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KEY POINTS
- The main different types of car insurance in Australia are Compulsory Third Party, Third-Party Property, Third-Party Fire and Theft, and Comprehensive.
- Compulsory Third Party (CTP) insurance is mandatory and covers injuries to others, but not damage to your own vehicle.
- Comprehensive car insurance provides the most coverage, including damage to your own car in an accident, though it may be one of the most expensive options.
What types of car insurance can be found in Australia?
There are four main types of motor vehicle insurance in Australia:
- Compulsory Third Party
- Third-Party Property
- Third-Party Fire and Theft
- Comprehensive
It’s important to consider the cost and benefits of the different types of car insurance, to make sure you’re getting the best value for money, as well as the best cover for your unique personal and financial situation. Remember, if you don’t have the right kind of car insurance cover, it could cost you a lot more if you have an accident.
How does third party car insurance work?
Third-party car insurance covers your liability if you’re involved in an accident and someone else is injured or their car or property is damaged.
There are also several levels of third-party car insurance coverage available:
1. Compulsory Third Party (CTP)
Every Australian state and territory requires you to hold a CTP insurance policy to register a vehicle. It is illegal to drive without at least this minimum level of car insurance. Several states and territories automatically include CTP as part of your registration, while some states (such as NSW, where CTP is sometimes known as your Green Slip) allow you to select your own CTP insurer and purchase your policy separately.
CTP protects people injured if your vehicle is involved in an accident. But it does not cover injuries to your own car’s driver and passengers, nor does it cover damage to your vehicle, other vehicles, or property.
You pay the smallest premium for CTP insurance, but in turn receive the least coverage. This means you could still end up with a considerable amount of liability following an accident.
2. Third-Party Property
This insurance covers damage to other vehicles and property in case of an accident. It does not cover damage to your own car, though some insurance companies may cover a certain amount of damage if your car was involved in an accident with an uninsured vehicle.
3. Third-Party Fire and Theft
In addition to third party property cover, this insurance policy also covers your vehicle for damage or loss if it catches on fire or is stolen.
How does Comprehensive Car Insurance work?
Fully comprehensive car insurance covers damage to your car, other vehicles (if caused by your car) and property following an accident. It also covers theft, fire damage, arson, and certain weather events. That said, exclusions may apply to a fully comprehensive insurance policy. Check the policy document carefully to avoid any last-minute surprises.
If you have a new car, or a used car in a good state of repair, a comprehensive insurance policy could be useful, though you’ll likely need to pay a higher premium. Comprehensive car insurance is also highly competitive, so comparing car insurance policies from different companies is often a good idea.
How does car insurance work for new drivers?
Insurance premiums are calculated based on a wide variety of factors, such as the type of policy, your driving record and insurance history, the type of vehicle, its intended use and even where the car will be parked.
Another significant factor is the nominated driver’s age and driving experience. Since young and inexperienced drivers pose a higher risk of accidents, they tend to be charged higher insurance premiums. An insurer is likely to consider any driver under the age of 25 years a higher risk than other drivers.
Are there any other car insurance factors to be aware of?
Some common queries about car insurance include:
How do multi-car insurance policies work?
If your household has more than one car, you may be able to cover all of these vehicles under a single policy. A multi-car insurance policy can usually cover 2 to 5 cars, and may help to reduce the amount of paperwork, as there’s only a single payment to be made. Some insurers may also offer discounts on these policies, but if they involve other drivers, their age and driving history could affect the premium.
How does rental car insurance work?
Rental cars need CTP insurance as part of their Australian registration, and often include insurance cover as part of the rental agreement. However, you may need to pay an expensive excess if the car is damaged or stolen while you’re driving it. You may be able to reduce or avoid paying this excess if you agree ahead of time to pay the rental agency an extra fee.
Some comprehensive car insurance policies include rental car excess cover, which may help to cover the cost of a rental car’s excess if necessary. However, this extra cover could increase your premium, and therefore may be more useful if you plan on renting cars frequently.
Cover image source: davidf/istockphoto.com
