Car insurance is a type of insurance that covers you when driving a motor vehicle, helping you meet the costs of any damage to your own car or others in the event of an accident.
In Australia, car insurance is a mandatory requirement to drive legally on Australian roads. At a minimum, you are required to have compulsory third-party (CTP) insurance, however, there are other levels of insurance you can choose depending on your needs and budget.
While many people think motor accidents are the only reason to take out a car insurance policy, that is not the case.
Depending on the level of cover you choose, a car insurance policy can also offer you protection if your car breaks down, such as roadside assistance or emergency accommodation; monetary reimbursements if your car is broken into, and valuables are stolen; and even a new car replacement if your car is written off.
How to Find The Best Car Insurance
Taking out car insurance might be the least glamorous part of purchasing a new car, but it’s essential to protect you and your wheels while on the road.
By paying your car insurance premium each year, you’ve essentially struck a deal stating your insurance company will cover costs related to car accidents and mishaps so you don’t have to foot the bill (within the parameters of your policy, of course).
The key to finding the best car insurance is to scout out a policy that meets your needs at a competitive price. But with inflation driving up the cost of living, this is becoming difficult. In the year to March 2022, the Australian Prudential Regulation Authority recorded premiums across the general insurance industry (which includes car, home and contents insurance) rising by a massive 11.7%.
As we juggle ballooning grocery bills and petrol prices, it’s more important than ever to get the right information on the best deal on car insurance. So, here’s everything you need to know about choosing the right policy for you, cutting down insurance costs while keeping you covered on the roads.
Related: Best Car Insurance Australia
What are the Different Types of Car Insurance?
There are four basic levels of car insurance in Australia:
Compulsory third-party insurance
Compulsory third party insurance (CTP), as the name suggests, is a mandatory requirement for driving on Aussie roads. What it’s called, its price and how you apply for CTP varies across the states and territories, but it broadly covers costs related to injuries or death in motor vehicle accidents.
In NSW, ACT, Queensland and South Australia, CTP is underwritten by private insurance companies. This means prices can differ depending on which provider you choose. Meanwhile, in Victoria, Western Australia, Tasmania and the Northern Territory, it goes directly through the relevant state government and is automatically included in vehicle registration costs.
Insurance is complicated, so be sure to check exactly who is covered (i.e. the at-fault driver vs all impacted parties) by CTP in the state where you live, as well as any limits on how long that coverage lasts as well as dollar caps.
Third-party property damage
This is the most basic and cheapest coverage type. It only covers damages you cause to other vehicles or property while driving, not your own car. If you think the value of your wheels doesn’t justify a pricer policy, but want to ensure you’re not footing the bill if you prang a Porsche, this option may suit you.
Third party fire and theft
This may be a great coverage option for those seeking to cover damage to their own car as a result of damages specifically caused by fire or theft with this policy. It could be useful for those living or driving regularly in high crime-risk areas, especially if you park your car on the street.
Comprehensive insurance
While they differ between providers, these policies cover a broad set of situations that may damage your car, as well as damages to other people’s vehicles and property.
It’s the highest tier of car insurance, but that doesn’t mean it covers everything – be sure to read your product disclosure statement (PDS) for exclusions that may void your policy.
How much does Car Insurance Cost?
This is tricky to pinpoint, as there are myriad factors that affect the cost of car insurance premiums (aka the amount you pay when you take out or renew your policy). This includes personal details like your age, gender, where you live and the type of car you drive, as well as your history as a driver and insurance customer.
The type of car insurance policy you choose also impacts the premium, with comprehensive policies hitting your wallet harder than third party cover. With comprehensive policies, you generally have more room to tailor the cover to suit your needs, which can also affect price. Common optional extras like roadside assistance, choosing your own mechanic for repairs and hire car cover will bump up your monthly premium.
Many car insurance policies give you the option to choose your excess. This is the amount you pay to your insurance provider when you’re making a claim before you are reimbursed.. For example, if you have a $500 excess and repairs come to $3,000, your insurance company effectively covers $2,500.
Generally, having a higher excess will reduce your annual premium and vice versa. You could opt for an excess as low as a few hundred dollars, or set it in the thousands. Just remember, you’ll need to fork out that cash come claim time, so make sure you’ve got room in your budget for whatever excess level you choose.
And remember: claiming on your car insurance can also increase your premium at renewal. Be strategic about what you claim for — perhaps ignore the odd superficial scratch or ding — so your risk profile as an insurance customer stays low.
Can I Get Discounts on Car Insurance?
Yes, there are numerous discounts to reduce your premium. Some insurance companies will apply discounts automatically if you are eligible for them, but with others you may need to scour the fine print and request a discount when it’s due.
Here are a few common car insurance discounts:
- ‘Buy online’ discounts are only offered to new customers who sign up for a policy digitally. They usually slash between 5% and 20% off your first yearly premium, with the price reverting back when your renewal period comes along.
- Loyalty discounts can take a number of years to kick in, but often increase the longer you stay with the same insurance company.
- No claims discounts are offered to insurance customers who don’t claim on their policy. They increase as you rack up more consecutive years with no claims, rising as high as 70%.
- Multi-policy discounts are sometimes an option if you hold other insurance products with the same company alongside your car insurance, such as home and contents cover or life insurance.
- Restricted driver discounts can cut down your premium if you ensure certain types of drivers deemed as higher risk by your insurance company (like young or inexperienced drivers) won’t be using your car.
- Fuel-efficiency discounts vary by policy and how ‘green’ your car is, but effectively offer a premium reduction for driving a more fuel-efficient car.
- Pay-per-kilometre policies are ideal for car owners who don’t drive often. The basic deal is if you drive under a set distance each year (as shown on your odometer), you’ll be rewarded with a reduced premium.
Your insurance provider may have a longer list of potential discounts, so be sure to investigate what you might be eligible for when buying or renewing your policy.
Why it’s Important to Shop Around for Car Insurance
Insurance costs have a habit of sneaking up year-to-year. The jump is especially high when you consider most new customers are receiving ‘buy online’ discounts in the first year they sign up, leaving long-standing customers with what effectively looks like a ‘loyalty fee’.
By collecting a few online quotes each year, you can compare your policy to other options, providing you with solid footing to haggle down your current offer, or switch providers for a better deal if necessary.
Beyond price, it pays to reassess your needs as a driver annually. Perhaps you’ve added modifications to your car, maybe you’re driving less often, or you think you could be eligible for a discount. All these circumstances can affect your car insurance, so it’s worth updating your policy.
How to Compare Car Insurance Policies?
At this point, it’s hopefully clear the best car insurance policy for you is one that suits your car, budget and driving habits. There is a range of Australian car insurance companies to haggle with, including the likes of AAMI, RACV, Allianz and Budget Direct — to name a few.
With that in mind, the following key policy features often come in handy:
Roadside assistance
Roadside assistance comes in handy when you have a flat battery, have locked your keys in the car or are in need of a tow. It’s generally separate to your insurance policy, but some providers offer bundle deals. Just remember, there’s usually a limit on covered towing distances, and if you have a comprehensive policy it’s worth checking if you already have a similar feature included.
Hire car cover
If you use your car daily for work or to support your family, you don’t want to be left without transport while your wheels are at the mechanics. Hire car cover provides a rental vehicle (with a time and dollar limit) so you can still get from A to B. This is generally only a feature in comprehensive policies, and may be offered as an optional extra for an additional fee.
Emergency repairs
This covers around $500-worth of repairs to get you back on the road after a minor incident. You’ll only find it in comprehensive policies.
Personal property cover
If you keep valuable items like sunglasses, a laptop or trade tools in your car, it could be worth taking out a comprehensive policy with cover for personal property stolen from your car or damaged during an accident. It’ll usually be capped at an overall limit (not per-item), so check your belongings don’t collectively exceed this amount.
New-for-old replacement cover
Many comprehensive car insurance policies offer new-for-old cover, meaning they will replace your car with a similar make and model of equal value after an insurable event. This is particularly useful for pricer vehicles or for people still paying off a car loan (you don’t want to add to that debt when finding a new vehicle).
Common Car Insurance Exclusions
There are some scenarios or actions that will cause your insurance claim to be rejected. This includes any illegal activity, like driving under the influence of alcohol or drugs, driving an unregistered car, or driving without a licence.
There are also less obvious exclusions like general wear and tear (think rust and tyres being worn down), mechanical or electrical breakdowns, or overloading your car beyond the manufacturer’s recommended weight.
And importantly, if you miss an insurance premium payment, you won’t be covered – so be sure to stay on top of your renewal calendar.
What Is the Best Car Insurance for Me?
Car insurance, like any insurance policy, is dependent on the unique circumstances of the individual as much as the policies of the insurer. A car insurance policy for someone over 70 years old who only drives their car once a week and keeps it securely garaged is going to differ from the policy of a 22-year-old who regularly drives long distances and parks her car on the street.
That’s why it’s worth looking carefully at the different types of car insurance and the varying car insurance providers, and then considering what you are looking for in a policy, too.
Do you want a policy that is going to offer you a cheaper rate for driving fewer kilometres every year? A policy that includes roadside assistance, or emergency transport in case of an accident? If your car is broken into, are you going to need cover for valuables as well as baby capsules?
Ultimately, the best decision for any driver is to purchase a comprehensive car insurance policy to ensure you have the maximum coverage when driving in Australia, helping to keep you and others safe.
Tips to Save Money on Car Insurance
Saving money on your car insurance policy is more simple than you may think. Whether it’s online promotions, discounts for driving less, or a no claims bonus, there are plenty of ways to save a few dollars when shopping around for car insurance.
Just as you want to carefully inspect a PDS for the inclusions and exclusions within your policy, it’s important to consider the ways you can save on your premiums. Here are a few tips:
- Check what the no claims bonus offered is, and whether you would qualify for it;
- Consider how much you drive and, if less than the average driver, if your policy premium could be lowered under a ‘drive less, pay less’ deal;
- Calculate whether you could save money on your premium by having a higher excess;
- Ask insurers if they have any promotional discounts, or if they offer discounts to pre-existing customers (such as customers who have another policy with the provider, like life insurance);
- Opt to pay the entire 12-month premium in one annual instalment. This may be a tough ask, and will depend on your cash flow, but annual premiums are usually cheaper, sometimes by as much as 10%, than monthly premiums.
- Ask for a better deal. It is likely that your car insurance will inch up year after year—it’s what is known as the ‘loyalty tax’, but you have some bargaining power. Get a quote from a rival insurer—who will no doubt offer you a better deal to switch—and then return to your insurer and ask them to match it at a minimum or lose your business.
- Evaluate whether comprehensive car insurance is a worthwhile cost for your budget, if your car isn’t worth much and you can live without it in the event of an accident.
