Understanding the Types of Car Insurances Available

  • Posted 21 Jul
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Understanding the Types of Car Insurances Available

Whether you are purchasing a new or used vehicle, in addition to arranging for car finance you’ll need to make sure you meet the legal requirements for car insurance.

Before you start searching, use this guide to help you understand the types of car insurances available within Australia and how to choose the right one for your situation.

Market Value vs. Agreed Value

Regardless of the policy you choose, you’ll want to find out from your insurer whether the policy covers the market value of your vehicle or the agreed value.

  • For market value policies, the insurer will determine the value of the vehicle in case of a claim, taking into account it’s age and condition
  • For policies that cover the agreed value of a vehicle, you’ll agree up front on the car’s insured value. The value is written into the policy and won’t be changed unless the policy is updated at a later date

Four Types of Car Insurance

  1. Compulsory Third Party (CTP)

CTP insurance is mandatory for all states and territories according to the Insurance Council of Australia. This insurance covers only bodily injuries caused by vehicles. Since CTP doesn’t help motorists repair or replace their car in case of a crash, many drivers choose to purchase additional forms of insurance.

  1. Comprehensive Insurance

A comprehensive policy covers any damage to your vehicle, whether through collision, theft, vandalism, or weather damage. Some comprehensive policies extend to repairing any damage you may do to other vehicles.

  1. Fire and Theft

A fire and theft policy does not cover collision damage, but protects owners if their vehicle is stolen or damaged by fire. This policy type is cheaper than comprehensive insurance because of its more limited coverage.

  1. Third Party Property

A Third Party Property policy offers protection if you damage another driver’s vehicle. It does not cover repairs to your own car in case of a crash. If you have an older car that isn’t worth much but want to avoid being sued in case of an accident, this can be a helpful policy to have.

Additional Considerations

Once you have chosen one or more from the four policy types above, here are some other items you’ll need to know about:

Uninsured Motorist Extension (UME)

If you take out a Fire and Theft or Third Party Property policy, some insurance companies offer the option to tack on a UME extension. This policy provides protection (typically between three and five thousand dollars) if your car is damaged by an uninsured motorist and you are not the one at fault in the accident.

Excess Payment

If you make a claim on your insurance, you will have to pay a portion of the damage not covered by your policy. Your policy will list the excess payment amount you’ll be required to pay. In addition, some policies require an additional contribution for drivers below a certain age.

No Claim Bonus

You may be eligible for reduced premiums if you haven’t made a claim within a certain time period. This is optional and depends on your individual insurance company. But if you haven’t made a claim in years and have not seen a decrease in your premium, you may save money by shopping around for a new policy.

Australian Credit and Finance helps customers with car loans and insurance everyday. Contact us today and we’ll help you get your next dream car.

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