Is comprehensive car insurance worth it?

Is comprehensive car insurance worth it? We think it is in most cases. But let’s peek behind the curtain and find out when it really shines, and when it may be better to go with a lower level of cover. 

We'll unravel this through four essential questions you should ask yourself before passing on that comprehensive policy.

Before we get into our four questions, let’s do a quick refresher on what comprehensive car insurance covers:

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

For all intents and purposes, it’s the only level of cover that protects your car from weather-related events and accidents you cause. Third-party fire and theft will cover you for fire and theft, but that’s barely a blip on the damage radar.

So 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:

If replacing your car out of your own pocket would be a huge financial hit, opting for comprehensive insurance is typically wise.

This becomes less necessary the lower your car is worth. On average, Australians pay around $1,400 for car insurance. So if your car is worth, say, $3000 or less, you may be safe going with a lower insurance option.

But for cars valued above that, especially if replacing it would strain your finances, comprehensive coverage is often the best choice.

These are just examples and your situation may be different. At the end of the day, whether comprehensive car insurance is worth it or not depends on your unique circumstances and comfort level.

If you can't afford to replace your car, or live without one, then comprehensive car insurance is probably worth it. 

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 sizable sum of cash lying around or if you absolutely need your car for family or work purposes, this probably isn’t an option.

If you go with a lower form of cover and then get in an accident, you could be without your car until the necessary funds become available to fix or replace it.

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 if you have loan repayments to keep up with, it’s probably worth getting comprehensive car insurance.

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 third-party property as the entry-level car insurance option. It covers you for any damages you make to someone else's car or other property. But it doesn’t cover your car at all.

• Third party fire and theft. Third-party fire and theft is basically third-party property with a couple of token protections for your car, namely against fire (fire damages your car) and theft (your car is stolen). It’s useful if you don’t want comprehensive cover, but live in a bushfire-prone or high-crime area.

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.