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Demystifying car insurance

Most of us just want to be sure that if we have a car accident, the associated financial costs will be manageable, but like lots of insurance, there are many types and levels of car insurance.

Some forms of car insurance are compulsory and cannot be avoided if you own and operate a car, others are voluntary but offer significant peace of mind knowing that should you have an accident you wont be left walking to the bus stop.

Read on to find more about our three car insurance cover options to ensure you are financially covered should the unthinkable happen.

What is comprehensive car insurance?

  • When involved in an accident where you are at fault Comprehensive car insurance provides cover for:
  • Damage or loss to your vehicle
  • Theft of your vehicle
  • Damage to other people’s vehicles and property

Most insurers offer a range of comprehensive car insurance to allow you to pick a policy with the benefits and price that suit your needs.

For the most part, comprehensive insurance is voluntary, in some instances however there may be a third party that will require you to have comprehensive cover on your vehicle – for example a finance company that has an interest in your vehicle may require you to hold a comprehensive insurance policy for the duration of the loan.

The cost of your comprehensive insurance policy will depend on a number of factors, including the make, model, age and condition of your vehicle as well as your age, your driving history and the garaging location of your vehicle.

What is compulsory third party insurance?

Compulsory third party (CTP) insurance is a legal requirement for every vehicle on Australian roads.

Compulsory third party insurance covers you for costs associated with claims made against you in relation to someone else’s injury or death as the result of an accident, and to a lesser extent injuries suffered by you, when you are at fault. Some compulsory third party insurance providers offer ‘at fault’ driver cover as an additional benefit – this provides additional lump sum benefits for certain injuries that you may sustain in an accident you cause.

There is a common misconception that compulsory third party insurance will cover you for damage to other people’s property, however this is not the case – for this you require comprehensive car insurance or third party property damage insurance.

In some states (such as NSW and QLD) you have the freedom to choose who your provider for compulsory third party insurance will be, in other states (such as WA) the cost of the third party insurance is automatically applied to your registration fees.

What type of car insurance do I need?

First and foremost, you will need compulsory third party car insurance. This is compulsory throughout Australia and you will not be able to register your car without it.

When considering what additional insurance you may need, there are a number of factors you should consider. These include:

  • Any legal agreement you may have with a finance company to maintain an in-force comprehensive car insurance policy
  • Your ability to cover the repair costs of someone else’s vehicle or property should you cause and accident
  • The financial cost to you if your own car is damaged, stolen or written off.

Apart from a comprehensive car insurance policy, there are some more specific and generally cheaper covers that may suit your needs better. These include third party property damage insurance, which covers you for any damage you cause to another person’s vehicle or property or third party, fire and theft insurance, which will cover damage caused to other people’s property as well as your car if it is stolen or damaged by fire.

Read more on CGU’s Car Insurance.