What does car insurance cover?
Depending on the level of cover you choose, your car insurance policy may provide cover for:
- Accidental damage to your vehicle (caused by you or a third party)
- Weather events, including storm damage, hail, fire & flood
- Towing costs
- Emergency repairs, transport and accommodation
- Theft or attempted theft
- Contents inside your car
- Your legal liability if your car accidentally causes damage to another person’s property
- Car accessories & modifications
- New-for-old replacement of your car (age limits usually apply)
- Car hire when you’re not at fault (optional)
Car insurance optional extras
Hire car after an accident
This optional extra provides you with a rental car if your vehicle is out of action after an incident (regardless of who’s at fault). Most insurers have a dollar limit per day for car hire and a time limit (usually for up to 21 days). Some providers offer unlimited days of car hire while yours is being repaired (or until it’s determined as a write-off).
Roadside assistance
Also known as breakdown cover, roadside assistance is a service that helps you get back on the road if your vehicle breaks down or won’t start. It can come in handy if you have a mechanical issue, a flat tyre, or need a jump start.
Windscreen and window glass damage
Pay no additional car insurance excess or reduce your excess for windscreen or window glass repairs if it’s the only damage to your car following an incident.
Choice of repairer
This optional benefit allows you to nominate your preferred repairer if your car is damaged in an accident or other insured event.
What is the excess in car insurance?
An excess is the out-of-pocket amount you must contribute when you make a claim on your car insurance. For example, if your standard excess is $800 and you make a repair claim for $5,000 your insurance provider would cover the remaining $4,200.
A standard excess under a car insurance policy will generally apply to the following insured events:
- Accidents where the insured driver was shown to be at fault
- Accidents where someone else covered by your policy was at fault
- Accidents where no one was at fault (e.g. if traffic lights are out of action)
- Accidents where the responsible party could not be identified
- Accidents involving your vehicle and an uninsured motorist was at fault
- If your car is damaged by fire or a weather-related event like floods
- If your vehicle is stolen or damaged in an attempted theft incident
You may have to pay additional excesses, depending on who was driving your vehicle. For example, if a young driver under 25 causes an accident while driving your car, you’d have to pay your standard excess, plus an additional young driver excess.
Your excess payable per claim or incident will be outlined in your Product Disclosure Statement (PDS), generally under the ‘Excess On Claims’ section. It will also be on your Certificate of Insurance.
How much does car insurance cost?
Car insurance can cost between $30-$250 per month, based on analysis of a selection of quotes obtained by Money.com.au. However, if you’re deemed high-risk by the insurer, your car insurance costs could be higher than this.
The amount you pay each month or year for your insurance is called a premium. Some insurers offer ways to lower your premium — for example, a discount if you sign up online or pay your premium yearly instead of monthly. Ultimately, the cost of your insurance will depend on factors specific to you and your policy.
What’s the cheapest car insurance option?
A basic level of cover like Third Party Property insurance is generally going to be cheaper than a Comprehensive policy. See below the annual difference between these options for a 2021 Hyundai i30. This cost comparison is based on quotes obtained from Allianz for a 35-year old male driver with no previous claims and no driver under 25 on the policy.
Factors that impact your car insurance premiums
1
Level of cover
You’ll typically pay more for Comprehensive cover than you will for a more basic third party car insurance policy. Adding drivers to your policy will also increase your premium.
2
Optional extras
Optional benefits like roadside assistance, optional hire car and windscreen protection typically come with an added premium.
3
Policy excess
Increasing your excess (the out-of-pocket sum you pay when you make a claim) can lower your premium and vice versa. Most insurers allow you to adjust your excess to increase or decrease your premium.
4
Age of car, make and model
Car insurance premiums also vary depending on your car's make, model, age and condition. How common the model is can be a factor too as it is generally cheaper to repair popular models (with easily accessible parts).
5
Value of car
As a general rule, the more valuable your car is, the more expensive it may be to insure (for example, it will cost the insurer more to replace or repair it).
6
What the car is used for
Your car insurance premium is usually cheaper if your car is mainly for private use. If your car is used for business, you'll generally pay more.
7
Whether the car is under finance
Some insurers (not all) may ask if your vehicle is under finance. This is because there can be additional administrative work involved if your car is written off with finance owing. In this situation, your insurance company will assess your car's market value and might ask for a letter from your lender to settle the outstanding car loan amount. If you own your car outright, the insurer would either pay you the claim amount or replace it at market value.
8
Annual mileage
Insurers calculate your risk based on how often you’re on the roads. The more you drive, the more chances you have of being involved in a car accident. According to Youi, insurers may call it a ‘probability factor’. Australian motorists drive an average of 15,000km per year, according to the ABS.
9
Your claims history
If you’ve made claims for at-fault accidents in the last few years, you may pay a higher premium. Some policies include a no-claim bonus, which means you pay less if you haven't made a recent at-fault claim.
10
Your age
Young drivers under 25 years old are statistically more likely to have a road accident than experienced drivers, and generally pay a higher car insurance premium for that reason.
11
Where your car is usually parked
If your car is parked in a garage or within the boundary of your property, instead of on the street, your premium will generally be lower.
12
Your location
Your address and postcode will also impact your premium. For example, if you live in a flood zone or densely populated area, your insurance provider may charge you more for cover.
We asked Australians to rank their most dreaded bills, and 15% of respondents cited car insurance premiums as their top concern. The ACT led the pack, with 21% of respondents naming car insurance as their most dreaded bill, followed by NSW at 17%, VIC at 15%, QLD at 14%, SA and WA at 13% each, TAS at 12%, and the NT at 9%.
Market value vs agreed value: How to choose
Market value or agreed value in car insurance refers to the amount your vehicle is insured for (and how much you’d receive in compensation) should it be written off in an accident or stolen.
Here’s the difference between the two:
Market value
Is the insurer’s estimate of your car’s selling price at the time of a claimable event like a road accident or theft.
Agreed value
Is a fixed dollar amount you negotiate with the insurer to insure your car for at the time you take out your policy.
Market value pros and cons
Insuring your car for market value means you’re covered for the fair cost of replacing your vehicle (in the event of a total loss) based on its current value in the market. Put simply, it's the amount you would pay to buy your car again today. It’s the most common coverage option since most people don’t exactly know the value of their car, according to Youi.
Pros
- Choosing to insure your vehicle for its market value generally reduces your premium. That’s because cars tend to depreciate over time, so the cost to reasonably replace a vehicle will typically be less than the initial market value of your car when you first got or renewed your car insurance.
Cons
- It gives you less certainty on your final settlement amount if your car is declared a total loss.
Your insurance provider will assess your car’s market value at the time of the loss or damage by considering factors like the make, model, age, mileage, and overall vehicle condition. Market value is generally the default coverage option when obtaining a car insurance quote.
Agreed value pros and cons
Insuring your car for an agreed value means your vehicle is covered for a pre-agreed amount decided by you and the insurer, regardless of your car’s depreciation during the policy term.
Pros
- In the event your car is declared a total loss, you’ll know exactly what settlement you would receive.
Cons
- Opting to cover your car for an agreed value often results in a higher premium. That’s because the compensation you would receive from the insurer could exceed the market value of your car.
When you get a car insurance quote, you will generally get an option to insure your vehicle for an agreed value. You’ll then be given a value range to choose from like, $20,000-$25,000, for example. It’s worth noting that some insurance providers will not insure vehicles older than 10 years old for an agreed value, such as Budget Direct and ING.
Market value vs agreed value cost comparison
Here’s an example of the difference in comprehensive car insurance premiums when insuring a vehicle for market value versus agreed value.
| Insurer | Annual premium for market value | Annual premium for agreed value |
|---|---|---|
Budget Direct | $781.36 | $862.15 |
ING | $789.17 | $870.76 |
NRMA | $1,068.08 | $1,060.14 |
Suncorp | $1,159.66 | $1,158.06 |
