Car insurance glossary

Compare the Market compares products from a range of insurance providers in Australia who use different insurance terminology and language for similar products, covers or situations related to car insurance. This car insurance glossary uses easy-to-understand language to explain what is commonly meant by terms and phrases you may come across while searching for car insurance. However, you should always check the Product Disclosure Statement (PDS) of policies before you purchase as precise definitions can vary between providers.

Accident/incident

An unexpected, unforeseeable event that may result in damage to your vehicle or anyone else’s vehicle or property.

Agreed value

An amount agreed upon between you and your insurer that your car is covered for during the term of your policy. It’s the amount you’ll be paid if an event covered by your policy causes your car to be written off.

Anti-theft device

A device that hinders thieves from stealing or vandalising your vehicle, like an immobiliser that prevents your car being turned on unless a unique code passes from the car keys to your vehicle.

At-fault claim

A claim that resulted from an accident that occurred because of something you did.

Car hire cover

If your car is stolen or damaged, your insurer may offer you a hire car for an agreed period. This period doesn’t always include the time it takes to receive a payout and may differ between insurers.

Claim

If your vehicle is damaged by an insured event, your insurer may need to pay for the repair costs. Making a claim gets that process started.

Comprehensive cover

With comprehensive cover, your repair or replacement costs are still covered regardless of who’s at fault – although you may still need to pay an excess.

Compulsory Third Party (CTP) insurance

CTP insurance is held by every driver in Australia who owns a registered passenger vehicle. It provides you with legal indemnity in the event you cause injury or death to someone when driving.

Contract

A legal agreement between you and an insurer that details the coverage you’ll receive in exchange for paying premiums.

Cooling-off period

The period following the purchase of a policy in which you can still receive a refund of what you originally paid if you decide to cancel your policy, provided you haven’t already made a claim.

Coverage

What’s included in your car insurance policy. Different types of car insurance policies (e.g. Comprehensive, Third Party Fire and Theft) will offer different coverage.

Depreciation

Depreciation is when your car’s value decreases over time. It occurs in most cars due to wear and tear, with few exceptions (e.g. classic cars).

Driving record

Your driving record refers to both your at-fault accident record and any other driving offences. This is one of the factors an insurer will use to decide whether to insure you and to calculate your premium.

Duty to take reasonable care not to make a misrepresentation

When an insurer assesses an application for insurance, they’re trying to determine whether they can offer you insurance and on what terms. Insurers determine this based on the information you provide. Your obligation to let your insurer know this information is known as your ‘duty of to take reasonable care not to make a misrepresentation’. If you don’t let them know, it may affect your ability to receive a benefit if you try to make a claim in future.

Excess

A contribution a policyholder may need to pay their insurance provider for a claim they lodge as a result of an insured event.

Green Slip

Green Slip is what Compulsory Third Party (CTP) insurance is called in NSW. It’s a legally required level of insurance all drivers are required to have to drive on Australian roads.

Listed, nominated or named drivers

Someone you’ve nominated to be covered in your policy as a driver of your vehicle. You can name multiple people who are likely to drive the insured vehicle during the term of your policy.

Market value

Market value is often the default insured sum and represents an estimate of what the market would pay for your car based on vehicles of the same make, model, age and condition.

Modification

Alterations made to the manufacturer’s engine, body work, suspension, wheels or paintwork of your vehicle in an effort to change its appearance or performance are considered modifications.

New car replacement

If your car is a total loss and meets the policy criteria for a new car replacement benefit, you’ll receive a new vehicle of a similar make and model instead of a cash payout.

No claim discount or bonus

If you don’t make an insurance claim over the life of your policy, your insurer may offer a no claims discount or bonus when you renew your policy. If you don’t claim for multiple years, the savings may increase.

Not-at-fault accident

When you have an accident and another driver was at fault. You must provide your insurer with their details at the time of the incident. If the third party can’t be identified, the fault may fall to you.

Premium

The cost you pay for insurance. You can usually pay annually or through monthly instalments. However, you may find that some insurers will add a surcharge if you pay in instalments.

Rating

To determine your premiums, insurers will calculate your risk based on your claims history and other relevant factors. This is known as your ‘rating’.

Regular driver

The driver who uses the insured vehicle the most throughout the term of the insurance policy is known as the regular driver.

Rental or hire vehicle

If your vehicle becomes undriveable or unroadworthy due to being involved in an accident, you may require a hire car or temporary vehicle to use while yours is being repaired.

Repairable write-off

Some written-off vehicles can be repaired, inspected to ensure they’re roadworthy and then re-registered. This is known as a repairable write-off.

Risk

This is defined as the likelihood of something harmful or unexpected happening that may cause the insurer to pay out a claim.

Safety features

Airbags, antilock brakes, parking sensors – all these things are considered safety features because they actively work to keep you safe while you’re behind the wheel of your car.

Sum insured

The amount you will receive if your car is a write off or total loss and is usually listed on your certificate of currency for your policy. Your sum insured may be either a market value or agreed value.

Third party

A third party is the other individual/s involved in your claim (e.g. the other driver/s on the road). Each type of car insurance includes cover for damages you cause to third parties in an accident.

Third Party Property Damage

This type of insurance covers the damage you cause to other people’s property if you’re at fault for an accident. Generally, it doesn’t include cover for the repair costs of your vehicle.

Third Party Fire and Theft

In the event of an accident, this product will cover the cost of any damage you cause to someone else’s car or property, as well as limited cover for your vehicle if it’s damaged by fire or stolen. However, this product generally won’t cover the costs of damage caused to your vehicle in an accident or by other events such as hail.

Vehicle identification number (VIN)

A VIN is unique to each vehicle. You should run a car history report on any second-hand vehicle you consider purchasing to ensure there are no outstanding loans against a car with that VIN.

Write-off or total loss

Your car is written off if the insurer deems it too expensive or unviable to repair. If you have a comprehensive policy, you’ll be paid out its value or receive a similar vehicle as a replacement.

Young driver

A young driver is any driver aged under 25. They are more likely to have Learners or Provisional drivers’ licenses and are statistically more likely to claim on their car insurance policy than experienced drivers.