Introduction
You've passed your test, got your licence, and maybe you've even bought your first car. The final hurdle to getting on the road is sorting out car insurance. For new drivers, this can be a confusing and expensive process. What do all the terms mean? What type of cover do you actually need? And why does it cost so much?
This guide will demystify car insurance for you. We'll break down the different types of cover, explain the jargon, and give you practical tips on how to find the right policy without breaking the bank.
The Bare Minimum: Compulsory Third Party (CTP) Insurance
Before you can register a car in any Australian state or territory, you must have Compulsory Third Party (CTP) insurance.
- What it is: CTP (also known as a "Green Slip" in NSW) covers your liability for injuries or deaths caused to other people in a car accident where you are at fault.
- What it doesn't cover: CTP does not cover damage to any property, including your car or anyone else's.
In most states, CTP is included in your vehicle registration fee. However, in NSW, QLD, and the ACT, you must purchase it separately before you can register your car.
Beyond CTP: Protecting Yourself from Property Damage
Since CTP only covers injuries to people, you need additional insurance to protect yourself from the enormous cost of repairing or replacing vehicles and property. Here are your options, from basic to full coverage.
1. Third Party Property Damage
- What it covers: This is the most basic level of optional insurance. It covers the cost of damage you cause to other people's property (e.g., their car, their fence).
- What it doesn't cover: It does not cover any damage to your own car.
- Who it's for: A good option if your car isn't worth much and you could afford to replace it yourself, but you want protection from a massive bill if you hit an expensive vehicle.
2. Third Party, Fire and Theft
- What it covers: This includes everything in Third Party Property Damage, plus it covers your own car if it is stolen or damaged by fire.
- What it doesn't cover: It still doesn't cover damage to your own car from an accident.
- Who it's for: A good middle-ground option if you want a bit more protection for your own vehicle without the cost of a comprehensive policy.
3. Comprehensive Car Insurance
- What it covers: This is the highest level of cover. It includes everything from the lower tiers, but most importantly, it covers damage to your own car from an accident, regardless of who was at fault. It also covers you for theft, fire, and damage from weather events like hail or storms.
- Who it's for: This is the recommended choice for most drivers, especially if your car is new or valuable and you couldn't afford to repair or replace it out of pocket.
Key Insurance Terms Explained
Insurance documents are full of jargon. Here are the key terms you need to know:
- Premium: The amount you pay for your insurance policy, either monthly or annually.
- Excess: The fixed amount you must pay out-of-pocket when you make a claim. For example, if your excess is $800 and the repair bill is $3,000, you pay the first $800 and the insurer pays the remaining $2,200.
- Age/Inexperienced Driver Excess: This is an additional excess that insurers charge for drivers under 25 or those who have held their licence for less than two years. It's one of the main reasons insurance is more expensive for new drivers.
- No Claim Bonus (NCB): A discount on your premium that you earn for each year you go without making a claim. It rewards safe driving.
Why is Insurance So Expensive for New Drivers?
Insurers base their prices on risk, and statistically, young and inexperienced drivers are more likely to be involved in accidents. The higher premiums and additional excesses reflect this increased risk.
6 Tips for Lowering Your Car Insurance Premium
While your premium may be high, there are ways to reduce the cost:
- Choose Your Car Wisely: A safe, reliable, and less powerful car will be cheaper to insure than a high-performance or modified vehicle.
- Increase Your Excess: Opting for a higher voluntary excess will lower your premium. Just make sure you can afford to pay that excess if you need to make a claim.
- Pay Annually: Paying your premium in one go is often cheaper than paying in monthly instalments.
- Be Named on a Family Policy: It can sometimes be cheaper to be listed as a named driver on a parent's policy. However, be honest about who the main driver of the car is, otherwise a future claim could be rejected.
- Limit Your Driving: Some insurers offer lower premiums for drivers who drive less than a certain number of kilometres per year.
- Shop Around: Don't just accept the first quote you get. Use online comparison websites to compare prices from different insurers.
Conclusion
Car insurance is a legal necessity and a financial lifesaver. While it can seem complex and costly for a new driver, understanding the basics is the first step to getting the right cover. By choosing the appropriate level of protection, shopping around for the best deal, and driving safely, you can ensure you're protected on the road without overpaying.