Do I need car insurance in Australia?

If you drive a car in Australia, you are required by law to have car insurance. At a minimum, you must hold Compulsory Third Party (CTP) insurance to register your car to legally drive on Australian roads. But with so many types of car insurance available, it’s important to know what protection you have, and what you might still need.

Is car insurance compulsory in Australia?

Yes, car insurance is a legal requirement in Australia. Without it, you cannot register your vehicle. CTP insurance provides cover for injuries or fatalities that may arise from a road accident. However, it does not cover damage to your own car or other vehicles.

While you are only legally required to hold CTP insurance, it may be worth considering additional cover to protect yourself financially. Choosing the minimum required insurance can seem like a cost-effective option, but it could leave you exposed to significant out-of-pocket expenses if you become involved in an accident. Taking the time to understand the different types of car insurance and your personal needs could help you find the right level of protection.

Types of car insurance

There are four main types of car insurance policies available in Australia:

CTP insurance

CTP insurance is mandatory for all registered vehicles in Australia and provides cover for injuries to people involved in an accident. However, it does not cover damage to vehicles or property. If you want broader protection, you can purchase additional insurance on top of your CTP, such as third-party property or comprehensive cover.

Third Party Property

Third party property damage car insurance covers the cost of damage caused by your vehicle to someone else’s property, such as their car or home.

Third Party Fire and Theft

Third Party Fire and Theft car insurance covers the cost of damage to your vehicle in a fire, as well as damage to someone else’s vehicle or property caused by a covered incident.

Comprehensive car insurance

Comprehensive car insurance offers the widest range of coverage, including accidents, theft, fire, vandalism, and natural disasters such as floods. It may also include additional benefits like roadside assistance or windscreen damage cover for an additional cost.

Keep in mind, comprehensive car insurance does not include CTP cover. It’s essential to read your policy’s Product Disclosure Statement (PDS) to understand the terms, conditions, exclusions, and coverage provided. You can also review the Target Market Determination (TMD) to ensure the policy is suited to your needs.

Compare Car Insurance

Do car insurance laws change in different states and territories?

When it comes to CTP insurance, each Australian state and territory has its own rules and regulations. While CTP insurance is a mandatory requirement for all vehicles nationwide, the way it is structured, purchased, and priced may vary depending on where you live.

In some states and territories, CTP insurance is included in the cost of your vehicle’s registration and managed by a government authority. For example, in Victoria, Western Australia, Tasmania and the Northern Territory, CTP insurance is automatically included in your registration fee and is provided by a government-run scheme. Vehicle owners in these regions do not choose their insurer.

In contrast, New South Wales, Queensland, South Australia, and the Australian Capital Territory allow drivers to select their CTP insurer from a list of approved providers. In New South Wales, you must purchase a separate ‘Green Slip’ from an approved insurer before you can register your vehicle. In Queensland, South Australia, and the ACT, you choose your CTP provider during the registration process, and the premium is included in your registration payment.

While CTP insurance is mandatory in all states and territories, the process for obtaining it and the available insurers can differ significantly depending on your location.

What are the risks of driving without car insurance?

Driving without CTP insurance is illegal in Australia. You cannot register your vehicle without CTP, and driving an unregistered car can lead to legal action.
If you only have CTP insurance, you are covered for injuries or fatalities that your vehicle may cause to other people in an accident. However, CTP does not cover damage to vehicles or property, including your own.

Even if you think your car isn’t particularly valuable, an accident can still lead to significant costs. If you damage a high-value car or property, you could be held personally liable for thousands of dollars in repair or replacement costs. While it may be tempting to go for the minimum cover, it is important to assess your needs carefully. Paying more for extra coverage could help you avoid large out-of-pocket costs if you need to make a claim.

Do you need to purchase extra insurance?

There is no legal requirement to purchase extra insurance beyond CTP cover. However, just because additional insurance is not mandatory does not mean you shouldn’t consider it.

You may feel that CTP cover is enough because you are a safe driver or because your car is not particularly expensive. You may also find the cost of additional insurance difficult to justify. However, it can be worth analysing your situation objectively and considering how much you could afford to pay if your vehicle is involved in an accident.

If you live in a flood-prone area, the risk of damage from natural disasters can be higher. CTP insurance does not cover damage caused by floods, storms, or other weather events. Without additional insurance, you could be left paying the full cost of repairs or replacement if your vehicle is damaged or written off in a natural disaster.

Similarly, even if your own car is inexpensive, you could still face large bills if you damage a luxury car or other valuable property in an accident.

How can you save on insurance costs?

When exploring car insurance, it’s worth considering the cost of extra cover and whether it suits your needs. Comprehensive car insurance offers the broadest protection but usually comes with a higher premium. If you are looking to keep costs down, you might consider a basic third party property policy that only covers damage to someone else’s vehicles and property. Alternatively, a third party fire and theft policy, which includes some protection for your vehicle, might offer additional peace of mind in case your car is stolen or damaged by fire.

In addition to the type of cover you choose, there are other factors that affect the cost of your insurance. For instance, the value of your car will impact the premium you pay – a new luxury vehicle will generally cost more to insure than a ten-year-old vehicle.

Choosing whether to insure your car for its agreed value or its market value can also affect your premium. Agreed value usually offers more certainty but can be more expensive, while market value could help lower your insurance costs.
The level of excess you select can also make a difference. If you choose a higher excess, your premium is likely to be cheaper. However, it means paying more out of your own pocket if you need to make a claim, so it’s worth considering if saving now is worth the potential cost later.

Optional extras, such as roadside assistance or reduced windscreen excess, can add convenience but also increase the cost of your insurance. For example, if you often drive long distances, roadside assistance might be useful. But if you rarely travel outside the city, you may decide to skip it to save on your premium.

Simply put, the best way to save money on insurance costs is to assess your needs carefully. Think about the value of your car, your driving habits, where you live, and how much risk you are willing to carry yourself. Reading the PDS before buying can help you understand what you are covered for, what is excluded, and whether the policy fits your needs and budget.

How can I compare car insurance policies?

It can be helpful to compare your car insurance policy options before committing to an insurer. If you are in the market for a new comprehensive car insurance, you can compare your options with Canstar.

Compare Car Insurance

Cover image source: GBJSTOCK/Shutterstock.com