How Much is Car Insurance?

Find out about what influences car insurance premiums and how you could keep costs down.

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, updated on February 15th, 2024       

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Car Insurance Banner - Smiling young woman giving her friend a lift after buying car insurance.

Car insurance is an important consideration for drivers across Australia, providing protection in the event of accidents, theft or damage to your vehicle. However, how much you pay for car insurance can vary significantly depending on a wide range of variables.

In this comprehensive guide, we explore the factors that influence insurance premiums, the different types of cover available and how you could save on your car insurance costs. Find out more with us today.

What factors influence how much car insurance costs?

When you take out car insurance, insurance providers calculate your rates based on a variety of risks and other factors. This may include:

Vehicle type and age

The make, model, age and value of your car can affect your premium. Generally, high-end or luxury vehicles tend to have higher insurance premiums due to their higher repair and replacement costs, while standard car models and older vehicles may have lower premiums since they are typically less expensive to repair or replace.

Driver’s age and experience

Age and driving experience can both affect insurance premiums. Younger drivers, particularly those under 25, often face higher premiums due to their statistically higher risk of being involved in accidents. In contrast, more experienced drivers with a long history of safe driving and few or no previous claims are generally considered lower risk, resulting in lower premiums.

Car usage

The way you use your vehicle can also impact insurance premiums. Insurance providers may consider factors such as how often you drive and how far, whether you use your car for business purposes or your safety record. Higher mileage or using the vehicle for business purposes may lead to higher premiums, as it increases the exposure to potential accidents.

Location

The area where your vehicle is primarily kept and driven can play a role in determining insurance costs. Insurance providers take into account factors such as crime rates, traffic congestion and the likelihood of accidents in the area. As such, if you live in an area with higher crime rates or a higher number of accidents, you may face higher insurance premiums. Similarly, densely populated urban areas often have more traffic congestion, increasing the risk of accidents and influencing insurance rates.

Type of insurance policy

The specific type of policy you choose also affects the cost. For example, comprehensive coverage, which can offer more extensive protection for your vehicle and other parties involved in an accident, generally has a higher premium than third party property damage or third party fire and theft cover.

What are the different types of car insurance?

Understanding the different types of car insurance can help you make an informed decision about the coverage that best suits your needs. In Australia, there are four levels of cover:

  • Compulsory Third Party (CTP): CTP insurance, also known as Green Slip insurance in New South Wales, is a mandatory requirement for all registered vehicles in Australia and a cost that you must factor in when buying a car. Limited in scope, it can provide cover for compensation if your vehicle injures or kills another road user. However, it doesn’t cover damage to vehicles or other property.
  • Third party property damage (TPPD): TPPD insurance can cover the costs of damage caused by your vehicle to someone else’s property, such as vehicles, buildings or other property, but doesn't cover damage to your own vehicle. Although cover isn’t extensive, these premiums are usually among the cheapest available.
  • Third party fire and theft (TPFT): TPFT insurance is designed to provide coverage for damage caused by your vehicle to other people's property, as well as protection against fire damage and theft of your car. It doesn't cover damage to your vehicle in other circumstances, such as at-fault accidents. However, premiums are usually lower than a comprehensive policy.
  • Comprehensive: comprehensive insurance is the highest level of coverage available for your vehicle. It can provide protection for damage to your vehicle due to collision, fire, theft and extreme weather (in some cases) as well as damage caused to other vehicles or property. It may also offer additional benefits like roadside assistance. This type of insurance offers the most protection but is also generally the most expensive option.

Please note that CTP insurance is compulsory for all drivers, whereas additional levels of cover are optional and available at a further cost.

How can I save on my car insurance premiums?

  • Drive safely – and less: maintaining a safe driving record, such as avoiding driving offences, accidents and insurance claims, can have a positive impact on your insurance costs. Many insurers offer safe driver discounts or no-claims bonuses for policyholders with a clean driving history. Additionally, reducing your overall mileage and driving less can also help lower your premiums.
  • Restrict drivers: limiting the number of drivers listed on your policy to only those who regularly drive your vehicle can help reduce your insurance costs. This can be particularly useful if there are higher-risk drivers, such as those who are young or inexperienced, in your household. By restricting the number of drivers, you may decrease the overall risk associated with your policy.
  • Choose a higher excess: opting for a higher excess means you'll have to pay more out of pocket when making a claim. However, it can help lower your premiums. Consider your financial situation and choose an excess amount that you can comfortably afford in case you need to make a claim.
  • Park securely: parking your vehicle in a secure location, such as a locked garage or well-lit area, can reduce the risk of theft or damage. Insurers may offer discounts for vehicles that are parked safely overnight, as it lowers the risk of potential incidents that vehicles parked on the road may be exposed to.
  • Choose the right level of cover: assess your requirements to make sure you don’t pay for coverage you don’t need. For example, you might be paying for benefits you don’t use or for a level of protection that is unnecessary for your vehicle.
  • Shop around: take the time to shop around and compare car insurance rates from multiple insurance providers. You can do this in using online comparison tools, which provide instant quotes from leading providers.

What other potential costs do I need to be aware of?

While car insurance can help protect you from many potential expenses, there are certain costs that it may not automatically cover. These may be:

  • Car excess costs: in the event of an accident or claim, you may be required to pay an excess amount as a contribution towards the repair or replacement costs. This excess can vary depending on your insurance policy and the specific circumstances of the incident. It’s essential to review your policy documents to understand the excess amount applicable to your coverage.
  • Uninsured costs: not all costs may be covered by your insurance policy, such as routine maintenance, general wear and tear or mechanical breakdowns. It’s your responsibility to maintain your vehicle and cover these costs separately.
  • Accessories or modifications: if you've added non-standard accessories or modifications to your vehicle, such as custom rims or an upgraded sound system, they may not always be covered under a standard insurance policy. However, some insurers may automatically cover all legal modifications and accessories, so it’s crucial to check with your insurer to find out whether yours can be included in your policy.
  • Towing and emergency services: it’s important to familiarise yourself with the terms and conditions of your policy to understand the extent of roadside assistance coverage provided. While some comprehensive policies may include roadside assistance or towing services, in other cases, these services may incur additional costs. Limits will also usually apply to these, such as callout and towing limits per year.
  • Rental vehicle coverage: if your vehicle is damaged and requires repairs, your insurance policy may include a rental vehicle to provide temporary transportation. However, this coverage may have limitations such as a specified daily allowance or a maximum duration. It’s essential to be aware of these restrictions to avoid unexpected out-of-pocket expenses.

How do I find the best car insurance policy for me?

Every driver has different requirements, so the best car insurance policy for you may be entirely different from what another person may consider the best for them. Before you take out insurance, it’s important to assess your needs to determine what sort of coverage would suit your circumstances. Consider factors such as the value of your car, your budget and your risk tolerance, and avoid paying for coverage you don’t require.

The next step is to compare insurance options. You can compare car insurance quotes in minutes online, helping you find the best possible deal from trusted lenders.

Common questions about the cost of car insurance

Is it worth taking out car insurance?

In Australia, it’s illegal to drive a car without CTP insurance, and doing so can result in significant penalties, including fines, licence suspension and vehicle seizure. The other levels of insurance – TPPD, TPFT and comprehensive – are optional, but provide additional cover and can help safeguard you against the associated costs of the repair or replacement of your vehicle and other people’s property (provided the event qualifies for coverage). The type of cover that suits depends on your circumstances, so it's important to assess your requirements and budget to determine the appropriate level of insurance.

Can I get a lower premium if I pay my car insurance annually instead of monthly?

Some insurance providers will charge less for policyholders who opt for annual rather than monthly payments. By paying the full premium upfront, you may be able to save on administrative fees and instalment charges associated with monthly payments. However, it’s important to check with your insurance provider to understand the specific discounts and benefits available for annual payments.

Why does my car insurance premium change each year?

Car insurance premiums may increase each time your policy’s up for renewal, even if your driving habits are the same and you’ve not made any claims. Reasons for this include:

  • Changes in circumstances, such as moving house
  • More risks on the road
  • Inflation
  • An increase in the insurer’s business costs, which are passed to the customer

 

Insurers are required to notify policyholders about any premium adjustments, but if you aren’t happy with the rate you're offered, you can compare and switch policies.

Does my driving record affect my car insurance cost?

Your driving record can significantly impact your car insurance cost. When you take out a policy, insurance providers assess your driving history, including any traffic offences or accidents, and adjust premiums accordingly to reflect the level of risk you pose as a driver. A clean driving record with few or no incidents indicates a lower risk, often leading to lower premiums. On the other hand, a history of accidents or traffic violations suggests a higher risk, resulting in higher insurance costs.

Will my insurance premium increase if I make a claim?

A driver’s claim history is a crucial factor affecting insurance costs. If a driver has a history of making multiple claims, insurers may consider them higher risk and, subsequently, increase their premiums. Maintaining a clean claim history can lead to lower insurance costs in the form of a no-claim bonus.

Can I lower my premium if I complete a defensive driving course?

Your insurer may offer a discount if you’ve completed a defensive driving course. These programs are designed to enhance your driving skills and teach you techniques to anticipate and respond to potential hazards on the road. Voluntarily completing a recognised defensive driving course helps demonstrate to insurers that you're committed to improving your driving abilities and reducing the risk of accidents, which can lead to you being offered reduced premiums.

How can I reduce my car insurance costs as a new driver?

Young and inexperienced drivers generally face higher car insurance premiums as insurers perceive them as higher risk. However, there are ways to reduce costs, such as:

  • Using your parents’ car
  • Buying a cheap car
  • Taking a defensive driving course
  • Driving less
Can I get a discount if I have multiple vehicles insured under the same policy?

Many insurance providers in Australia offer a discount if you have multiple vehicles insured under the same policy. Keep in mind that eligibility criteria, such as all cars being registered to the same address or owned by the same person, may apply, so it’s important to check with your insurance provider.

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