After your house a car is the biggest purchase you are likely to make. Ensure you take out adequate cover and that you understand exactly what it means.
There are four different types of policies available:
Compulsory Third Party
Covers you for any injury or medical costs associated with accidents where you are at fault. As the name suggests, this type of insurance is compulsory and is included in your registration cost in all states except Queensland and New South Wales where you are required by law to take it out.
Third Party Property
Covers you for any damage caused by your car to other people's property. This does not cover you for any repairs to your car.
Third Party Fire and Theft
Covers you for any damage caused by your car to other people's property as well as limited cover for loss or damage to your car caused by fire and theft only.
Comprehensive Cover
Covers you for any damage to your car or other people's property as a result of an accident. This is the most expensive type of car insurance but can provide you with the peace of mind that no matter what your investment is protected.
Now you know what each policy covers, here's a look at what they don't cover. Most policies will not cover:
- Damage resulting from un-roadworthy cars.
- Cars with any modifications not outlined in the policy, this may be as small as tinted windows
- Cars driven by drivers under the influence of alcohol or drugs.
- Cars driven by unlicensed drivers.
- Cars driven by people not authorised on the policy i.e. drivers under the age of 25.
- Cars driven recklessly or cars involved in races.
You know what the different types of policies are now you need to know how much it's going to cost. The cost of insurance will depend on;
The Vehicle's Value
Make, model, age, accessories and modifications are all factors that will be considered in valuing the car. Powerful cars and cars with modifications generally cost more to be insured.
Agreed Value or Market Value?
Agreed value – more expensive but gives you the assurance of knowing exactly what you will get if the car is stolen or written off.
Market Value – value is determined at the time of the claim, may mean you get significantly less than you thought.
Where the vehicle is stored.
Certain suburbs are more at risk of theft and therefore attract higher premiums. If your vehicle is kept on the street rather than in a garage you will attract higher premiums.
The Driver
Your age, sex and driving record will significantly alter the size of your premium.
With all these factors contributing to the cost of a premium it is little wonder that prices can fluctuate greatly. It pays to do some research prior to buying your car or at the very least prior to committing to a certain policy and or insurer.
One final point to remember is always give the insurance company full disclosure as failure to do so may result in your policy being declared void.
Sources; Australian Securities & Investment Commission.
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