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Aussie’s love their cars. It is widely known that Australian’s spend a lot of time on the road in their vehicles. In fact, on average we travel approximately 13,800 kilometers per year, which, by the way, is about 8 return trips from Melbourne to Sydney.
With all of that driving, it is no wonder why Australian’s want to have additional protection for their cars.
Car insurance in Australia is very important, with most of us purchasing additional protection for our cars. Below we introduce the topic of what car insurance is and provide a breakdown of the different types of insurance available in Australia.
Basically, car insurance in Australia is a contract between the purchaser and the insurance company. This means that by agreeing on a private car insurance, you agree to pay the premium and the insurance company agrees to pay any losses as a result of an accident as defined in your specific insurance policy.
It is important to note that by law, every single car owner in Australia must have the Compulsory Third Party (CTP) insurance (also referred to as the Green Slip insurance in NSW). CTP insurance is, in fact, the bare minimum level of cover. While car owners are not required to hold more expensive car insurance policies than this basic one, it is still a good idea to consider outside insurance policies since they provide better protection overall. We outline this below.
As we have already outlined, all car owners in Australia require a minimum level of cover. So, you might be thinking, why anyone would need anything extra?
The truth is, in more cases than not, basic CTP insurance does not cover all the costs that might arise from an accident. And, accidents happen on a daily basis, so it’s reassuring to know that you are covered financially if you’re involved in one.
Just like cars themselves, car insurance policies in Australia come in different sizes and fit different people’s needs. These insurance policies come with different features, which is why it is always advisable to compare insurance policies to find the right one.
There are a few different general types of auto insurance in Australia. And even though their concept is very basic, all of these types can differ between different insurers.
The typical types of insurance on cars in Australia include:
Comprehensive car insurance is one of the most popular types of car insurance in Australia. Comprehensive car insurance covers the owner for damage to their vehicle and vehicles and property owned by others.
These types of policy also takes care of fire damage and potential theft. What is important to know is that comprehensive insurance will usually cover the cost of vehicle repairs, regardless of which party was responsible for the damage to the vehicle.
In some cases, insurers offering comprehensive cover may even provide enough to purchase another car if your car is written off, allowing you to get back on the road as soon as possible.
Comprehensive insurance usually offers the greatest peace of mind to vehicle owners since it covers pretty much everything: from theft, collision, fire, malicious damage, all the way to weather-related damage – this type of auto insurance in Australia will usually cover it all.
Of course policies do different between insurance companies in Australia, so make sure you compare each comprehensive policy in detail and read the fine print of what is and isn’t covered!
Another popular type of insurance is “Third party fire and theft cover”.
Third party fire and theft cover is very similar to the Third Party property cover discussed later in this article.
Third Party Fire and Theft Cover basically covers you in the same way that the Third Party Property Cover does, with the addition of cover in case of fire damage or theft to your vehicle.
Another important thing to note is that the Third Party Fire and Theft cover may also cover potential repairs to your vehicle. This is up to a specified limit, of course, but if you are involved in an accident with an uninsured driver and they are at fault, it is important to know that your policy will provide money for at least some of the repairing.
Again check and compare the fine print across different insurance companies and their policies.
As mentioned earlier, Third Party Property cover works in pretty much the same way that the Third Party Fire and Theft Cover works meaning that this specific type of an insurance policy in Australia will provide cover for all of the damages caused by you to other people’s cars or property.
Depending on the insurer, you might also get a limited amount of cover for your car if it is damaged in a no-fault accident with an uninsured vehicle.
This type of insurance policy usually comes at less of a cost than the Fire and Theft one since it covers only the event of you damaging someone else’s car.
As discussed above, Compulsory Third Party Insurance is required in Australia by law, meaning that every single car owner must have it. This is set by each state and territory.
Compulsory Third Party Insurance covers your liability against personal injury or death caused by you a car accident or road incident. It covers not only drivers to other vehicbles but also pedestrians, cyclists etc. This means that if you happen to be in an accident where somebody is injured and you are at fault, CTP will protect you.
It is important to stress, however, that the Compulsory Third Party Insurance does not cover for damages to the vehicles! This is one of the main reasons why so many people think that it is not sufficient and decide to purchase additional car insurance in Australia.
Do your research on the various types of Australian car insurance policies before making a final decision. This is important whether you’re after insurance for a new car or simply reviewing your current insurance position. Selecting the right car insurance is not always as simple as it seems.
One of the details that can be confusing to those purchasing car insurance in Australia is the difference between Agreed Value vs. Market Value.
“Market value” is an insurance industry term for the price that your car would be expected to sell for on the open market in its current state. Note that this estimated value is not the same as the trade-in value or the price that a specific buyer, such as a collector, would pay for your car.
The insurer is usually the one who determines the car’s market value when estimating the sum that your vehicle is insured for. This is done by using different industry guides as determiners for the calculations.
“Agreed value”, on the other hand, is the sum insured fixed by an agreement between the insurer and the car owner. This agreement includes specific information about the agreed car value. Both the insurer and the owner must decide on a mutually acceptable amount.
When the car in mind is not new, the Agreed value, too, is generally calculated and negotiated based on industry guidelines.
How is the Cost of Car Insurance in Australia Calculated?
There are some factors that influence the price of your particular car insurance in Australia. These factors serve as a basis for the car insurance calculations.
Such factors include:
Everyone who has ever taken out insurance cover before, knows that choosing the most suitable insurance policy is not always the easiest of tasks. Therefore, we have put together a list of some of the best car insurance tips.
Did you know that there are 120 licensed insurers in Australia? It’s a very competitive industry. As with all insurance products offered on the Australian market it pays to shop around.
So, do not rush into the decision and research and compare different policies at different insurers. Read the fine print and ask lots of questions before you make your final decision.
Insurance policies are not one-size-fits-all. They are not even one-size-fits-most, as a matter of fact! So, before buying anything, do your own math and try to figure out what cover you require.
Buying all or most of your insurance products from the same insurer often results in significant discounts. So, ask for bundling! Bundle your Australian home insurance, car insurance and even life insurance for the cheapest deal possible.
Keep our insurance tips in mind when getting a car insurance policy. Take your time, compare policies and insurers and get as much information as possible before making a final decision! This will also help you in saving some money.
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