Apples and Oranges: A Car Insurance Comparison Guide
What we don’t know about car insurance is costing us money: A recent study found that Australians are spending more than $3 billion in unneeded comprehensive car insurance coverage.
Let’s be honest: Do you know what “comprehensive car insurance” means? Learning about car insurance may not be the most exciting thing you do, but it is a valuable lesson, that could save you lots of money. Here’s a breakdown of the different types of insurance policies that are available.
Take a look at your coverage. What you don’t know could be costing you money.
Know Thy Coverage: The Four Types of Car Insurance
1. Compulsory Third Party Insurance (CTP)
- Compulsory. It is illegal to drive without this insurance. (When you register your car you pay for CTP.
- Covers costs of injury and death to others
- In some cases, covers costs of injuries you receive
- Exclusions: In some cases, coverage of your injuries is not provided.
2. Third Party Property Insurance
- Covers damage your car causes to other people’s property.
- Covers your own legal costs.
- Exclusions: Does not cover costs of repairs to your car.
3. Third Party, Fire & Theft Insurance
- Covers damage your car causes to property of others.
- Provides limited coverage in case of theft or fire
- Exclusions: Does not cover repair costs of your car caused by accident.
4. Comprehensive Insurance
- Provides most extensive coverage
- Most expensive form of car insurance
- Covers cost of damage to your car and other people’s property in an accident.
- Covers theft.
- Optional coverage may include providing you with a replacement vehicle while yours is being repaired.
Five Facts About Insurance That Can Make a Difference
Now that you know the difference between the four main types of insurance policies, here are some key facts to know that can make a difference when comparing car insurance policies and costs:
1. Agreed vs. Market Value
When your car is insured, your car insurance company will choose to insure it in one of two ways: For an agreed value that is clearly stated in your policy, or for the market value (based on the type of car you have, and the going rate and condition of your car at the time of evaluation). Be clear about which method is chosen for your car, and why.
2. Think About Insurance When Buying a Car
Remember, some car finance companies may require you to purchase a certain type of insurance. Be clear about these requirements before you purchase your automobile. In addition, the cost of your insurance can be impacted by the type of car you buy. The faster the engine, the higher your insurance will probably be.
3. Factors That Affect Your Insurance Costs
If you have a safe driving record, your insurance rates may be lower. A female driver over the age of 40 will probably pay less insurance than a male driver under the age of 25. Several factors can affect the cost of your insurance, including which part of town you live in, and whether you park your car on the street or in a garage. In addition, you can receive discounts if you’ve never had a car insurance claim, while a poor driving record and several claims can drive your insurance costs higher.
Combining different types of insurance in a package with a single insurer, to become eligible for a multi-policy discount, can save you money. In addition, purchasing optional insurance can drive your costs up, such as coverage for rental cars. Remember, if you’re tempted to fib in order to save money on your car insurance, don’t. Lying on a car insurance application isn’t just wrong, it could also leave you unprotected as it may void your insurance policy entirely. It’s not worth lying to save a few cents, as if your car insurance company finds out it could refuse, in part or entirely, to a pay claim.
4. What’s Excluded is as Important as What’s Included
When comparing the costs of car insurance policies, remember that just as there are differences in coverage, there are also differences in what a policy won’t cover. For example, most policies will not cover damage that is caused by normal wear and tear, mechanical failure, or faulty tires. In addition, most policies will not cover damages or accidents caused by cars that were considered to unsafe to be on the road.
Always read your car insurance policy carefully, from cover to cover, to ensure you’ve got the coverage you’re expecting.
5. The Premium and the Excess
There are two important costs to consider when choosing a car insurance policy: The premium, which is the amount of money you pay for insurance coverage. And the excess, the amount you must pay out of pocket once you make a claim. Remember the higher the premium you pay the lower your excess will be.
Remember, car insurance is big business. Make it your business to know the basic facts when comparing car insurance costs and policies. And always know your policy from cover to cover – to be sure that you’re covered from bumper to bumper.
This article contains general advice about car insurance. The author has not taken into account your financial situation or needs and you should consider whether the advice provided is appropriate for your own circumstances before relying on it.
Filed Under: Insurance Comparison
