Types of Insurance

Because there are so many companies and policies available, it is important you have a good understanding of the basics before you make a decision. Prices vary, and detail may vary from one to another, so your broker can provide a lot of help here.

There are four basic cover options:

• Compulsory Third Party (injury) - insures against claims made against you for personal injuries and covers legal costs arising out of the use of your car. Commonly referred to CTP, you must obtain this insurance to register your car.
• Third Party Property Damage - insures your liability for damage to another vehicle or to the property of others (a fence, for example). It covers both the damage and your legal defence. It does not include repairs to your own car if you cause an accident. If you decide you don't want or can't afford comprehensive insurance (see below), third party property is undoubtedly vital insurance to have, because a big claim could easily bankrupt you.
• Third Party Fire and Theft - insures against the events in the former category as well as fire and theft. It also insures against damage caused while the car is stolen.
• Comprehensive - insures against all of the above plus damage caused by your own car by you in an accident. If you're buying a car on an installment basis, this cover will usually be insisted upon by the finance company.

Temporary car insurance

Collision or Comprehensive Insurance?

Collision Insurance reimburses you for the entire cost of repairs or replacement of your motor car after an accident. Comprehensive covers you in the event your car falls victim to a natural disaster, vandalism or theft. With either coverage, the lower the deductible you choose, the more the policy will cost you. We recommend that you always choose the highest deductible you can afford ($800 is fine). Besides, the purpose of insurance is to help you out of situations that could send you broke, or even worse, forcing you to sell your car. If you have an older car, you might drop this coverage altogether. So when do you need it?

Do I need Comprehensive Car Insurance?

Well, it can account for 30% to 40% of your total premium. If your car is damaged, the most you'll recoup is the Red Book value, which declines relative to your cars age. If the cost of your collision and comprehensive insurance is more than 10% of your car's Red Book value, it probably makes sense to drop these coverages and save wad of cash. With most cars, you should approach this limit as the car turns five years old. Please be aware, however, that if you eliminate comprehensive or collision insurance, you'll have to foot the repair bill if you get in an accident that's your fault, or if the car is totalled or stolen.