powering smart financial decisions

Do you know these tips to save money on car insurance?

Do you know these tips to save money on car insurance?

If you own a car in Australia, you’ll need to purchase Compulsory Third Party (CTP) insurance, sometimes even before you can register the vehicle. However, it only covers the compensation payable to people injured in an accident if you’re the at-fault driver.

Most Aussies buy additional car insurance to expand their level of coverage, depending not just on their car and driving needs but also their budget. If you’re looking for ways to save money on car insurance, you could start by choosing the most necessary car insurance coverage, as well as looking for deals and discounts. 

How can choosing the right coverage help me save on car insurance?

A common assumption about car insurance is that it needs to cover damage to your car, but this may not always be the case. There are four main types of car insurance in Australia:

  1. Compulsory Third-Party (CTP) insurance is the most basic and covers your liability for other people’s injuries in an at-fault car accident. It is mandatory in all Australian states and territories.
  2. Third-Party Property Damage Insurance covers your liability for other people’s injuries and damage to other cars or property
  3. Third-Party Fire and Theft Insurance covers not only your entire liability in an at-fault accident but also includes coverage for damage to your car from these incidents.
  4. Comprehensive Car Insurance covers your liability and damage to your car from most kinds of incidents.

Here are four tips to consider when looking for car insurance:

  • Legal liabilities

When looking for car insurance, you should ideally begin by considering your legal liability in case you cause an accident. You may be liable for paying the cost of treating injuries and repairing damage to other cars and properties, which can be significant. Coverage for your vehicle in the event of an accident is a secondary priority and may only be necessary if you’re paying off a car loan or driving a car whose repairs can cost a lot.

  • Compare your options

A third-party fire and theft insurance policy covers your liability in an at-fault accident and, further, protects your car from fire damage and robberies. This policy can offer essential coverage but at a relatively reasonable cost for most people driving average cars.

If you were to think about car insurance only from the perspective of protecting your car against damage, you may end up buying an expensive comprehensive car insurance policy. Considering comparing car insurance quotes from different insurers to discover the difference in cost between a third-party fire and theft policy and a comprehensive car insurance policy.

  • Market vs. agreed value

Insurance providers may ask you to choose between market value and agreed value coverage, which decides the amount you’ll get as compensation if your car is totalled, or damaged beyond repair, in an accident.

Market value coverage doesn’t guarantee the sum you’ll get for your vehicle as the insurer will look at the worth of your car on the open market the day before the damaging accident. Alternatively, you can agree on a value for your car with your insurer when buying a policy, which can be useful, for instance, if you need to repay a car loan. However, you’ll possibly have to pay a higher premium for the agreed value coverage. Choosing market value coverage may help you save money on your car insurance.

  • Choose a ‘pay as you drive’ policy

If you don’t have much driving experience, or you don’t foresee yourself driving much, you can choose a ‘pay as you drive’ policy. The cost of a ‘pay as you drive’ policy is usually based on the distance you drive, which could mean paying a lesser premium compared to a regular, annual car insurance policy. As most insurers offer comprehensive car insurance coverage when you buy a ‘pay as you drive’ policy, you’ll get coverage for damage to your car as well.

What are some other ways to save money on car insurance?

Even if you’ve picked a suitable car insurance policy and coverage, there are still further ways to save money, such as buying your policy online which can get you a discount. Another option involves paying a higher excess, which is a part of the compensation you claim from your insurer but is paid out of your pocket.

Your car insurance premium depends on the compensation the insurer has to pay out, so reducing that amount may bring down your premium. Younger and less experienced drivers may be asked to pay multiple excesses given their lack of driving history.

Many policies bundle optional coverages, which you can refuse to include, to keep the cost of your policy low. Consider checking what such coverage would cost if bought separately. Once you’ve finalised the policy, you should find out if you qualify for any discounts, such as the no claims bonus, which is available to drivers with long years of incident-free experience.

Did you find this helpful? Why not share this article?

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



More car insurance articles

More articles? Read more here

Learn more about car insurance