Depending on the type of car insurance you have, you may be covered for a wide range of insured events. With comprehensive insurance, you will be covered for accidental damage to your car, malicious damage, fire, theft, and a range of other insured events. So, whether you’re involved in a motor vehicle accident, a tree falls on your car or even if you get caught out in a hailstorm, you won’t need to worry.
Yet, even with the best insurance, you won’t be covered for mechanical faults. This can be confusing, as determining what is an unforeseen event and what is mechanical fault can at times seem a little unclear.
Types of car insurance
The first thing you should be aware of is there are several different types of car insurance.
Compulsory Third Party (CTP) insurance is mandatory insurance that is necessary in every Australian state. Depending upon where you live, CTP insurance will either be included in your registration price or required to be purchased separately before you register your car. This insurance protects you from financial liability if you are at fault in an accident in which another person is injured.
In addition to CTP insurance, it is also a good idea to have insurance that protects you from financial liability if you cause an accident and your car damages other cars or property. Three types of insurance will do this.
- Comprehensive insurance is the gold standard of car insurance and the type we talked about in the opening of this article. It covers you for loss or damage to your car, as well as any damage it causes.
- Third Party Fire & Theft insurance will cover you for any damage your car causes and cover your car against fire and theft.
- Third Party Property Only insurance protects you for any damage your car causes to somebody else’s property.
Unforeseen events vs mechanical breakdowns
Keeping in mind the different types of available insurance, the next thing to consider is the fundamental difference between an insured event and a mechanical breakdown. This is an important distinction to understand, as car insurance is designed only to protect you in an insured event. Definition of what constitutes an insured event is defined within an insurer’s product disclosure statement.
Insured events are events by definition which trigger your insurance coverage jumping into action. Regarding car insurance, this includes accidents, fires, malicious criminal damage caused by another person, storms, floods and storm damage, or even falling tree branches.
Mechanical breakdown refers to electrical or mechanical issues with your car that result from faulty parts and general wear and tear. A mechanical breakdown may surprise you when it happens but isn’t something completely unforeseen as they commonly occur.
While insurance doesn’t cover mechanical breakdown, you can still protect yourself from many mechanical issues by regularly maintaining and servicing your car. Regular maintenance ensures that your vehicle's vital components are checked, and minor repairs made before small faults or worn parts become more significant issues.
If you have a newer car, you may also be protected by the car’s warranty. Suppose that’s the case, and a mechanical part fails; depending upon the specifics of the warranty, you may be able to have the manufacturer repair or replace it for free.
In addition, some car insurers, including Youi, include free 24/7 roadside assistance as part of your insurance. So, while you can’t make an insurance claim for the breakdown, your insurance company’s roadside assistance may be able to help you get back out on the road sooner.
Still a little unsure of the distinction between the two? Consider these scenarios.
Imagine you’re driving home from work in your brand-new car. You’ve just driven off from a set of lights, and you notice that your vehicle is suddenly revving at an extremely high rate. As you continue driving down the road, you realise that the car isn’t changing gears. Concerned, you pull into a nearby garage. After inspecting your car, the mechanic tells you that there is a problem with your automatic transmission, and it needs to be replaced.
In this scenario, you may think to yourself, “Well, this is unexpected. My car is brand new, so this must be covered by my comprehensive insurance.”
Unfortunately, no, it’s not. Regardless of the age of your car, the problem is still a mechanical fault and, as such, not covered by your insurance. Although, in this case, you would likely be able to make a claim against your new car’s warranty and have the vehicle manufacturer repair or replace the faulty automatic transmission.
You’re out for a drive in your ten-year-old car. As you’re driving around some bends, you hear a loud crack, the steering wheel shudders in your hands, and suddenly the car veers off the road and you crash into a tree. It’s later determined that a critical component of your car's steering snapped while under pressure, and that sent you careening out of control, causing the crash.
Given the accident was caused by a mechanical fault, you wonder whether your comprehensive insurance will cover the accident.
In a scenario like this, provided your vehicle was roadworthy before the accident, the damage caused to your car resulting from crashing into the tree will be covered. While the mechanical fault wouldn’t be covered, the fact that your car careered off the road and happened to hit a tree is an unforeseen circumstance, meaning you may be able to make a claim on your insurance.
Of course, if the car was unroadworthy before the accident, or you knew about the fault with the steering and chose to drive the car anyway, your insurance company might decide not to pay your claim. This is because it is your responsibility to ensure your car is maintained and roadworthy at all times.
Putting your new knowledge to work
While we would all hope never to suffer a mechanical breakdown while we’re out driving, breakdowns can and do happen all the time. Hence, it’s essential to know what your car insurance will and won’t cover.
The information provided in this article contains general advice only. It has been prepared without taking into account any person’s particular objectives, financial situations or needs.