Have you decided to cancel your car insurance policy? Maybe you’ve sold your car, or you found a better rate elsewhere.  Perhaps you’re just not driving it anymore. So what happens to the unused amount of your car insurance? Can you get a refund on unused car insurance in such a scenario?

It often depends on who cancelled the policy: you or your insurance provider. If you initiated the process of cancellation, then you may be able to get most, if not all, of your unused amount. There might be some cancellation fees involved.

However, if the policy has been cancelled by your provider, because you defaulted on a payment, then you will not receive any refunds. Keep in mind, sale of your vehicle, or traffic violations such as receiving too many speeding tickets, or being charged with reckless driving, are not reasons to withhold refunds.

If you pay your insurance monthly, your future payments will simply stop. However, many insurance policies are paid upfront for the year, as some companies offer discounts. If this is the case, get in touch with your insurer about getting a refund for the unused amount.

Can you register and insure a car without a license?

Yes, it is possible to buy, register and insure a car without a driver’s licence in Australia. While most states and territories have different rules regarding car purchase, some states may allow this. However, it is important to note that you won’t be covered if you’re driving the car and you are involved in an accident.

The reason people consider taking out cover on their car even without a licence is to protect the car against theft, vandalism and fire. If someone else regularly drives your car then also you may wish to insure your vehicle. Ensure that you list this driver on your policy, else you might end up having to shell out money for an unlisted driver excess in the event of a claim.

Can you claim insurance for car dents?

Car insurance has been designed to protect you from some of the costs of repairing damage to your car. However, is it worth claiming car insurance for a dent?

The main factor to take into account is the excess that you will need to pay at the time of making the insurance claim for the car door dent, and comparing it with the repair cost of the dent.

For instance, if someone collided into your car with a shopping cart and the cost of repairing the dent is lesser than your excess, you would be better off not making the claim. However, if your car’s panels are dented by intense hail, in all likelihood the cost of getting the dents taken care of will be much higher than your excess. Here making a car dent insurance claim would make sense.

Please note that if you’re making a car dent insurance claim for damages that have accumulated over a long time, you will be required to pay an excess for each separate incident that dented your car.


Does car insurance cover driving while intoxicated?

Will car insurance pay if drunk driving causes an accident? Driving under the influence of drugs or alcohol is illegal, however, some insurers may cover the liabilities.

Your driving history and experience are important factors that affect the car insurance premium. If you have had violations for drinking under the influence, insurers may perceive you as high-risk. They will then be more likely to charge you a higher car insurance premium.

But does car insurance cover drunk driving accident liabilities? Many factors are involved in answering this, here’s what you should know.

Amount of cover

Although driving while intoxicated is illegal, if you’re involved in an accident, your insurance may cover damages within the limits of the policy. While expenses should be covered under your car insurance for drunk driving accidents, you may face other penalties, like cancellation or non-renewal of your policy.


Additionally, the premium on car insurance for drunk drivers may increase by as much as 79% if you’re convicted. Some insurers, however, won’t cover damages if you’re driving whilst intoxicated and you don’t comply with the conditions laid out in the Product Disclosure Statement (PDS).

Check "does car insurance cover you if you are drunk" in the terms and conditions of your policy if you have a history of such violations.

Are stolen car keys covered by insurance?

Having your car key stolen is not just frustrating, but it can also turn out to be quite a costly affair. Modern electronic keys can be much more expensive to replace than traditional ones, and losing one can make a sizeable dent in your pocket. But does insurance cover stolen car keys?

A few comprehensive car insurance and third party fire and theft policies do cover lost car keys as a standard, while others offer it to their customers as an extra. However, there are some that don’t entertain stolen car keys insurance claims, so you must check with your insurance policy provider and read the Product Disclosure Statement carefully before purchasing the policy.

It is important to note that you will need to prove to your car insurance provider that the keys have actually been stolen and not merely misplaced, as most policies will refuse to provide cover in the case of lost keys. Car insurance policies that cover stolen keys typically cover the cost of replacing the keys, recoding your car locks and locksmith charges.



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



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