Car Insurance 101

If you own a car, it’s important that you have the right insurance in place to keep you covered when you need it. With a few different types of vehicle insurance out there, it pays to know what kind of cover is best for your situation, particularly if you get into a sticky situation on the road. We’ve put together this helpful guide to car insurance to help you understand how it works.

Types of car insurance

Comprehensive cover

With comprehensive car insurance policies, your car is covered if it’s damaged or stolen, and if you cause damage to someone else’s vehicle, that’s covered as well.

Most comprehensive car insurance policies also come with extra benefits, such as covering the cost of towing your car to the nearest repairer after an accident.

Comprehensive vehicle policies offer the broadest protection that also covers fire and theft.

Third-party cover

While third-party vehicle insurance is cheaper than comprehensive insurance, you’re only covered for the damage to someone else’s car in an accident. If you damage your own vehicle, this type of policy won’t cover that.

There is an exception however with some policies. If an uninsured driver crashes into you and causes damage to your car, you may be able to receive a limited payout if you’re not at fault and you can provide the other driver’s registration and contact details.

Within third party policies, there’s also a third-party fire and theft option. These policies give you the same benefits as general third-party policies, plus they cover you if your car is stolen or damaged by fire.

Agreed and Market Value

When you arrange insurance for your car, you’ll need to specify what kind of value you’d like to place on your car. That means you need to choose how much you’d like to be covered for in the event of a write-off.

When it comes to valuing your car, there are two options, market value and agreed value.

Market value

Market value policies are based on the amount a similar car would fetch on the retail market as determined by your insurer.

As the market changes and your car depreciates in value, you might end up being covered for a lower amount when you eventually need to make a claim. Although it might be worth a certain amount at the time of taking out your insurance, if you need to make a claim after a couple of years, the market value of your car will likely have gone down.

Agreed value

With agreed value policies, you and your insurer agree on a specific amount that represents your car’s value, giving you greater certainty about the amount you’ll receive if your car is written off. As your car decreases in value, you might need to also revisit this number whenever you renew your vehicle insurance policy.

Excesses

Most vehicle insurance policies come with a standard excess amount - that’s the amount you’ll need to contribute if you need to make a claim.

You are usually able to increase or decrease your excess in exchange for higher or lower premiums to suit your needs.

If you are a younger driver or have anything less than a full driver’s licence, you’ll usually be required to pay a higher excess. This can be as much as $1800 for a driver under the age of 21 with a learner’s licence.

You can find out more about excess in our helpful article, “Insurance excess - what is it, exactly?”

If you’d like some help making sure you have the right car insurance in place, or you want to know more about agreed value vs. market value, come and chat to us. We’ll help you get it right!