Types of car insurance – an overview

Deciding on which car you want to buy can be exciting, but it may also be worth making sure you’ve got the appropriate level of car insurance for you and your vehicle.

For example, what if you only have CTP cover but you’ve accidentally caused damage to someone’s expensive sports car? What if your car’s been stolen, but you’re only insured for damage to third-party property? Perhaps you’re covered for third party, fire and theft, but not flood damage or hail and storm damage. An an appropriate level of car insurance, can help reduce the financial impact of being involved in a car accident. So what are the different types of motor vehicle insurance in Australia, what does each one provide cover for, and which one might be most appropriate for you?

What are the different types of car insurance?

There are four main categories of car insurance available to Australian consumers. They are:

  • Compulsory Third Party (CTP) insurance: protects you financially if you injure or kill someone in an accident, and is mandatory for Australian drivers in every state and territory. In the ACT, it is now known as motor accident injuries (MAI) insurance, following a recent law change. While it is mandatory for all Australian registered vehicles, you can also choose to add one of the following three types of car insurance to add onto your CTP insurance.
  • Third party property damage: covers you if you cause damage to someone’s property (e.g. their car or home).
  • Third party fire and theft cover: covers your car if it’s damaged by fire or stolen, and includes the cover provided by third party property damage insurance.
  • Comprehensive car insurance: the most extensive (and generally most expensive) form of cover. Provides a more thorough degree of cover for damage or theft to your car, as well as to the property of others.

Compulsory Third Party (CTP) insurance

CTP insurance provides protection against claims for financial compensation if you injure or kill someone in a motor vehicle accident. As the name indicates, it is mandatory for all registered vehicles, and is generally paid for in most states and territories through the cost of vehicle registration.

That being said, CTP insurance works in different ways and comes with different conditions in each state and territory, so you may want to check the specifics of how it functions where you live. For example, some states require you to purchase your own CTP insurance policy, whereas others include it as part of the registration fees. Different states and territories also have different requirements when it comes to whether you need to prove you were not at fault in order to make a claim through your CTP insurance.

CTP only provides liability cover in the event of injury or death you cause to other people. It doesn’t insure against the cost of repairs to any vehicles or property, regardless of who they belong to. This means that whether your car ends up slightly scratched or completely written off after an accident, your insurance will not pay to have the damage repaired.

While CTP insurance is fairly inexpensive, generally speaking, it also won’t cover you in the event that you damage a vehicle or other property belonging to someone else.

Third Party Property insurance

This is the most basic level of optional car insurance, and provides you with financial assistance if you cause damage to someone else’s property – for example someone’s car, boat,caravan or home.

It also includes liability cover, meaning it will provide financial assistance if you become involved in legal proceedings as a result of the damage caused. This liability cover doesn’t extend to personal injury liability cover, however your mandatory CTP insurance will provide that.

Third party property insurance doesn’t cover the cost of any repairs to or replacement of your own car. So it’s similar to CTP insurance in that it only provides cover for other people, rather than you or your property.

Third Party, Fire and Theft insurance

If you don’t want to pay for comprehensive car insurance but do want some level of protection for your own car, Third Party, Fire and Theft insurance represents a step up from third party property insurance, both in terms of the cover it provides and the cost of that cover.

In addition to covering damage to the property of other road users, third party, fire and theft insurance also provides a degree of cover for your own car in the event that it’s damaged or lost due to fire or theft. However, like CTP and third party property insurance, it doesn’t provide cover for damage to your vehicle resulting from a driving accident such as a crash or collision.

Third Party, Fire and Theft car insurance provides cover for theft of your car, among other things. Credit: Daniel Jedzura (Shutterstock)

What are the chances of your car being stolen?

When looking at the likelihood of one of the risks this type of policy covers occurring,according to the Australian Bureau of Statistics based on interviews conducted between 2018 and 2019, an estimated 0.5% of Australian households (41,600) reported the theft of a motor vehicle in the prior 12 months. The figures show that 57% of car thefts (26,100) were from someone’s home, and 30% (13,900) were in the street or other open land.

Comprehensive insurance

As the name implies, comprehensive car insurance is the most extensive and all-inclusive form of car insurance available in Australia. However, it’s also normally the most expensive form of car insurance if all other things are equal, with annual premiums exceeding $2,000 for some drivers.

Comprehensive car insurance provides all the cover that third party property, fire and theft does, but adds cover for accidental damage to your own car, regardless of who is at fault. Depending on the insurer and policy you choose, there are also a range of optional insured cover types you may be able to purchase, including temporary replacement vehicles for while your car is being repaired, and no-excess windscreen replacement. A comprehensive car insurance policy may also let you choose between market value or agreed value for your policy, meaning you could get a say in how much you’ll be paid in the event that your car is stolen or written off, depending on the policy. However, your choice may affect your premiums.

That being said, even comprehensive insurance doesn’t cover everything. It generally won’t cover damage caused by someone else driving your car, unless they are authorised to do so on your policy (which could make your car insurance more expensive). It also won’t cover damage if it happened while the driver was over the legal alcohol limit or under the influence of drugs.

As mentioned, comprehensive car insurance is the most expensive level of car insurance. According to Canstar Research, average annual premiums for comprehensive car insurance can range from less than $1,000 to more than $2,000, depending on how old you are and which state/territory you live in. The larger price tag means that you may want to shop around and compare policies before you buy.

One of the ways you can save on insurance is by shopping around for car insurance sign-up deals, and comparing policies in order to find one that offers you the right balance of cover and cost. Our most recent Car Insurance Star Ratings compared 53 comprehensive car insurance policies from 42 different providers, and identified the ones offering 5-Star Value to consumers.

You can also visit our car insurance comparison tables in order to generate a list of products based on your circumstances.

In summary: What do different types of car insurance policies cover?

Type of insurance Injuries or death to other people Damage to other people’s property Damage or loss of your car caused by theft or fire Damage to your car from a traffic accident
CTP Yes No No No
Third party property No Yes No No
Third party, fire and theft No Yes Yes No
Comprehensive No Yes Yes Yes

If you’re considering car insurance policies, the comparison table below displays some of the policies currently available on Canstar’s database for a 30-39 year old male seeking cover in NSW without cover for an extra driver under 25. Please note the table is sorted by Star Rating (highest to lowest) followed by provider name (alphabetical) and features links direct to the providers’ websites. Use Canstar’s car insurance comparison selector to view a wider range of policies.

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