What are the different types of car insurance?
In Australia there's one form of compulsory insurance (Compulsory Third Party or CTP) then three levels of optional cover, each offering a different level of protection (in ascending order of coverage):
- Third Party Property Damage (TPPD)
- Third Party Fire and Theft (TPFT)
- Comprehensive
What type of car insurance is mandatory?
CTP insurance, also known as a Green Slip in NSW, is the only mandatory type of car insurance. You are required to apply for CTP insurance when registering your vehicle, but depending on your state it may be included in your registration costs.
Higher levels of cover are optional, but they protect against more risks, so they come at a higher cost.
What do different types of car insurance policies cover?
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Type of insurance | Injuries or death* | Damage to other people’s property | Damage or loss to your car caused by theft or fire | Damage to your car from an insured event |
|---|---|---|---|---|
Comprehensive | X | ✔ | ✔ | ✔ |
Third-party, Fire & Theft | X | ✔ | ✔ | X |
Third-Party Property | X | ✔ | X | X |
CTP | ✔ | X | X | X |
*Optional covers exclude personal injury/death (handled by mandatory CTP insurance).
It can be important to read your policy’s Product Disclosure Statement (PDS) to see if your policy covers you for the above situations.
Compulsory third party insurance explained
- CTP is mandatory to register a vehicle in Australia
- Covers compensation for people injured or killed in an accident you’re at fault for.
- It does not cover damage to vehicles or property belonging to you or others.
Third party property damage insurance explained
- Third Party Property Damage (TPPD) is the most basic level of optional car insurance.
- It covers damage you cause to other people’s property, such as their car, home, caravan, or boat.
- Usually includes liability cover, which may help with legal costs if you’re sued.
- Generally excludes repairs to your own vehicle if you’re at fault in an accident.
- Some policies may provide limited cover if an uninsured or unidentified driver hits you, though conditions usually apply.
Third-party fire and theft insurance explained
- Third Party Fire and Theft (TPFT) generally offers more protection than TPPD insurance for your own car.
- Covers damage you cause to other people’s property.
- Protects your own vehicle if it’s stolen, damaged during an attempted theft, or damaged by fire.
- Does not cover accident damage to your own vehicle, such as from a collision.
Comprehensive insurance explained
- Comprehensive car insurance is the highest level of optional cover in Australia.
- Includes TPPD plus fire and theft cover.
- Covers accidental damage to your own car, such as collisions.
- Typically protects against risks like theft, fire, and natural disasters like storms and floods.
- Optional extras include rental car cover, roadside assistance, or windscreen replacement.
- Like all insurance, it comes with conditions and exclusions. For example, claims may be denied if you were driving under the influence.
What car insurance extras can I get?
Depending on the car insurance policy you take out, you may be able to pay extra for wider coverage. Some of these extras could include:
- Windscreen cover: Covers windscreen replacement or repairs if it’s cracked, chipped, or shattered in an insurable event. Exclusions may apply depending on your insurer.
- Hire car cover: If your car is involved in an accident, this extra provides you with a temporary replacement car while waiting for your car to be repaired/replaced.
- Roadside assistance: Provides roadside support, such as on-site repairs or towing your vehicle to a mechanic, if your car is experiencing technical issues on the road.
How to choose the right type of car insurance for you
Choosing car insurance doesn’t have to feel like decoding a contract in a foreign language. The key is matching the cover to your car, your driving habits, and your budget. Below are some practical tips and questions to help you figure out what level of cover makes sense and how to keep your premiums under control.
How do you want your car valued?
If you choose comprehensive insurance, some policies let you decide whether you want to insure your vehicle for its market value or an agreed value. This decision affects both how much you could get paid and how much your policy costs.
- Agreed value: You and your insurer set a fixed payout amount at the start of the policy. Premiums are usually higher because the insurer promises to pay that set amount if your car is damaged or destroyed.
- Market value: The payout is based on what your car would sell for on the open market when you make a claim. Premiums are often lower, but the payout falls if your car loses value, so you may receive less than what you paid for the car.
The more your car is worth, the more it costs to repair or replace, so your insurance needs to match its value:
- For newer or high-value cars: Comprehensive insurance is usually worth it because repairs or replacements can be expensive.
- Older or low-value cars: If your yearly premium too high relative to your car’s value, comprehensive cover may cost more than a potential payout.
- Enthusiast, vintage and classic cars: Vintage or collectible cars might need comprehensive insurance with an agreed value, so the insured amount reflects the car’s worth, not its depreciated market value.
Could you afford to repair or replace your car yourself?
Car insurance is ultimately about financial risk. If your car is damaged or written off in an accident, could you handle the costs of repairing/replacing it?
If the answer is no, comprehensive insurance could protect you from these worst-case scenarios, giving you that financial peace of mind.
If you have a car loan, comprehensive car insurance can help you repay it if that car is written off or stolen, especially if you have to buy a replacement.
Where and how often do you drive?
If you drive every day in heavy traffic, park on the street, or travel long distances, your risk of damage or accidents is higher in the eyes of insurers.
Comprehensive insurance can offer better financial protection. If you rarely use your car and keep it in a garage, a lower level of cover might be enough.
Some insurers offer discounts if you drive less than average. Depending on your usage, you may consider low-kilometre policies that set a yearly limit or pay-as-you-drive policies. This can help you maintain a high level of coverage while keeping your premiums low.
Who drives your car?
Inexperienced or younger drivers are at a higher risk of accidents on the road. The more high-risk drivers on your policy, the higher the chance of a claim, and insurers will raise your premiums to reflect that risk. In these situations, you might want to choose a higher level of cover.
Are you paying for add-ons you don’t use?
Taking off extras you don’t use, like roadside assistance, can help lower your costs. Still, some add-ons are useful depending on how you use your car. For example, if you drive long distances or live far from town, roadside assistance could be important. Thinking about add-ons in this way can help you tailor your policy to fit your needs, and decide if a lower level of cover is enough.
How to save on each type of car insurance
Here are some additional tips to help you save on your car insurance after you’ve picked the right level of cover.
- Compare quotes regularly: Premiums can go up when you renew your car insurance, even if its features haven’t changed. Checking quotes from different insurers yearly ensures you are getting good value.
- Do not choose based only on price: Reading customer reviews and checking claims satisfaction can reveal how well an insurer could support you when you need help. More importantly, make sure the type of car insurance you choose satisfies your needs.
- Review your excess: Excess is the amount you agree to pay when you make a claim. You could lower your premium by choosing a higher excess, but that would also mean more out-of-pocket costs if you ever need to claim.
- Payment options: Some insurers may offer a discount if you choose to pay for your insurance yearly instead of monthly. Some insurers also offer discounts for purchasing a policy online.
- Car insurance deals: To incentivise new sign-ups, some insurers may offer car insurance deals, typically in the form of a percentage discount off your first year of premiums.
- Bundling policies: You may be eligible for a multi-policy discount with some insurers when you combine your car insurance with other insurance products, like home or contents insurance.
- Safe driving habits: Maintaining a clean driving record and parking safely can also help reduce premiums. For example, comprehensive car insurance holders who haven’t made a claim in a while may be entitled to a no-claims discount, which increases each year with zero claims (up to a capped number of years).
