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Car insurance provides financial peace of mind for car owners and other road users, but you may not be aware that there is not just one standard level of car insurance. There are actually four main types, each offering different cover. In addition, benefits differ between insurance providers and there are often add-on options available.
Therefore, to ensure you choose the right car insurance policy for your budget and personal needs, it’s important to understand the various types of car insurance available and the levels of cover they provide.
Here are the four main types of car insurance in Australia, and what they cover:
Compulsory third party car insurance: what does it cover?
Compulsory Third Party (CTP) is the only insurance required to legally drive on the roads in Australia. The most basic, and cheapest, level of car insurance, it provides cover for those injured in road accidents. It pays for medical bills and rehabilitation costs, as well as loss of earnings.
CTP insurance varies across the country. In NSW, Queensland, South Australia and the ACT, where it’s known as Motor Accident Injuries insurance, motorists are provided with a choice of insurers.
However, in Victoria, NT, Tasmania and WA, CTP cover is included as part of a vehicle’s registration fee and you don’t get to choose your provider.
Third party car insurance: what does it cover?
Third party car insurance is a basic policy that covers you financially for damage you cause to another person’s car or property in the event of an accident. It doesn’t provide any cover for your own vehicle or possessions.
Therefore, if you crash into another motorist, while a third party insurance policy will pay to repair the other car, you’ll have to use your own money to tow and fix or replace your vehicle.
While most third-party policies are designed solely to cover you for any damage you cause to others’ property, some do include limited cover for damage to your own car caused by at-fault uninsured drivers.
Third party fire and theft car insurance: what does it cover?
A mid-level option, third party fire and theft provides insurance to replace your car if it is stolen or destroyed by fire, in addition to third party cover.
While it will cover the cost of repairing any damage caused by a thief, it won’t cover the cost of repairs to your vehicle if it is involved in an accident.
As third party fire and theft is a generic term to describe this level of cover, it’s always a good idea to compare products and costs between different car insurance providers, because some third party, fire and theft policies on Canstar’s database also include limited cover for:
- Towing costs
- Emergency accommodation/travel costs following an accident or loss of car
- Personal possessions in your car and baby seats
- Hire car in the event your vehicle is stolen
- Damage to your own car caused by at-fault uninsured drivers
Comprehensive car insurance: what does it cover?
The most expensive form of car insurance, comprehensive provides all the benefits of third party fire and theft insurance, plus it covers the cost of repairing or replacing your car should it be damaged or destroyed, regardless of who is at fault.
Coverage usually extends to damage caused by extreme weather events, such as hail or flooding, as well as road accidents.
It’s worth noting that in event of an accident, if you are at fault, or the other driver leaves the scene and can’t be traced or contacted, while comprehensive cover will still pay for repairs to your vehicle, you will likely to have to pay an excess, covering some of the costs yourself.
As with third party, fire and theft car insurance, levels of comprehensive cover vary between providers, but policies often include:
- Damage to trailer/caravan
- Hire car in the event of an accident
- New car replacement
- Replacement of keys and damaged locks
In addition, most providers offer optional extras including:
- Reduced or zero excess for windscreen and glass damage
- Choice of own repairer
- Roadside assist services
What does comprehensive car insurance not cover?
A Product Disclosure Statement (PDS) provides a precise breakdown of what is and isn’t covered under the terms of a car insurance agreement. It’s always recommended to read the PDS of the policy you are interested in thoroughly before making a purchase.
However, most comprehensive car insurance products share common policy exclusions, circumstances under which they won’t accept a claim, these include:
Unlawful use of the vehicle: for example if the car is unroadworthy, or damaged due to dangerous driving, driving while intoxicated or without a valid licence.
Business use: if you plan to use your car for business purposes, such as a ride-share or food-delivery service, you’ll need to let your insurer know and amend your policy accordingly, otherwise it could void your cover.
Unapproved modifications: most insurers are happy to tweak their plans to cover legal modifications, but you’ll need to let your insurance provider know if you make any structural changes to your car.
Carelessness: don’t expect your insurer to accept any claim made as a result of your carelessness, for example if you leave your car unlocked with the keys inside and it is stolen, or you fill up with the wrong type of fuel.
Mechanical failures: car insurance policies don’t provide cover for general mechanical repairs or breakdowns.
Ultimately, when deciding on the best car insurance for you, comparing providers and thoroughly reading the PDS of any insurance product that you’re interested with can give you a clearer picture of the levels of cover available and the premiums involved.
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