Money Buddy guide to … car insurance
For many people these days their car has become an essential member of their family. Transporting them to and from work, school, shops, friend's houses; the list is endless. So, how would you cope if your vehicle was suddenly unable to serve its function? Could you afford to replace it if it was written off? Could you afford to repair any damages caused as a result of theft or fire?
For many people the threat of these unexpected costs forces them to consider taking out car insurance. But with all the different policies available, how do you know what kind of insurance is right for you?
Types of insurance available
When choosing your car insurance, it's essential to understand the different types of compulsory and optional cover available.
Every owner of a registered vehicle in Australia is required, by law, to have third party personal insurance. To make this easy for you, third party personal insurance, sometimes referred to as a green slip, is included as part of the registration process.
In most Australian states and territories there is one designated insurer who can supply green slips. The identity of the insurer is determined by the state or territory government concerned. Only New South Wales and Queensland offer consumers a choice of insurer for their third party personal cover. If you live in one of these states, it is worth obtaining quotes because there are large variations in premiums and fees between insurers.
In addition to compulsory third party personal insurance, there are a number of choices available to car owners for optional cover. The three main types are:
Cover for your vehicle and any other vehicles that may be involved from losses as a result of events such as malicious damage, theft, fire, collision and some weather-related damages. Comprehensive insurance is most useful to owners of vehicles in a good or nearly-new condition. Be aware that comprehensive insurance may not be available to vehicles with existing rust damage.
Third party, fire and theft insurance
This covers damage to other people's property when caused by your car. It also covers any repair or replacement costs for your own car as a result of fire or theft.
Third party property insurance
This only covers for damage made by your car to another person's property. Any necessary repairs to your own car are not covered.
Some policies also have additional benefits, designed to make them attractive to consumers, such as cover for towing costs or car hire. Some third party property policies can be arranged with limited cover for your car as well.
What's not covered?
In general, insurance policies do not cover for loss or damage as a result of:
- electrical or mechanical failure,
- structural failure,
- normal wear and tear,
- accidents caused if your vehicle is unroadworthy,
- accidents caused by a person driving under the influence of drugs or alcohol, and
- accidents caused by a person unauthorised to drive the car under the policy.
Other exclusions or limitation may also be included so always read the policy to ensure you know what is and is not covered.
The final decision will always be in your hands; only you know what you need. Generally, the newer the car, the higher the level of insurance cover required. However, always consider your personal situation; could you afford to replace or repair your vehicle? Is it worth paying insurance premiums for every month or year for your old car? It's a big decision so make sure you take the time to consider all your options.