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How to choose car insurance coverage?

Jodie Humphries avatar
Jodie Humphries
- 3 min read
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:

  1. 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.

  2. 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.

  3. 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.

  4. 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.
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Product database updated 21 May, 2024

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

Promoted car insurance

Youi Pty Ltd

Comprehensive

  • New car replacement
  • Flexible excess
  • Roadside assistance

Agreed or market value

Either

Roadside assistance

Standard

AAI Limited T/AS AAMI

Comprehensive

  • New car replacement
  • Flexible excess
  • Roadside assistance

Agreed or market value

Either

Roadside assistance

Optional

AHM Health Insurance

Comprehensive

  • New car replacement
  • Flexible excess
  • Roadside assistance

Agreed or market value

Either

Roadside assistance

Optional

Allianz Australia Insurance Ltd

Comprehensive

  • New car replacement
  • Flexible excess

Agreed or market value

Agreed

Roadside assistance

Not available

product data updated on

Product data updated on 21 May 2024