What types of car insurance can you get in Australia? What’s the right car insurance policy for you? What traps should you look out for in your car insurance cover? And how can you save money on your car insurance premiums?
Our experts have answered all these questions and more in this comprehensive guide to shopping for car insurance.
On this page:
- Do I need car insurance?
- Do I need comprehensive or third party car insurance?
- What is an excess?
- What is a no claims discount?
- What is market value? And what is agreed value?
- How to save money on car insurance
- Can car insurance get transferred to the new owner?
Do I need car insurance?
If your car is roadworthy and registered, then you already have compulsory third party (CTP) car insurance. This covers the cost of compensation claims if anyone driving your car injures someone else in an accident.
But CTP insurance doesn't cover damage to your own, or someone else's car. So unless you want to fork out to repair someone else's Porsche, or be left without a car if yours is written off in an accident, then taking out insurance on top of that is a good idea. So what are your options?
|
Insurance type |
Covers |
|
Compulsory third party (CTP) |
Compensation to people injured in an accident you caused. No cover for your own or other people's property and cars. |
|
Third party property |
Other people's cars and property damage. |
|
Third party fire and theft |
Other people's cars and property damage. Cover for your car for theft or fire damage. |
|
Comprehensive |
Other people's cars and property damage. Cover for your car for theft, fire, natural disasters, vandalism and accidents, even if you're at fault. |
Is car insurance compulsory in Australia?
It's up to you if you want to take out comprehensive or third party car insurance, but you must have compulsory third-party (CTP) insurance to register your car in Australia.
It covers you against paying compensation to people injured in an accident that you caused. You need to take out CTP insurance at the same time as you register your car. CTP insurance is administered by the states, so it works differently depending on where you live.
Do I need comprehensive or third party car insurance?
Comprehensive car insurance policies are more popular than third party policies and with good reason – they offer a lot more cover. But they are also the most expensive type of car insurance, so if you have an older car you might want to check how much a third party policy can save you – at least it covers you against a hefty repair bill for someone else's car.
Third party car insurance
Third party policies generally cover you for any damage incurred to other people's cars or property. Third party fire and theft policies also cover your car against damage or losses caused by theft and fire. Some policies also provide some capped cover (for example, up to $5000) for your car if you have an accident with an uninsured driver.
If you're under 25 and driving a 2002 Mazda 121 with a broken tape deck, then this is probably the policy for you. Insure everyone else's car instead of your own. The money you save on premiums will have you driving something better much sooner.
Comprehensive car insurance
Comprehensive policies cover everything that third party fire and theft policies cover, plus they also cover your car for the following.
- Accidents – even if you are at fault or no-one was at fault; for example, you hit an animal on the road.
- Natural disasters – such as bushfires and floods or hail storms.
- Vandalism and malicious damage.
While all comprehensive policies cover these basics, there can be differences in the bells and whistles each policy provides. Some policies may also provide cover for any of the following.
- Accommodation and transport if you have an accident away from home.
- Personal property – while most policies don't cover cash, many will cover jewellery, sporting equipment, mobile devices and electronics such as phones and tablets.
- Replacement or re-coding of keys after theft; some insurers also cover lost keys.
- Replacement child seats after an accident – car seats always need to be replaced after an accident, because it's not possible to determine if they've been damaged.
- Towing - if your car needs a tow because of an accident, then you will use your comprehensive car insurance. Roadside assistance programs generally only cover towing if you've had a breakdown.
- Damage to your car's engine caused by contaminated fuel (no cover if you use the wrong type of fuel).
- Damaged or stolen trailers, and some cover caravans as well.
The following features may also be included in 'premium' policies, or perhaps come as optional extras you can pay more for to have included.
- Car hire in case of theft or while your car gets repaired after an accident where you're at fault.
- New car replacement if you write off a new car that you only recently bought – usually this cover will be offered for the first two years of your cover, but some insurers offer lifetime replacement.
- Choice of repairer.
- Roadside assistance.
There are several exclusions across the board: you're not covered if your blood alcohol limit is over 0.05, if you use your car for racing, or if you get paid for transporting goods or people (unless you get a policy specifically for this purpose).
CHOICE experts compared more than 40 comprehensive car insurance policies to find the best cover for your ride. We looked at the biggest brands on the market – AAMI, Allianz, Aldi, Budget Direct, Everyday, NRMA, RACV, Coles, GIO, Youi and more.
We're not like the other insurance comparison websites – we don't get paid by any of the insurers we're comparing. And CHOICE is not-for-profit, so your membership fees help our fight for fair consumer rights and empower you to get the best products.
If you can afford a higher excess, it will save you some money on premiums
What is an excess?
An excess is the amount you pay to make a claim. So, for example, if the repair cost to your car is $4000 and you have a $600 excess, you pay $600 to the repairer or your insurer and the insurer pays the rest ($3400).
You usually don't have to pay the excess if you weren't at fault, as long as you can give the details of the at-fault driver. In cases where there was nobody at fault, like if your car is damaged in a storm, or you hit an animal on the road, you still may have to pay your excess. Also some policies might charge extra excesses in certain situations, for example, for young or inexperienced drivers.
Increasing your excess can save you money, but be wary of a really high excess – it won't be worth your while to make a smaller claim. However, taking a large excess for comprehensive car insurance may be an alternative to downgrading to third party cover.
What is a no claims discount?
Every insurer has a name for this: 'no claims discount', 'no claims bonus', 'safe driver bonus', the list goes on. Essentially it's a discount for not making a claim. The amount of the discount varies depending on the insurer, but a 'maximum' rating (which usually means no at-fault claims for five years) can save you up to 70%.
You can often pay extra to protect your no claims discount, meaning if you do have an accident, it won't affect your rating. But if you have a protected no claims discount don't assume an 'no-fault' claim won't have an impact on your premium. Some insurers increase your premium even for a no fault claim such as hail damage.
Some insurers let you pay extra to protect your no claims discount, so your rating won't be affected if you do have an accident.
What is market value? And what is agreed value?
The amount your insurer will pay if you write off your car depends on how much it is valued at. Your car can be insured for either an agreed value or market value.
Agreed value
This is when you insure your car for a specific amount (within a range set by the insurer). If your car is a total loss (written off or stolen), the insurer will pay you this amount, less the excess. If your car is under finance, consider insuring it for an agreed value that's at least equal to the amount remaining on the loan. That way, if you have a total loss, you'll be able to square away the debt before looking for a new car.
Market value
This is when you insure your car for what its value is at the time of an accident, determined by your insurer. Selecting this option reduces your premium, but it gives you less certainty about the value of your payout in the event of a loss.
How to save money on car insurance
We found that for an adult driver over 25 with a $50,000 vehicle, annual car insurance quotes can vary by more than $500. So there are a number of things worth doing to keep your car insurance premiums affordable. Here are some ideas to save.
Compare prices and avoid the loyalty penalty
Car insurers may give the impression through misty-eyed marketing campaigns that they value your loyalty – but the reality is they often value new customers more than existing ones. All other factors being equal, premiums for a renewal are often higher than those for a new policy.
So check your insurer's quote online as a new customer, and get quotes from at least three other insurers before renewing your premium. Use our comparison, and start with the cheapest policies in your state that have the features you need.
Ask for a discount
Look out for special offers from insurers, such as online discounts – they can be as high as 15%. And if there isn't an online discount, try to get a human on the line as some insurers will match or beat competitors' quotes. If you're driving less than average, mention this when you get a quote and use it to negotiate a cheaper premium.
Discounts may also be available if you have other policies with the same company or have an approved engine immobiliser or alarm installed in your car. People aged 50–70 and young drivers who've completed a skilled driver's course may also receive discounts.
But most discounts only last for your first policy year – they're just there to get you through the door, and you'll be stung with a steep increase in a year's time.
A discount can be a good way to shave some dollars off your premium, but don't let that be the deciding factor in your purchase.
Can car insurance get transferred to the new owner?
The cost of car insurance often depends on the owner and the regular drivers of the car – factors like their driving record and age make a difference – therefore comprehensive and third party car insurance cannot be transferred to the new owner.
If you buy a used car, the previous owner would have had CTP insurance, and this stays with the car. You will take it out in your name and can choose a new CTP provider when it is up for renewal.
How to check if my car is insured?
You can check the registration details and CTP insurance on your state or territory website:
Can I insure a car I don't own?
Yes, you can insure a car you don't own. But make sure you correctly list the primary driver and all other drivers of the car. And to be sure, check with your insurer that they allow this in your specific circumstances.
It might be tempting to insure a car in your name to get a cheaper premium, for example, your son's or daughter's car. But it's illegal to lie about who actually drives the car. It can get you into all sorts of trouble if you have a claim, from an additional excess to the insurance company cancelling the policy and not paying the claim.
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