No one wants their wheels out of action, with no way to afford the repair bill. Things could get even stickier if you're not insured properly and you run into the back of someone's new Porsche Boxster. Here we explain the different insurance options and the questions you need to ask to get it right.
Compulsory insurance (aka green slips)
You need Compulsory Third Party (CTP) insurance before you can register your car in NSW.
CTP insurance - also known as a green slip - provides compensation for other people injured in an accident when you or the person driving your vehicle is at fault, and in certain circumstances, regardless of who was at fault.
Your CTP insurance covers:
- Your passengers
- Other people on the road such as drivers, passengers, pedestrians, cyclists, motorcyclists and passengers on the back of a motorcycle
- Injuries caused through the use of a trailer
- Children injured in a crash regardless of who was at fault.
It does not cover:
- Damage to property or other vehicles.
How to get a green slip
There are seven licensed CTP insurers in NSW. The price they charge depends on lots of factors, such as your crash record, your age, the kind of chariot you drive and other stuff.
It's a good idea to shop around for the best price, and a place to start is the Green Slip Calculator. Just answer the questions and you'll get a list of prices for all licensed CTP insurers. Individual insurers can also provide quotes online - insurance companies currently selling green slips are:
Your other options
Besides the green slip, you should consider what other insurance cover you want. There are different levels, from the basic property damage to comprehensive, which covers the biggest range of situations.
Before you start shopping around for prices, decide which level of cover you want. This will usually depend on the value of your car and how much you can afford. For example, if you have a bomb and are low on cash, comprehensive probably isn't for you. But even in this situation, you should consider at least third party property. The options are below.
Third Party Property Damage insurance
This covers you for damage caused by your vehicle to other vehicles or property, but doesn't cover your vehicle. Third party cover is usually taken out by someone with a car of relatively low value. It protects you from having to pay for the damage your car might do to a more valuable vehicle or other stuff belonging to someone else. Given that even a little dingle can cost thousands to repair, this insurance is definitely worth considering.
Third Party Fire and Theft
This cover has limited availability in NSW. It's designed to cover damage caused by your vehicle to someone else's vehicle or property, plus repair or replacement of your vehicle if it's stolen or damaged by fire. It adds another layer of protection, compared to Third Party Property insurance.
Comprehensive Motor Vehicle insurance
This covers the repair or replacement of your car if it's stolen, involved in a collision, suffers malicious damage or cops a caning from the weather. It also covers repair or replacement costs of other vehicles and property that are accidentally damaged by your vehicle.
Comprehensive insurance is usually chosen to cover vehicles that are in good condition. Insurers may not provide cover if a vehicle contains rust damage.
Naturally, as this is the most comprehensive cover, it is also the most expensive, but if you shop around you can often get a good deal.
Uninsured Motorist Extension (UME)
Some third party fire & theft, and third party property insurance policies offer this extension. It covers damage to your vehicle up to a set amount (usually around $3,000 to $5,000) if your vehicle is damaged by an uninsured vehicle. You must be considered to be not at fault by the insurer and you need to be able to provide the uninsured driver's name and address.
Why you pay more
Ever wondered why your car insurance costs more than your parents'? Insurers see young drivers as having a greater chance of being involved in a crash than older drivers, partly due to having less experience and taking bigger risks when driving.
Insurers also take into account whether you've been involved in a crash before and also your driving record, for example, whether you've been convicted for drink driving. This is just another reason to drive safely - it can save you heaps of money.
The right questions
When buying insurance you need to ask the right questions to make a good choice. The Insurance Council of Australia advises people to ask the following:
- Is my car insured for Market Value or Agreed Value?
- If the crash is my fault will my no claim bonus be affected?
- Will I have to pay my excess if I can nominate the other driver responsible for the loss or damage?
- What can I do to reduce my insurance premium?
- Is UME offered? (see explanation of UME above)
- Am I allowed to select my own repairer in the event of a crash? If so, is a guarantee provided on the repairs?
Insurance is a detailed business. Here are some things you should look out for:
- Full disclosure - when you take out a policy you'll need to give the insurance company full details about any past traffic offences, fines or criminal history. If you don't do this, you may not be covered.
- In your name - make sure you insure your vehicle in your own name. If you insure your vehicle using someone else's name (such as your parents), you may not be covered in the event of a claim.
- More than price - don't purchase insurance cover by price alone. Make sure the policy you're getting is the most suitable for your needs.
- Double check - check exactly what you're buying. Make sure your insurer provides you with all the information you feel you need about your policy.
- Read the policy - read your insurance policy as soon as you receive it. If you don't understand something, ask the company to explain.
- The most important thing - The Insurance Council says that the most important thing to know about motor vehicle insurance is that you are only covered up to the amount stated in your policy and that your insurance contract obliges you to take reasonable care to avoid crashes and theft.
The insurance world has its own language. Here's an explanation of a few choice words and phrases, so you always know what's going on.
- Premium: Annual charge for insurance cover.
- Claim: Reporting an incident to your insurance company to cover the potential costs to your vehicle or another person's property.
- Excess: Amount you pay towards a claim.
- No Claim Bonus: Amount of discount you earn annually if you don't have an at-fault accident.
- Not At-Fault: Another driver hits you. If you can identify the driver who caused the damage you will not be charged an excess or lose your no-claim bonus.
- Write-off: Your car is declared a write-off when it is so badly damaged that it would not be either safe or economical to repair (eg it will cost $6000 to repair your car, which is only worth $4000).
- Market Value: Where the insurer determines how much the car is worth in the market, usually using an industry guide. This guide, along with a number of other factors, determines the premium. The condition of your vehicle is also taken into account.
- Agreed Value: Where the insurer and the owner agree on the value of the vehicle at the time of taking out the policy. If the vehicle isn't new, this may be based on one of the industry guides. This figure, along with a number of other factors, determines the premium.