Car Insurance in Australia: An Overview
Anyone who owns or leases a car in Australia must have some form of car coverage, be it the mandatory green slip CTP cover or a comprehensive collision policy to something in between.
Types of Car Insurance in Australia
- Compulsory Third Party Insurance (CTP): Also known as a Green Slip (due to the color of the certificate), this is the mandatory insurance in Australia. Most states include this in the registration fees for the vehicle, and it is issued by state funded insurers. Some states allow for private insurers to issue the insurance, but tightly control the price. CTP covers medical costs to people injured by the insured, but now also includes coverage for any children injured, regardless of the car they are in. Without it, you aren’t allowed to drive your car.
- Third Party Property Insurance: This is optional insurance that can be purchased to cover property damage you cause, although damage to your car is not covered. This is the cheapest of the optional insurance plans offered in Australia.
- Third Party, Fire and Theft Insurance: Like the name suggests, this cover provides insurance in case your car is damaged in a fire or is stolen, in addition to the property cover explained above.
- Comprehensive Collision Cover: The most expensive insurance plan on the market, this plan covers damage to other motorists’ vehicles as well as your car, and typically includes fire and theft coverage as well as cover if your car is struck by an uninsured vehicle. Many will also include extras such as towing and rental car allowances.
How Rates are Determined
Car insurance rates in Australia are determined by a variety of factors that all work together to determine the final premium.
- Previous claims can cause a premium to jump significantly.
- Driving history. Traffic citations will lead to higher premiums.
- Make and year of car. Newer, lighter cars can cost more to repair as they tend to suffer more damage in collisions.
- Excess. This is the amount of money that that you pay before insurance cover kicks in. The higher the excess, the cheaper the policy, but the higher the cost you need to bear if you need to make a claim.
- Age of insured. Generally speaking, the more mature a driver is, the cheaper the premium.
- Gender. Males tend to pay a higher premium as they tend to do stupider things behind the wheel that lead to more claims.
- Neighbourhood. Safer neighbourhoods can lead to lower premiums and vice-versa.
- Garages. Cars parked in a structure receive a break whereas cars parked on the street can suffer an up-tick in premium.
- Modifications to the car such as body effects or expensive electronics.
Additional Types of Car Insurance
Many times when purchasing a new car, the car yard will try and include extra insurance, and often times the financing may require certain additional insurance cover.
Consumer Credit Insurance This insurance will make some or all of the repayments on your car loan in the event of your injury or death, and sometimes will also make payments if you find yourself suddenly without a job.
Security Shortfall Insurance In the event of a total loss, this covers any excess owed to a lender after the insurance pays off your car. Sometimes the value of the car is less than what you owe on it, leaving you owing money on a car you no longer have. This is sometimes referred to as gap insurance.
Mechanical or Extended [Warranties] This may or may not be an insurance policy, and like the name implies, it kicks in when the vehicle suffers a mechanical breakdown. These products often benefit the lender, and are the kinds to most likely be pushed at a dealer, in addition to comprehensive collision products. Including them in the loan can, in some cases, result in a price break in the premium – but this isn’t always the case, so check the details carefully and watch out for any other additions to the loan amount.
Determining the Right Kind of Insurance
Comprehensive collision insurance covers both damage caused to and by third parties as well as self-inflicted damage and theft. The mandatory green slip and third party collision insurance provide a lower level of coverage. Damage to other cars could leave you owing thousands and thousands of dollars, so it’s important to have a plan for this expense.
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: Car Insurance
