There's a wide range of car insurance options in Australia, which is impressive for a country of our size. It's easy to become overwhelmed given the number of companies offering "the best", "the cheapest" or "the best and cheapest" car insurance, but there are a few things you need to consider before you commit to one particular insurer.

What kind of insurance are you looking for?

Compulsory third party insurance: Known as Greenslip Insurance, this is the most basic form of car insurance for an Australian driver and is compulsory for Australian-registered cars. While it usually doesn’t cover damage to the policyholder's car or cars and property of others, it does cover personal injuries for people involved in an accident. Depending on the state laws there may also be some limited cover for the driver at fault.

Third party property insurance: This pays for any damage you cause to another person's car or property. However, it doesn't cover the cost of repairs for your own vehicle. Third party fire or theft insurance, an extension of third party insurance, insures you against the loss of your car through theft or fire.

Comprehensive insurance policy: This combines all of the above. As such, if yours and another person's car are damaged through your own negligence, your insurance policy will extend to cover repairs for both parties.

Can you buy the policy online?

An insurance company that allows you to sign up for car insurance online may have a distinct edge over one that doesn't. Online insurance policies, usually paid for by credit card, can be more affordable due to the reduction of processing fees. It's also very convenient for the buyer as it can be done at any hour or any day of the week. You can also take your time to fill in the application form and there is less pressure for you to complete the transaction compared to completing one over the phone.

Consider a multi-policy deal

Many insurance companies provide insurance for the home, travel and health in addition to car insurance. In many cases, insurance companies may offer a more favourable rate to customers who purchase more than one type of insurance from them.

What's your demographic?

Did you know that the cost of car insurance premiums can vary based on where you live? Premiums can differ even further based on your address within the state itself as well. Varied intra-state car insurance premiums are mainly down to the risk an insurance company perceives you and your car to be.

Therefore, the higher the risk of your vehicle encountering an accident or being stolen, the higher the premiums you have to pay. For instance, residents of New South Wales, which has a high population density, may pay higher car insurance premiums than other less populated states.

Age and gender too, are parameters that need to be considered when comparing car insurance. Young men are perceived to be more of an insurance risk, and this is reflected in their insurance premiums. Additionally, the owner of a newer, more expensive car is likely to pay higher insurance premiums based on the risk such a vehicle poses for the insurance company.

Discounts are for the asking

Sometimes, people compare car insurance when they're thinking of switching to another insurance company. In this case, a person has nothing to lose by asking their current insurer if they're able to match or surpass a cheaper quote from another company. Revisiting the terms of your present car insurance policy may also allow negotiation of better terms for you; there may be discounted premiums for drivers above 25 years of age. Tailoring your car insurance policy to match your personal requirements can make it even more affordable.

Look beyond the bottom dollar

A cheap insurance quote is very attractive. However, when comparing quotes from different insurance companies, you need to ensure that the policies themselves are similar too to prevent comparing apples and oranges. By scrutinizing policies closely, you won't wind up paying less but receiving inferior or limited insurance coverage from Insurer A, as opposed to paying Insurer B slightly more in return for more benefits and security.

One of the first things a person looks at when comparing car insurance is the premium paid. At first glance, a cheaper premium is certainly tempting. Having extra cash available is always welcome. Yet, is an annual difference of $200 really such a bargain if, in the event of a write off, the insurance company deems your car worth less than you expected?

You need to ensure that the bottom value an insurance company quotes for your car isn't too far away from your car's actual worth. It may be useful to consider an "agreed value" policy so that replacing your car won't be such a financial burden in the event of a write off, and to avoid the situation where the insurance company undervalues it. This is general advice only and you will need to consider whether an agreed value policy will meet all of your car insurance objectives and whether it is relevant to your personal circumstances before relying on it.

Point-for-point comparison of different policies

There are sure to be similarities when you compare the basic policies of most major car insurers. A consumer needs to look at the cost of the policy and any extra benefits that particular insurer provides and ask about them if they're not immediately obvious. For instance, comprehensive car insurance may entitle you to a hire car if your car needs repairs, until a claim is paid, or your car recovered (if it was stolen). Different insurers also have varying conditions pertaining to no-claim bonus and excess payable.

Different insurers offer different hire car periods that may also vary based on the premium you pay. Additionally, the time it takes to process a claim may take longer (months) than the period to which you're entitled the hire car (days). Additionally, the maximum value insured for items inside the car that are damaged or stolen may vary between companies.

In the event car repairs are needed, most insurance companies have workshops authorized to carry out the necessary repairs. Some people, though, may be more comfortable appointing a mechanic of their own or who can finish the job more quickly. Aside from determining if this option is available to you, be sure to determine who bears the cost of transporting the car to the garage and if roadside assistance is provided.