There are essentially three types of private car insurance in Australia. At a high level they are:

• Comprehensive. This covers damage you cause to another vehicle or property as well as damage caused to your car through your own fault or the fault of another party.

• Third Party Fire & Theft. This covers damage you cause to another vehicle or property as well as loss or damage to your vehicle through theft or fire.

• Third Party Property. This covers damage you cause to another vehicle or property but not damage to your vehicle except in some circumstances (see below).

The level of cover you need is closely aligned to the value of your vehicle. The more it's worth, the more likely you will want comprehensive insurance. The less it's worth, the more likely you are to consider one of the third party covers.

So how do you make up your mind about which type of policy gives you the best cover for the lowest premium? There are a number of risks that you will need to consider:

• The value of the vehicle. As mentioned above, the more your car is worth the more you have to loose if you don't have comprehensive cover. All things are relative of course. A $5,000 car may represent a lot of money to some people, and not so much to others. The cost of comprehensive insurance reduces as the value of the vehicle reduces so it may be worth the money even if the car doesn't have a particularly high value.
• Do you have a personal loan or some kind of lease on the car? The finance company will probably require comprehensive insurance if that's the case.
• Where you leave the vehicle when you're not driving it. If you have off-street parking at home and secure parking at work the car is a lot less likely to be stolen than if you have to park on the street at home and leave it at a railway car park during the day.
• What type of driver are you? Be honest! If you always find yourself in a rush when you're behind the wheel, sitting close to the car in front, changing lanes, trying to make the lights, you are more at risk of having an accident than if you tend to be more relaxed behind the wheel.
• How much driving do you do? Do you have a long commute in peak hour traffic or do you catch public transport and do most of your driving on the weekends?

The tendency is to ignore everything except the value of the car but all these factors need to be considered. The same things can be applied to associated insurance such as for caravans, boats, camper trailers and so on.

The ability to fit comprehensive insurance into the household budget is, of course, the ultimate decider. If the car is not financed, you consider yourself to be a good driver, the car is generally in a secure location and your mileage is low, maybe third party insurance is a serious option.

If you are good with money, work out the difference between comprehensive and third party and work out how long it would take you to save the value of your car with the difference. Perhaps set aside the difference each month and work towards getting ahead of the game.