How to choose car insurance
When you take out a car loan, comprehensive car insurance for your new car is one of the conditions for final approval of your car loan.
Before funds are released, you'll need to provide evidence of a comprehensive car insurance policy for the car that you've contracted to purchase.
So how can you choose the right car insurance?
The right car insurance will depend partly on the type of car loan that you've taken out to buy your car. We'll focus on secured car loans, which require comprehensive car insurance, and then discuss some options if you're buying an older car with an unsecured loan at the end of this article.
Choosing Comprehensive Car Insurance
When you take out comprehensive car insurance, you can select a policy to suit your needs. If your car comes with roadside assistance as part of your new car warranty, you won't need this along with your car insurance policy.
Tailoring your car insurance policy so it provides just the value that you might need will reduce the costs of your insurance. For example, if you have RAA membership, this will cover you for towing up to 50 kilometres, so you won't need towing cover as part of your comprehensive car insurance policy.
When selecting car insurance, some things to check for are:
If your windscreen gets chipped and needs replacing, it should be covered without the need to pay your excess.
If you get stuck and need a tow, find out how far your policy covers you for. If you drive rural roads and you have to pay for a tow back to suburbia, this could be very expensive if its not covered.
Access to a hire car so you can still get around if your car needs to be repaired. Some policies will also include accomodation or 'fly home' costs.
Cover for sports gear
If you've got your bike on the roof racks or in the car, or other sporting equipment like golf clubs, climbing equipment - whatever your sport is - some policies will cover damage to your equipment up to $3000 or similar.
New for old replacement
If you're car is under 2 years old and it's written off, some insurers will offer a replacement of a new car with the same value.
Carbon offset options
Some car insurance companies offer a carbon offset option to make your driving carbon neutral.
Fixed kilometer discounts
If you spend less time driving each year, you'll pay less for your car insurance policy.
Cover for drivers under 25 years
If everyone driving your car is over 25 years, and you state this on your policy, your premium will be less. Note that if anyone under 25 does drive your car, you won't be covered if they are in an accident.
Choice of repairer
Some insurers will allow you to choose the repairer where you have your car fixed under a claim, others, like RAA, will require you to use an approved repairer.
Agreed value or market value comprehensive car insurance
An agreed value comprehensive insurance policy will cover your car for the amount set out in your certificate of insurance. Agreed value insurance is offered by companies like AAMI, RAA, and Allianz.
Market value insurance is usually less expensive than agreed value car insurance. If your car is written off you'll receive a sum equal to the market value of your car at the time of the loss. Market value insurance is offered by some of the newer insurance companies like Bingle, Woolworths or Huddle.
Know what your excess is
One way to lower your car insurance premium is to select a larger excess payment. This is the amount you'll contribute to any repairs that you claim under your insurance policy.
A larger excess payment will mean that you pay a lower premium. Just make sure that you keep this sum in your emergency savings fund just in case you need it.
Understand Your Product Disclosure Statement (PDS)
Your PDS is where you'll find all the information about exactly what your car insurance policy covers, and how to make a car insurance claim.
Other Car Insurance Options
If your car isn't under secured finance, you might decide to pay a lower premium with one of the following options.
Third Party Property Cover
This is the least expensive type of insurance, and its the minimum insurance that you should have to protect your financial situation.
It covers damage to someone else's vehicle or property if you are in a car accident.
Some insurers will cover you under this policy for a small sum, often up to $3000, of damage caused to your car by an uninsured driver.
Theft, Fire or Malicious Act Cover
This is an optional cover you can add to your Third Party Property insurance. It covers you for loss or damage to your car if its stolen, damaged in attempted theft, a malicious act or fire.
This gives you an overview of the different types of car insurance that you can choose. But before you finalise your car loan, you'll need to use this guide to make sure that you have the right car insurance in place.