Car Insurance Guide
Newcastle Herald
Monday February 4, 2002
MOST of us are aware that one of the costs of owning a car is insurance. If you don't take out any insurance you could find yourself with a hefty bill in the event of an accident.
Here's a guide to help you decide what you need. While there are insurance policies to cover a number of scenarios, the three main types of car insurance are: compulsory third party; third party property; and comprehensive.
COMPULSORY THIRD PARTYA GREEN slip is the colloquial name for compulsory third party (CTP) insurance. You cannot legally drive a car without CTP insurance, which you get when you register your car.
It is this insurance that covers you or any other driver against a claim for personal injury or death that may have been caused by your car, assuming it was your car that was at fault.
Costs for CTP insurance vary, but generally it will cost you upwards of $230, and in some States, such as NSW, it can cost more than $300.
THIRD PARTY PROPERTYIN addition to CTP insurance, the minimum insurance you should take out is third party property. This insurance will cover you should your car be responsible for damage to another one.
While this insurance does not cover any damage to your car, it should pay for the damage to any other car involved in the accident. Without insurance, you could be liable for many thousands of dollars and still have your own car written off.
If, however, you were not at fault, some insurance companies such as the NRMA will pay you up to $3000 damages to your own car if the other driver is uninsured. This is detailed in the Uninsured Motorist Extension.
COMPREHENSIVEIF your car is new or you have spent upwards of $10,000 to $15,000 buying it, think twice about whether third party property insurance is adequate.
You'll have to pay for damage to your own car, and if your car is a writeoff $15,000 is a lot of money to lose. Comprehensive insurance may be the better option.
Comprehensive insurance will cover you for damage to your own car and damage to other people's property. It's not cheap, but if you shop around you can get some reasonable deals.
If you have finance on your car, your lender will probably ask you to have comprehensive insurance to protect their interest in case the car becomes written off.
GAP INSURANCECAR dealers often offer gap insurance when you take out finance.
If your car is written off, gap insurance makes up the difference between what your insurance company pays the finance house and what you still owe.
Often the car dealer only deals with one insurance group and may be on commission. As a result, you might be sold more than you need at a price above that of other insurers, so remember to shop around.
MECHANICAL FAILURE INSURANCEIF you buy a second-hand car and find you've been sold a lemon, mechanical warranty insurance may prove invaluable.
Such insurance covers the failure of any part of the engine, transmission or differential drive.
The vehicle must be less than a certain age, maybe five or 10 years old, and usually have limited kilometres on the clock, rarely more than 180,000km. It is ideally suited to cars where the manufacturer's warranty has run out.
SWITCHING INSURERSIN the past, people were reluctant to switch between insurers because it meant they could lose their no-claims bonus.
The no-claims bonus can often be a 60% discount on the premium if you haven't made a claim for a specified number of years.
However, most insurance companies these days allow you to make the switch with no loss on your bonus. Again, don't forget to check. This article is based on the first step of the Car Insurance Guide found on the MoneyManager site at www.moneymanager.com.au. Log onto the guide for the other steps.
© 2002 Newcastle Herald
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