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4 questions to ask before dropping your comprehensive car insurance

Two people exchange insurance information using their mobile phones after an accident on the road

Wondering whether your comprehensive car insurance is worth it? Before you ditch your policy for a cheaper option with less coverage (i.e. CTP or third-party), it's probably worth a refresher on why comprehensive car insurance is king. 

What does comprehensive car insurance cover?

While comprehensive car insurance policies can differ, you're typically covered for: 

  • Damage to someone else’s car or property
  • Damage to your own car
  • Theft
  • Fires
  • Floods
  • Storms
  • Earthquakes
  • and more.  

If you’re still not convinced about the value of your comprehensive policy, we strongly suggest you ask yourself the following questions before you decide to downgrade your car insurance cover:

What is the value of your car?

A woman's hand touches a dent in the side of her car door.

If the annual cost of your car insurance is less than the value of your car, it could be worth keeping your comprehensive policy.

It's true that cars depreciate in value each year. So, you might ask yourself whether paying your car insurance premium is still worth it.

The answer really depends on your wheels, but a good rule of thumb is: until the sum of your annual premium and excess outweigh that of your car's value, it's probably still in your best interests to keep your comprehensive policy – especially if you can’t answer question 2 with a resounding “yes!”.

Can you afford to replace your car or live without it?

A man and woman exchange insurance details from behind the scene of a minor car accident, where one car rear-ended another

If you can't afford to replace your car, or live without one, then it could be worth holding onto your comprehensive car insurance policy. 

If it's possible for you to arrange other modes of transport to get to work, or if your car's more of a luxury transportation device for you, then you might consider dropping your comprehensive policy.

However, if you don’t have a sizeable sum of cash laying around or if you absolutely need your car for family or work purposes, this probably isn’t an option.

If you ditch your comprehensive car insurance, then get in an accident, you could be without your car until the necessary funds become available to fix or replace it.

Do you owe money on your car?

Two toy cars in front of a loan manager calculating the cost of a car loan

If you're still paying your car off, then it could be worth keeping your comprehensive policy in case you're in an accident. 

Did you have to externally finance the purchase of your car? You might not be able to drop your comprehensive car insurance without voiding the conditions of your loan. So, check with your car loan provider before taking steps to cancel your comprehensive policy.

Even if that’s not the case, dropping comprehensive car insurance with a pricey car loan hanging over your head might not be the smartest move.

If you find yourself in an at-fault car accident, then you could be left with the bill to repair or replace your car as well as the outstanding loan.

So, consider holding onto your comprehensive car insurance if you’ve got loan repayments to keep up with.

What are your car insurance alternatives?

A happy man hugs his car

If you’ve gotten this far and are still considering making the switch to a more budget-friendly car insurance option, then you’ll want to know exactly what your options are.

If you’re not wanting to insure your car comprehensively anymore, you generally have two options: third party property and third party fire and theft.

Third party property

Consider this as the entry-level car insurance option.

It will cover you for the damages you cause to other people’s property, but it could be pretty minimal cover (usually starting around $5,000). If you write-off someone else’s car, you may have to pay the difference out of pocket to replace it as well as managing your own repairs or replacement.

Third party fire and theft

Car insurance companies usually give you the option to add fire and theft cover to your third party insurance for a few extra bucks a month. This gives you added security against a range of circumstances, depending on your provider and what you select.

While this level of car insurance will cover you against fire and theft, it probably won’t cover you for things like vandalism or storm damage – so check the fine print.

Across all these coverage levels, there are some things generally not included. So before you make any changes to your policy, make sure you know what isn't covered by car insurance in Australia.

And don't forget you'll also need to take out compulsory third party (CTP) insurance to legally drive in Australia. This essential level of car insurance covers you for costs related to injuries and deaths caused by road accidents.

If after reading this you’re feeling a little uneasy at the thought of going without your comprehensive car insurance, it is probably best to stick with a higher level of cover. But remember to shop around using Mozo’s car insurance comparison page.

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    Olivia Gee
    Olivia Gee
    Money writer

    Olivia has two years experience as a finance journalist, working across insurance, property and banking.

    Jack Dona
    Jack Dona
    RG146
    Money writer

    Jack is degree-qualified in communications and creative writing, with a talent for simplifying financial jargon. His approach helps consumers make better decisions. Jack is RG146 certified in generic knowledge and uses his flair to make finance interestin

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