A Guide to Car Insurance Cover Notes

What is a Cover Note?

Australian drivers used to get car insurance for a cover note online. Cover notes were temporary, no-cost insurance policies that provided interim coverage for car owners until a formal policy was purchased. In Australia, the cover note for car insurance has been replaced by instant car insurance, which activates immediately upon payment. This is usually done online or over the phone.

Although insurance companies no longer offer cover note insurance, most car insurance policies now provide immediate cover upon purchase, and include cooling-off periods. These cooling-off periods have effectively replaced cover note insurance, serving a similar purpose.

What were Cover Notes used for?

The purpose of cover notes were for a level of temporary protection while you gathered and submitted the necessary information and payment to obtain a full car insurance policy. The duration of your temporary coverage was specified on the old car insurance cover note.

If you failed to submit your information before your cover note expired, your cover ended and you were unprotected as you drove around. For some types of cover - like Compulsory Third Party (CTP), that’s not legal to do in most Australian states. 

Can I still get a cover note?

It’s not possible to get a car insurance cover note in NSW or any other Australian state, but you can achieve a similar outcome by purchasing a policy and later cancelling it during the cooling-off period for a full refund. 

All car insurance policies now include a mandatory cooling-off period, allowing you to cancel without financial penalty. 

Important Note: There may be a delay in receiving your refund and that cooling-off periods vary between insurers. Always read your product disclosure statement (PDS) before purchasing or cancelling any policy.

What is a car insurance cooling-off period?

A cooling-off period is a set timeframe (usually between 14 to 31 days) during which you can cancel your car insurance policy for a full refund, provided no claims have been made. 

This period allows you to review your policy and consider your options without being locked in financially. The specifics of your cooling-off period can vary based on your car insurer and your state, so make sure you check you PDS for details.

How do I get temporary car insurance?

To obtain temporary cover, you can use the cooling-off period of a new policy. Decide on the type of policy you need (comprehensive, third party, or third party fire and theft) with an appropriate cooling-off period, and apply. 

If accepted, you’ll be covered from the start date listed on your insurance certificate. You can then cancel the policy within the cooling-off period if you change your mind. Remember to read your PDS to understand the terms and conditions and any steps required to cancel. 

Important Note: You must not make any claims during your cooling-off period if you want to receive a refund.

Are there any other short-term car insurance policies?

If you need temporary car insurance but don’t want to rely on a cooling-off period, consider these alternatives:

• Pay-As-You-Drive insurance: Ideal if you plan to drive 15,000 kilometres or less annually, offering the same cover as traditional comprehensive insurance at a reduced premium.

• Pay-by-the-Month insurance: Allows monthly payments instead of an annual lump sum, with the option to cancel when you no longer need your cover. Be aware that this option might have higher monthly costs and potential cancellation fees.

• Comparing car insurance policies: Before committing to an insurer, it’s wise to compare car insurance policies. For those seeking new comprehensive car insurance, platforms like Compare Club can help you compare options to find the best fit for your needs.

Does short-term car insurance have any drawbacks?

Short-term car insurance can have several downsides, including high cancellation fees and potentially higher month-to-month costs compared to traditional policies. 

In Australia, signing up for short-term car insurance typically means entering a one-year contract that can be cancelled at any time. However, cancelling may incur significant fees. As a result, the cost of insuring a vehicle for just a few months could be comparable to paying for a full year's standard comprehensive insurance policy.

Sources:

https://www.nrma.com.au/faq/whats-a-cover-note-and-do-you-offer-them/13

https://rollininsurance.com.au

https://www.pd.com.au/comprehensive-car-insurance

https://www.aami.com.au/faq/does-aami-offer-cover-notes.html

https://www.gio.com.au/faqs/general/cover-note.html

Paul Coughran is the General Manager of Emerging Verticals at Compare Club. Paul has over 20 years of experience across a wide range of industries including Banking and Finance, Telecommunications and Energy. Paul leads a team of trusted experts dedicated to helping individuals make informed decisions about their insurance and utilities needs.

Meet our car insurance expert, Paul Coughran

Paul's top car insurance tips

• 1

  Regularly compare your insurance policies – You could be paying for cover you don’t need. Shopping around every so often can save you a fair bit, maybe even hundreds each year.

• 2

  Don’t just look at the premium—check the excess too. While a higher excess might bring down your premium, remember you’ll have to fork out more if you do need to claim.

• 3

  Double-check what’s included in your policy. Extras like windscreen cover or roadside assistance might not be part of the deal and could cost you more.

• 4

  If you don’t drive much, consider usage-based insurance. Some policies base your cost on how much you actually drive, if you work from home or only use your car for short trips this might be a much better option.