What does car insurance cover?

Co-author: James Hurwood

When it comes to choosing the right car insurance, many people don’t know where to start! When you begin looking around, it’s important to understand what the different types of car insurance are out there – what they cover, and maybe don’t cover.

There are four main types of car insurance available to you, and they are:

Compulsory Third Party (CTP): As the name suggests, CTP is compulsory, and you must have CTP insurance in order to register your vehicle. CTP is the cheapest form of cover, but only having CTP insurance puts you at a significant financial risk if your car happens to damage someone else’s vehicle or property.
Third Party Property: This is the most basic form of optional insurance cover, and it is designed to prevent you from going bankrupt if you run into someone else’s expensive car, boat or caravan.
Third Party, Fire and Theft: This is the next option if you don’t want to pay for top-of-the-line insurance but you do want some protection for your own car. The 2015 NMVTRC figures above indicate that a vehicle is being stolen every 8.5 minutes in Australia, up from one theft every 10 minutes in 2010.
Comprehensive Car Insurance: This is the highest level of insurance cover and it will definitely give you the greatest peace of mind. Logically however, given that this type of car insurance policy covers the most things, these policies also tend to be the more expensive.

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Compulsory Third Party (CTP) Insurance

What it covers: CTP offers protection against claims for compensation if you injure or kill someone in a motor vehicle accident. The specific conditions on this type of insurance are different from state to state.

What it doesn’t cover: CTP doesn’t insure against the cost of repairs to your vehicle or property or anyone else’s, which may prove to be an issue if you find yourself in an accident with a Lamborghini!

Case Study: Richie’s lack of insurance gets him into debt

“Richie decided not to get any extra insurance on top of his CTP because his car was very old. A few months later, he hit a brand new sports car, which needed $20,000 worth of repairs.

Because he was not insured for damage to other cars, Richie had to take out an expensive personal loan and work extra hours to pay off the debt over 5 years.”

Source: ASIC

Third Party Property Insurance

What it covers: Third Party Property covers the cost to repair damage caused by your car to other people’s property. It will also cover your legal costs if they sue you over that damage.

What it doesn’t cover: Third party property doesn’t cover the cost of any repairs or replacement of your own car, except under some limited circumstances through some insurers.

Third Party Property is similar to CTP in that it only provides cover for other people and their property, rather than you and yours as well.

Third Party, Fire and Theft Insurance

What it covers: In addition to covering damage to the property of others, Third Party, Fire and Theft insurance also provides some limited cover for your own car if it is damaged or lost because of fire or theft. Some insurers will only cover the value of a vehicle up to a limited amount such as $5,000 – $10,000, while others will cover the car for its full market value or an agreed value.

What it doesn’t cover: This insurance doesn’t cover the cost of repairs to your vehicle if it is involved in a traffic accident.

Comprehensive Car Insurance

What it covers: Comprehensive insurance covers everything mentioned in the lesser insurance options above and it also covers you for accidental damage to your own car, regardless of who caused the damage. Comprehensive also has a range of optional extras, including replacement vehicles while you can’t drive your own car and no-excess windscreen replacement if you have a crash.

What it doesn’t cover: Comprehensive insurance won’t cover damage caused by someone else driving your car, unless you have listed them in your policy as an authorised driver or have a policy that allows anyone to driver your vehicle. It also won’t cover damage caused if the driver was over the legal alcohol limit or affected by drugs. This cover requires that your car is roadworthy and that you hold a valid driver’s license.

Compare Car Insurance Policies with Canstar

Overall, buying a car is an exciting time in your life. Ensuring you have the right insurance policy to suit your needs is key. Thankfully, we here at Canstar have done the hard work for you, comparing over 63 insurance policies in one easy to use comparison table, to help you find outstanding value cover.

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