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What Are The Different Types of Car Insurance?
●May 19, 2021●4 minute read
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Buying a car is one of the biggest financial decisions you’ll make in your life (aside from purchasing a home). Understandably, you want to be protected physically and financially when you’re behind the wheel. This is where car insurance can come in handy.
According to data from Budget Direct, here were an estimated 32,300 car accidents in 2016 that involved hospitalisation.
Whether you scraped the curb or got involved in a major accident, fixing your car can be expensive. However, deciding on which type of car insurance is right for you can be overwhelming.
To help you out, we’ve put together a simple guide that takes you through the different types of car insurance and how they differ in price.
What are the different types of car insurance?
There are four main types of car insurance available in Australia: Compulsory Third Party (CTP), Third Party Property Damage, Third Party Fire and Theft Cover, and Comprehensive Car Insurance.
Compulsory Third Party (CTP)
Compulsory Third Party (CTP) insurance protects you in the event you are involved in a car accident in which another person is injured or killed. In ACT, it is known as motor accident injuries (MAI) insurance.
This type of insurance is mandatory for all Australian drivers. It is typically purchased in conjunction with your car registration each year. You can choose to add on an insurance premium that covers additional costs.
Third Party Property Damage
This type of insurance covers you if you cause damage to another person’s vehicle or personal property. If you are involved in legal proceedings as a result of this, it also includes liability cover.
Let’s say you damage another car in an accident or any of the personal belongings in the vehicle. Third party property damage can cover the costs of replacing or fixing said items. However, this type of insurance does not cover any damage to your car or personal items in an accident; you will be required to cover these costs.
Third Party Fire and Theft Cover
Third party fire and theft cover can be used to cover costs in the event your car is damaged or lost in a fire, or stolen. This type of insurance also covers the same situations covered by third party property damage including if your car is involved in a fire, stolen, or you cause damage to another person’s property. Again, you are not covered for any damage done to your own car or personal belongings.
Comprehensive Car Insurance
Comprehensive car insurance covers a more extensive range of situations. This type of insurance covers most situations in which your vehicle is damaged and in need of repairs.
Typically, if you are in an accident in which you are deemed not at fault, your insurance provider will cover all costs involved in repairing your vehicle. If you are in an accident that is your fault, you will likely be asked to pay an excess (which will be outlined by your provider). Once this is paid, they will cover the costs of repairing both cars involved. While the specifics will be outlined to you in your individual contract, comprehensive coverage is a more thorough degree of insurance than the other types available.
There are some situations in which comprehensive car insurance will not cover your costs. Specifically, if you are in an accident in which you were over the legal alcohol limit or under the influence of drugs, you will not be covered by your insurance premium. You also won’t be covered if the damage was caused when a person that isn’t authorised to drive the vehicle on your policy was driving.
What are the differences in pricing?
Generally, the more extensive your car insurance cover is, the more expensive you can expect the bill to be.
The type of car you own, age, and gender can influence the price you pay for your insurance premium regardless of which type of cover you take out. Typically, young people pay more for car insurance, and young men pay more than young women.
Did you know?
In NSW, the average cost of an under 25 female to insure her car for one year is $2,204, while the cost of someone aged 50+ is $998?
There are countless different car insurance providers, all of which offer different prices on their insurance plans. However, you can use a car insurance comparison tool to know the different prices of car insurance for your specific vehicle and personal details.
Which type of car insurance should I get?
At the end of the day, any type of car insurance you purchase in addition to your CTP insurance is completely optional. There are benefits and drawbacks to each type of car insurance.
While you may pay less annually with a lower level of insurance, if you’re in an accident in which your car is not covered, you will be required to cover the costs (which can be quite expensive). Ultimately, it’s up to you to choose whether you’d like to be covered for any situation or would rather pay for any possible damage upfront.
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Written by Rachel Horan
Rachel Horan is a Content Writer for Jacaranda Finance. Rachel has previously produced content for Brisbane City Council, Black & White Cabs, and Clubs Queensland. She has a Bachelor of Mass Communication with Distinction from the Queensland University of Technology.