Are you looking for cover to help your car vroom? Before you jump into researching car insurance quotes and comparing car insurance policies, it pays to have a clear idea of what type of policy will be best for you. Let’s step through some important factors to consider to help you choose the right car insurance for your situation.
What are the different types of car insurance?
Before you commit to one particular car insurance policy, it’s helpful to know the different types that are available.
In most cases, insurance providers will tend to offer a comprehensive policy, third-party fire and theft cover, and third-party property damage1. Keep in mind, each of these is a different policy – you only choose one. You’ve probably also heard of Compulsory Third Party insurance (CTP) and may need to purchase this on top of regular car insurance1. This will depend on which state you live in as some states will include it in your vehicle registration fees while others require you to purchase CTP separately1.
What do the different types of car insurance generally cover?
Now you know the different types of car insurance, you’re probably wondering how each differs.
- Comprehensive car insurance: When you compare car insurance coverage for each type, you’ll notice that comprehensive is usually the most expensive, but this is because it typically offers the most cover. Depending on your cover, accidental damage to your car can be covered under your insurance (subject to the policy terms). Plus, some insurance providers may also offer the option to add cover for the cost (to a certain amount) to hire a replacement vehicle in the event yours is damaged or stolen1. Depending on your comprehensive car insurance policy, you may be covered for flood or storm damage, theft or attempted theft, and vandalism. You may also have the option to choose whether you would prefer market value or agreed value insurance1.
- Third-party fire and theft insurance: If you’re looking for car insurance that protects your car without the cost of comprehensive insurance, third-party fire and theft insurance may be an option for you. It can cover your car to a degree for damage caused by fire or due to theft, but, unlike comprehensive car insurance, this is generally the only damage that is covered1. It’s important to note that if you are in a car accident, this type of insurance will not cover damage to your vehicle1.
- Third-party property insurance: When choosing car insurance coverage, you’ll notice that third-party property insurance is often the cheapest. This is because it’s essentially the most basic policy available, which helps provide cover for the cost of repairs from damage you caused to someone else’s property (e.g. car, boat, home, etc.)1. It also generally includes liability cover in case legal proceedings result due to the damage caused1. However, liability cover doesn’t extend to personal injuries caused by the accident (your mandatory CTP will cover this), and any damage sustained to your vehicle will need to be paid for out of your own pocket1.
It’s important to remember that each insurance provider is different, so it’s always a good idea to double check their Product Disclosure Statement (PDS) and Target Market Determination (TMD) before taking out a policy. Conditions, limitations and exclusions apply to the benefits set out above.
Market value vs agreed value insurance cover
Remember earlier we mentioned that comprehensive car insurance often allows you to choose whether you will insure your vehicle at market value or agreed value? Let’s delve deeper into what this means before you get too carried away and start to compare car insurance policies.
Deciding between market value and agreed value determines to what extent you are covered if your car is deemed a write off or stolen.
With market value, the insurance provider values your car as if it was up for sale at the time you make a claim. To do so, they take into account your vehicle’s make, model and age2. If you choose market value for your car insurance policy, this could mean your car’s value, as determined by your insurance provider, may not be the same as what you bought it for or what someone else may be willing to pay for it2.
If you opt for agreed value for your comprehensive car insurance policy, this means you and your insurer negotiate a set amount that your vehicle is worth in the instance it is stolen, written off or unrecoverable2. The obvious benefit of choosing this option is that you know how much your car insurance provider will cover up to in the event of a claim. It may also be a good option for those who have recently purchased their car or made modifications that are above the stock-standard model’s value2.
How much excess should you have for your car insurance?
Perhaps the question that everyone wonders, determining the right amount of excess for your car insurance policy all comes down to personal choice and what is offered by the insurer.
What you should know about car insurance excess is that whatever amount of money you choose is how much you must contribute to have your car fixed if you make an insurance claim after a covered incident3. In the event a claim is accepted, your insurer will then typically cover the rest of the repair bill (up to the coverage limit). Keep in mind that you will be responsible for covering any damage to your vehicle that falls below the excess threshold you have selected3.
If you opt for a higher car insurance excess, your premium may be cheaper than if you selected a lower excess3. When it comes to deciding how much to set your car insurance excess at, it’s completely up to you and what you would be able to afford. Before choosing excess for your car insurance, you may like to ask yourself what you could afford to pay if you had to make a claim3.
Choosing your car insurance coverage
Deciding which car insurance policy is right for you is a completely personal choice depending on your circumstances and financial situation. It is a good idea to purchase protection to suit your needs before you hit the road.
To help you out, Queensland Country Bank offers car insurance through CGU Insurance, with quotes and a range of information available for your perusal before you make the final decision.
Queensland Country Bank Limited ABN 77 087 651 027, AFSL 244 533 acts under its own AFSL and under an agreement with the issuer Insurance Australia Limited trading as CGU Insurance ABN 11 000 016 722, AFSL 227681. Any advice provided is general advice only and does not take into account your individual objectives, financial situation or needs (“your personal circumstances”). Before using this advice to decide whether to purchase a product, you should consider your personal circumstances and the relevant the Product Disclosure Statement and Target Market Determinations from cgu.com.au.
General Advice Warning: This information is intended to be general in nature and is not personal financial advice. It does not take into account your objectives, financial situation or needs. Before acting on any information in this article, you should consider the appropriateness of the information provided. In particular, you should seek independent financial advice.
Sources
1Karen Yang, 2023, Different types of car insurance explained, Canstar, https://www.canstar.com.au/car-insurance/types-of-car-insurance/
2Olivia Gee & Jack Dona, 2023, Market value vs agree value car insurance, Mozo, https://mozo.com.au/insurance/car-insurance/guides/car-insurance-market-value-vs-agreed-value
3Amanda Horswill, 2021, What is a car insurance excess and how much is it?, Canstar, https://www.canstar.com.au/car-insurance/what-is-car-insurance-excess/