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Car Insurance Explained

Can’t make heads or tails of car insurance? We lift the veil from car insurance so you can make an informed decision.

The Basics – Types of Insurance Coverage

When you’re in the market for a new car, you will have to pay compulsory third party insurance (CTP) along with your registration. This might be included with registration or available on the open market. This covers you for accidents in which you inflict injuries on other people. It does not cover you for property damage.

Third party property damage (3PP) insurance is a product that does cover you for any damage you cause to another car or property. It tends to cover legal costs, limited damage by uninsured drivers and even a hire vehicle. It does not cover damage incurred by your own car.

You can also buy premiums one-step above 3PP, with added fire and theft cover.

Comprehensive car insurance is the “complete” cover – it covers damaged caused by you to third parties and to your own car, regardless of who is at fault. Policies can also include emergency repairs, hire cars, hotel stays and contents. This varies by policy, insurer and premium.

You can also purchase additional cover such as No Claim Bonus, choice of repairer and new for old replacement.

For people buying a car under finance, especially those with bad credit, will most often be required to take out a comprehensive car insurance policy. Read more information about it on bad credit car loans.

The Nitty Gritty – Excess, Payments and Car Valuation

Insurance companies calculate how much you’re entitled to if your car is stolen or written-off. They use either an agreed value or market value.

Agreed value is a number that you and your insurance company negotiate, valid until your next renewal date.

Market value is a number that represents how much your car might fetch if you sold it today. This takes into account existing damage, make, model, year and mechanical condition. Note that the market value is usually the lowest possible value in the eyes of your insurer.

When you claim, you will have to pay what’s called a basic excess. This means you pay a small fee (relative to the entire claim) to access a payout to either party. This ranges from about $500 to $800. If your claim is worth $2,000, you are effectively paying the first $500. Increasing your excess (known as a voluntary excess) lowers your premium. If you are under 25 or inexperienced, you may have to pay an age/inexperienced driver excess.

The Hard Print – Claiming

When you’re in an accident and need to claim, you should gather as much information as possible before initiating the claiming process. You should report all details to your insurer as soon as you can. Take photos (if possible) and get the details of any third parties or witnesses. Some insurance companies provide smartphone apps to assist you with this process. You may have to complete a formal claim declaration, which is a legal document. You should always be honest with your insurer, as insurers may refuse your claim if information is lacking, incomplete or untruthful.


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