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Should I Get Comprehensive Car Insurance?
●May 24, 2021●4 minute read
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Whether it’s new or second-hand, buying a car is an expensive purchase. The last thing you want is to end up with a hefty bill to repair or replace your car after an accident. This is where car insurance comes in.
While you can’t drive in Australia without at least having compulsory third party (CTP) insurance, there are other types of car insurance you can consider to financially protect yourself and your car. One of these is comprehensive car insurance, but what exactly does it cover and is it worth it?
A quick note
In Australia, it is required by law that every registered motor vehicle has Compulsory Third Party (CTP) insurance, also known as ‘Green Slip’ insurance. It is designed to protect you financially if you are involved in a car accident that causes injuries to a third party including pedestrians, cyclists, and passengers.
If you’re looking to take out comprehensive car insurance, here’s a quick rundown of what you need to know.
What is comprehensive car insurance?
Comprehensive car insurance covers you for a wide range of insured events. It provides cover for damage to your car and other driver’s vehicles or people’s property. It also covers damage to your vehicle as a result of theft, vandalism, fire, and weather-related events (e.g. flood, storm, hail). Given that comprehensive car insurance offers a higher level of protection compared to other types of car insurance, it can also be costly.
According to the Australian Automobile Association Transport Affordability Index report, these are the average weekly costs of comprehensive car insurance in Australia:
What does comprehensive car insurance cover?
As the name suggests, comprehensive car insurance covers an extensive range of situations including accidents, theft, and fire. While it depends on the provider, a comprehensive car insurance policy generally covers the following:
- Theft: If your car is stolen or damaged from theft, comprehensive car insurance can cover the costs to repair or replace your vehicle.
- Weather-related damage: This can include loss or damage from hail, flood, thunderstorms, cyclones, and lightning.
- Vandalism: If your vehicle is damaged as a result of vandalism or civil disobedience, this can be covered with a comprehensive policy.
- Damage to your vehicle: This covers any damage to your car, regardless of whether you were at fault or not.
- Damage to other vehicle/s and property: This covers damage you’ve caused to another vehicle or someone’s property.
Some comprehensive car insurance policies come with extras including roadside assistance, hire car cover, and limited or no excess on damaged windscreens.
However, comprehensive car insurance doesn’t cover you if you cause an accident that results in an injury or death.
If you’re shopping around for car insurance, make sure you read the Product Disclosure Statement (PDS) before purchasing a policy. A PDS is a document that outlines the terms and conditions, any limits or exclusions, fees and charges, and any other important information about a financial product.
What’s the difference between agreed value and market value?
When you take out comprehensive car insurance, you can choose to insure your car for either an agreed value or market value.
An agreed value is when you insure your vehicle for a fixed amount that has been agreed upon by you and your insurance provider. This amount will be paid to you in the event of your car being stolen or written off. Generally, having an agreed value comes with a higher premium but allows you to know exactly how much you’ll get paid.
A market value is the amount your car is valued at the time of an accident. While this option typically comes with a lower premium, it also means you won’t know how much you’ll get paid when you make a claim.
Do I need comprehensive car insurance?
Comprehensive car insurance can be expensive, especially compared to other types of car insurance policies. If you’re weighing up whether or not the price tag is worth it, here are some questions you can ask yourself:
|How much is your car worth?
||An unfortunate reality of owning a car is that it depreciates in value each year. Depending on how old your car is, it might not be worth having a comprehensive car insurance policy. As a general rule-of-thumb, if the annual premium and excess of your policy exceeds the value of your car, you might want to reconsider getting or keeping comprehensive car insurance.
|Do you have a car loan?
||If you have financing for your car, it’s likely you’ll need to take out comprehensive car insurance as a condition of your loan. Generally, this is to financially protect the lender if you default on your repayments.
Even if you don’t need to take out comprehensive car insurance, it can be handy to have it as a financial safety net. This is because if you are left without a car after an accident, you might still have to pay off your loan repayments.
|Can you afford to replace or go without your car?
||Do you need your car for work or family? If your car gets written off, do you have the financial means to replace it?
If you don’t have comprehensive car insurance, you could be left with an expensive repair or replacement bill after an accident. In some cases, you can also get a hire car to get to-and-from work if you have a comprehensive car policy.
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Written by Katie Douglass
Katie Douglass is the Senior Communications Manager at Jacaranda Finance. In recent years, Katie’s work has appeared in publications such as Marie Claire, InStyle, Oiyo, and THE ICONIC. She has a Bachelor of Creative Industries in Fashion Communication & Journalism from the Queensland University of Technology.