What are the different types of car insurance?
If you’re buying a new car or renewing your car insurance policy, it’s a good time to think about how much coverage you actually need. In Australia, there are four main types of car insurance, each offering a different level of protection (and price tag):
- Compulsory Third Party (CTP)
- Third Party Property Damage (TPPD)
- Third Party Fire and Theft (TPFT)
- Comprehensive
CTP insurance is the only type that’s mandatory, but it won’t cover damage to vehicles or property—which is often why you’ll find it’s the most affordable type of cover. The higher levels of cover are optional, but protect against more risks, so come at a higher cost.
Knowing what each type of cover includes (and what it doesn’t) can help you choose a policy that protects your wallet as well as your wheels, without paying for more cover than you need.
What do different types of car insurance policies cover?
← Mobile/tablet users, scroll sideways to view full table →
|
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 (CTP)
- CTP is mandatory to be able to register a vehicle in Australia
- Covers compensation for people injured or killed in an accident you cause.
- It does not cover damage to vehicles or property.
- Depending where you live, some policies may cover all injured people regardless of fault, while others may cover only the not-at-fault party.
Third party property damage insurance (TPPD)
- This 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 does not cover repairs to your own vehicle if you’re at fault.
- Some policies may provide limited cover if an uninsured or unidentified driver hits you, though conditions (like a police report) usually apply.
Third-party fire and theft insurance (TPFT)
- A step up from TPPD, TPFD insurance generally offers more protection for your own car.
- Covers damage you cause to other people’s property.
- It also protects your own vehicle if it’s stolen or damaged by fire.
- Does not cover accident damage to your own vehicle, such as from a collision.
Comprehensive insurance
- Comprehensive car insurance is the highest level of optional cover in Australia.
- It includes third party property damage plus fire and theft cover.
- It also covers accidental damage to your own car, such as collisions.
- Policies typically protect against risks like theft, fire, storms and floods.
- Optional extras can 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.
Find the right car insurance without paying a fortune
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. Think of it like picking shoes—you want the right fit, not just the fanciest looking pair.
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 valuable is your car, and is comprehensive insurance worth it?
Why it matters: 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—repairs or replacements can be expensive.
Older or low-value cars: If your yearly premium is close to 20% of your car’s value, comprehensive cover may cost more than a potential payout.
Special cars: Vintage or collectible cars might need comprehensive insurance with an agreed value, so you’re covered for the car’s true worth, not its depreciated market value. Having comprehensive insurance with an agreed value may be preferred in such cases so the insured amount reflects the car’s worth rather than typical age-based depreciation.
Could you afford to repair or replace your car yourself?
Insurance is ultimately about financial risk. If something goes wrong, could you handle the costs?
If you can’t afford the repairs or buy another car, or if you still have a car loan, a higher level of cover like comprehensive insurance may be a good idea. This can help you avoid paying off a loan for a car you no longer have while also needing to buy a new one.
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 that track your actual usage. This can help you maintain a high level of coverage while keeping your premiums low.
Who drives your car?
The more high-risk drivers on your policy, the higher the chance of a claim—and your premiums. Younger or less experienced drivers are more likely to have accidents. If they often drive your car, the risk of damage goes up. 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 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: means you and the insurer set a fixed payout amount at the beginning of the policy. This amount stays the same over time. Premiums are usually higher because the insurer promises to pay that set amount if your car is damaged or destroyed.
- Market value: means 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 can go down as your car loses value, so you might get less than what you paid for the car.
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 nothing has changed. Checking quotes from different insurers each year helps you make sure you are getting good value. Do not choose based only on price. Reading customer reviews and checking claims satisfaction can show how well an insurer supports you when you need help.
- Review your excess: Excess is the amount you agree to pay from your pocket when you make a claim. You might be able to lower your premium by choosing a higher excess. However, that would also mean more out-of-pocket costs for you if you ever need to claim.
- Payment options: Some insurers may offer a discount if you choose to pay for your insurance annually instead of monthly. Some insurers also offer discounts for purchasing a policy online.
- 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.
