When you've just shelled out X amount of hard earned dollars on a new car and then added all the dreary associated fees and Government charges, there usually isn't much left over: most of us have already emptied out the piggy banks. But there's another significant cost that warrants some major thought. Car insurance. Do you need it - and, if so, what type?
First up you need, yes NEED third party property coverage. For some reason (in Australia at least) this is still optional and can be paid in addition to the 3rd party bodily injury insurance you get when you register a vehicle. Third party property will protect you if you end up at fault in an accident and cause damage to someone else's property (whether it be a another car, a fence, or whatever). The insurance company takes care of all of the costs associated in fixing up the damage you caused. Depending on the age of the driver, the type of car and the area where it's stored, the average cost is around A$150 for this type of coverage - it's well worth it. Just think, replacing the rear bumper and tail lights of some cars can cost over A$4000 alone. And if you don't have that cash available to pay for the damage at the time you might need to get a bank loan - so it can get ultra-expensive!
The next level is fire and theft insurance - which is an option offered by most insurance companies we've come across. As the name implies, this gives you protection against fire and theft. This is paid in addition to 3rd party property, and a typical cost is around A$800 p.a. - but note that some companies have bars against V8s and turbos. Some also have value ceilings of around A$5000. With this type coverage, at least if you have to park your car in a seedy location you don't have to sweat it out so much. If the car does disappear, you'll get back either the market or agreed value of the car.
The safest type of insurance for a car is comprehensive coverage. This includes 3rd party property, fire and theft, plus the costs of any repairs needed to your car. It's only when you have this type of insurance when you can (supposedly) have total piece of mind. Shopping around for the right price for comprehensive insurance can pay huge dividends too. Premiums and excess amounts can vary massively and, if you're tight for money, this can prove to be the difference between having comprehensive insurance or not.
The annual premium amount you pay is determined by the pricing structure selected by any given insurance company. For example, some companies quote premiums based on the car's storage area, type of car, previous insurance claims, whether or not a security system is fitted and driver age. Others (in addition to this) make a decision on price depending on the car's application (business or recreation), the expected number of kilometres and the person's driving record. Sports cars, turbos, V8s and anything hi-performance or modified are categorised as "high risk", which means you'll pay more to insure them (damn it!).
OK - so when is it appropriate to take the expensive option of comprehensive insurance? No, it's not when we can afford to pay it, but when we can't afford to lose the car and the financial bundle that it represents. It's a matter of "protecting your investment". If your car is one that's relatively expensive to fix or replace, then having comprehensive coverage can potentially pay itself off quite quickly (if something does go wrong).
Remember though, most insurance companies aren't like charity funds. If you ever need to make a claim, you have to be 100% sure you've told the truth about everything on your car's insurance details. For example, forgetting to mention an aftermarket set of wheels may well void coverage if the car gets stolen. If you've told a little porky pie, it's all too easy for the company to wriggle out of coughing up the loot. It's just not worth trying to save those few (relatively speaking) dollars on the premium. What about when something bad happens? You'll be paying for it tenfold...
Speaking of diddling car insurance companies, here's a funny little story for ya. I couldn't help but have a chuckle while thumbing through a local newspaper the other weekend. The light reading page 3 story that caught my eye told the saga of a young lad whose father had lent him his business car for recreational purposes. But it seems our 21 year old mover and shaker wasn't too keen on the car - a 1993 Ford Telstar Ghia. It was too old and cheap for him to be seen dead in.
So what was the solution? Well somehow, our man persuaded a friend to take the car and drive it square into the middle of a city river! The plan was to cash in on a dodgy insurance claim and - with a little luck - that money would be spent on a newer, more desirable car! So after the car went in for its bath (which was photographed fully immersed from the c-pillars forward!), the lad made a false report to the police, claiming that the car had been stolen. It was to be a watertight plan - or so he thought (sorry 'bout the pun!).
However, after only a few hours of investigation, the local police were onto the scam and the young man was in - as the article said - "hot water". A few months later, it was off to court where he copped a couple of smallish fines and was ordered to pay back several thousand dollars to his father's company as reimbursement.
No doubt, our boy would've been a popular member of the family! Dinner time conversation would've been pretty interesting too... hehehe.
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