Different types of car insurance available in Australia

There are four main types of car insurance policy in Australia:

As the name implies, Compulsory Third Party or CTP insurance is a mandatory requirement to drive in Australia. Every state and territory requires a CTP insurance policy to be in place to register a vehicle to be legally driven. In some states and territories, you can choose your CTP insurer, while in others the CTP insurance is included as part of the registration process, and paid for alongside the other registration fees.

CTP insurance offers the most basic level of car insurance cover – it only covers the cost of medical bills for third parties injured in an accident where you are the at-fault driver. For example, if you crashed into another car and injured the other driver, your CTP insurance policy should cover the cost of their hospital stay.

This insurance policy covers the cost of repairing property damage to third parties that results from a car accident where you are at fault. However, it won’t cover repairs to your own vehicle or possessions.

So for example, if you were to crash into another car, this policy would cover the cost of repairing the other driver’s vehicle. It could also help cover the cost of repairs if you were to knock over a letterbox or a garden fence belonging to a third party.

This policy also covers third party property damage, but goes further to also cover the cost of repairing or replacing your car if it is damaged or destroyed in a fire, or if you are the victim of a crime and your car is damaged or stolen.

Some of these policies may also cover the cost of replacing your car’s contents if they are stolen (from electronics to CDs to sunglasses), though you should read the Product Disclosure Statement (PDS) and check with the insurer to be sure.

A comprehensive car insurance policy offers the highest level of cover, and typically comes with the highest price tag. This policy also covers damage to third party property, fire and theft, but also covers your own vehicle. So, whether your car crashes, bursts into flame, or is stolen, your comprehensive policy should cover your costs.

As the old saying goes, you get what you pay for. The more coverage, features and benefits a car insurance policy offers, the more your premiums are likely to cost. You may be able to save some money by opting for a more basic car insurance policy, but you’ll run the risk of finding yourself underinsured when you need it most. 

Other factors that affect your car insurance premium include your age and driving history, the car you’re insuring, and where it will be garaged.

Some strategies you could consider to help lower the cost of your car insurance premiums include:

Your excess is the amount you agree to pay out of your own pocket when making a claim, with the insurer agreeing to cover costs in “excess” of this amount. For example, if you have a $1000 excess and your car requires a $5000 repair following an accident, the insurer will cover $4000 of these costs.

Most insurers will allow you to adjust your excess. Choosing a lower excess means the insurer will cover more of your costs if you make a claim, but you’ll likely need to pay a higher premium. Similarly, choosing a higher excess means more of each claim you make will come out of your own pocket, but your car insurance premium should be lower.

Several car insurers offer a no-claim bonus, where you get a discount for holding the policy for a length of time without making claims. In some cases, the longer you hold the policy, the greater the discount you’ll receive.

In some cases, you may decide that it’s better to cover the cost of minor car repairs yourself rather than making an insurance claim, if that’s likely to lose you your no-claims bonus.

Some car insurance policies (particularly comprehensive policies) offer a variety of optional extra features and benefits for policyholders. This could include roadside assistance, excess-free windscreen replacements, or a hire car if you’re left without a vehicle after an accident.

While these optional extras can offer value in the right circumstances, they can also raise the cost of your car insurance premium. You may need to consider whether you’d prefer to enjoy these extra benefits, or extra flexibility in your budget.