Close

Why you should reconsider purchasing car insurance through a car dealer

If you have a car, then you should probably have car insurance too. No matter how safe you think you are, accidents happen, and if you don’t have insurance, you may be out of pocket more than you would like to be.

Of course, there are different levels of insurance and the level you decide to take out will largely depend on what kind of car you have and the type of protection you’d want for it.

Cars are becoming much more affordable and available in Australia, meaning people are spending more time on the roads1 – young Australians who maybe not be able to afford air travel are taking to the highways for lengthy road trips, and the net for employment opportunities is much wider given young people’s access to cars.1

Over the past several decades, car ownership has risen significantly from 1.4 million in 1955 to 13 million in 2013.1 And according to the Australian Bureau of Statistics, while young people (aged 18–24) were the least likely to drive to work or full-time study, the percentage is still pretty high, sitting at 63%.1 Given so many young people have access to vehicles and use them regularly, the need for insurance is obvious.

Why should you consider car insurance?

All it takes is one accident. With one accident, you could be out of pocket for thousands of dollars. Unless you have the right insurance of course.

When it comes to accidents and fatalities on the road, young people have a bad reputation. However, this is supported by recent statistics. According to Transport for NSW, fatal accidents caused by drivers aged 17 to 25 in the month of December was up from 82 to 106 between 2015 and 2016.2

The reason behind having insurance is simple. It may seem like a financial burden when you’re forking out all that money each month, but that amount will never be as expensive as having to deal with an at-fault car accident without insurance.

Breaking down the types

The cost of car insurance depends on a number of factors, the main two being the level of risk and your age. For young Australians, there is a premium for drivers under 25 years old. If you are using a family car, an extra cost will be added to the policy to accommodate your age. The cost is also largely dependent on which cover you take out.3 And this is where it can become confusing. So here’s some help understanding all the jargon.

  Damage to your car Damage to other people’s property Damage or loss caused by theft of your car Injuries or death to other people in an accident
Compulsory Third Party (CTP) No No No Yes
Third party property No Yes No N/A (covered by CTP)
Third party property, fire and theft No Yes Yes N/A (covered by CTP)
Comprehensive Yes Yes Yes N/A (covered by CTP)

Compulsory third party (CTP) is just that – compulsory. If your car is registered, you already have CTP (otherwise known as green slip) insurance.3 But remember, this doesn’t cover you for the property of a third party. So, if you hit another car, not having third party property could mean a very large bill, especially if it’s a luxury car.3

For drivers under 25, it’s recommended to get third party property at the very least.3 This will cover you for the damage to another car and may also include limited cover for damage to your own car by an uninsured driver, although this will depend on your insurer.3 It’s the cheapest option for young drivers.4

However, if you really can’t live without a set of wheels, comprehensive could be the best for you. It covers the most, including the cost of crash repairs or replacing your car, regardless of who was at fault.4

Factors that can impact your insurance rates

Here are some factors that can impact your car insurance premium:

  • Your age, the state you live, and the type of car you drive.4
  • You could save up to 10%5 by purchasing online through direct car insurer Real Insurance.
  • If it’s your car and you alone will be driving it, there may be a discount option.4 By restricting the use of your car to nominated drivers, you are restricting the risk, which is why some insurers are willing to offer a discount to your premium.4 Of course, ensuring that you and any other nominated people are the only ones to drive the car is essential in this case. There’s nothing worse than letting someone else drive and getting into an accident because it’s you who will suffer financially.
  • Research what other possible discounts may be available. Some insurers will offer a discount if you have other policies with them.6 In terms of cars, an engine mobiliser or an alarm may also attract discounts.6 For young drivers, taking a skilled driver’s course may also help.6
  • Consider a Pay As You Drive insurance policy, where you only pay for the amount of driving that you actually plan to drive.7

Some traps

Of course, just like there are discounts available, here are some of the traps to be wary of:

  • While increasing your excess may lower your premium and save you money, it may not actually be worth it.4 A higher excess may mean that it’s not worth your while claiming on smaller repair jobs which means you’d be out of pocket.
  • Be mindful of add-on insurance by car dealers. While lenders can insist that you take out a certain level of insurance in order to loan the money, they cannot tell you which insurance company to go to.3

Finally, remember, if it sounds too good to be true, it probably is.

Get a no-obligation quote from a direct car insurer who understands that young drivers need a real insurance policy. Contact Real Insurance on 13 19 48 or apply for a car insurance quote online.

  1. http://www.abs.gov.au/AUSSTATS/abs@.nsf/Lookup/4102.0Main+Features40July+2013Australian Bureau of Statistics
  2. http://roadsafety.transport.nsw.gov.au/downloads/road-fatalities-2106.pdfTransport for New South Wales
  3. https://www.moneysmart.gov.au/insurance/car-insurance/young-drivers Moneysmart
  4. https://www.choice.com.au/money/insurance/car/buying-guides/car-insurance Choice
  5. 10% discount consists of 5% saving for online applicants, savings in first year only. Up to 5% off to exclude drivers under 25. Minimum premiums may reduce savings discount.
  6. https://www.canstar.com.au/car-insurance/ten-ways-to-cut-car-insurance-costs/https://www.canstar.com.au/car-insurance/ten-ways-to-cut-car-insurance-costs/
  7. https://www.realinsurance.com.au/car-insurance/pay-as-you-drive Real Insurance

Real Insurance is an award-winning provider of car insurance.

Car Insurance Request a Free Quote