Car insurance

Where Are You Going?

Whether you're using them for Sunday drives, commuting to and from work/school, road trips or just driving around; cars play a really big part in how we get around. For most people, their first car is the most expensive asset they have to their name and most cars don’t get more valuable with time…

Whether you’re going to buy your own car one day, borrow mum and dad's in the meantime or ride in the backseat of the family car, there are a lot of things we need to know about buying and owning a car.

The cost of purchase

There’s more to it than that price tag at the car yard.

So what do we need to be aware of?

• Purchase price: how much the person selling the car is asking for. Do you need a loan?
• Registration: the cost of registering the car with the NSW Roads and Maritime Services (formerly the RTA) so it can be driven on Australian roads.
• Stamp Duty: a payment imposed by the state government for purchasing a new car.
• Insurance: cover provided by an insurance broker (or institution) that will pay for some or all of the costs involved in an incident (depending on what type of insurance).

The bottom line is to figure out how much money we have to spend! Consider what kind of car you’re looking for and start saving.

Insurance

Whenever you get into a car, there’s always some risk involved. To help with the consequences of an incident (both medical and financial), you can choose to purchase certain types of insurance. However, to operate any car in Australia every driver MUST have a minimum level of insurance, known as Compulsory Third Party (CTP) insurance or a ‘Green Slip’. This covers the cost of any injury you might cause to someone else from your driving.

Optional/extra forms of insurance include:

• Comprehensive: provides full cover for any accidental loss or damage to your car and other people’s property, regardless of who was at fault. Whilst this is usually the best option, it’s the most expensive.
• Third Party property damage: covers damage you cause to other people’s property but not damage to your vehicle. Some insurers provide options such as cover for accidental damage to your car by someone who is uninsured or fire and theft of your car.

When it comes to choosing insurance, above all its best to know how you’ll use your car. A number of significant factors impact the price of different insurance premiums (the amount you pay for the cover).

Factors affecting car insurance premiums:

• Type of vehicle: sports cars, luxury cars and other cars that are more commonly the result of theft or vandalism attract a higher premium.

• Age of the driver: age and experience will attract different premiums. Usually, under 25’s and over 65’s attract the highest premiums, with 35-50 year olds typically having the lowest premium. Why?

• Driving and insurance claim history: safer drivers who have not received any penalties or required to claim insurance for incidents will usually have a lower premium than others.

• Location of the car’s garage: insurance agencies have data that rates locations based on thefts, accidents, number of claims filed and the average cost of claims. This has a huge impact on the cost of premiums and is usually standard to everyone in that postcode.

Take a look at this table which matches the difference in the average premium price for CTP Green Slips for different age groups at a few different locations in NSW. The car is a 2003 model Holden Commodore…

*Prices collected from various green slip calculators. Average premium price indicates the average quoted premium from 7 different insurers.

*These prices do not reflect any discounts, no claim bonuses, previous insurance, driver experience etc.

The range in prices for the CTP insurance is closely linked to a few variables such as accident statistics, claims for personal injury etc.

Notice that the three Sydney suburbs (Cronulla, Mosman and Bankstown) all have the same premium price whereas outer suburbs away from Sydney generally become cheaper. Why do you think this is so?

For Comprehensive Car Insurance (or other non-compulsory insurances such as Third Party Property Damage), the range in premium price varies in a different way, with postcodes in various areas of Sydney being subject to different premium prices. Let’s discuss why.

Remember that insurance agencies rate suburbs based on theft statistics, accident statistics and the number/cost of insurance claims in that area.