Drive with confidence
Insuring your car can give you peace of mind if things go wrong,
but it's important to choose the right type of insurance to suit
Here we explain the different levels of cover, how to choose,
and how factors like your age can affect the cost.
Types of car insurance
Main types of car insurance
There are four main types of car insurance:
- Compulsory third party (CTP) insurance - Also
known as a 'green slip', this covers death and injury to people if
you are involved in an accident. Each state and territory has
different rules about this type of cover, so check your state or
territory traffic/transport authority for more information.
- Third party property insurance - Covers the
repair costs of property damage your car causes. Some policies also
include an 'uninsured motorist extension' that covers you if you
are in an accident caused by another driver, and they are not
- Third party property, fire and theft - Covers
damage to other people's property and provides limited cover for
damage to your own car caused by theft or fire.
- Comprehensive car insurance - Covers damage to
your own car and other people's property if your car is in an
accident (including fire) as well as theft.
The table below shows the coverage offered by different types of
||Damage to your car
||Damage to other people's property (e.g. other cars)
||Damage or loss caused by theft of your car
||Injuries or death to other people in an accident
|Compulsory third party
|Third party property
|Third party property, fire and
Other types of car insurance
- Add-on insurance - Offered by car dealers and
may include gap insurance, consumer credit insurance, or breakdown
insurance. Some of this insurance is not very good value and you
may already have some of this cover. Find out more about
the insurance extras sold by car
- Usage-based insurance - Insurers track your
driving habits using technology installed in your car. They will
track things like your speed, distance travelled and how hard you
brake and accelerate. They may also consider where your car is
driven and where it is usually parked. Your premium is then
calculated using this information.
- Pay as you drive (PAYD) insurance - The
premium is based on the number of kilometres you expect to drive in
the coming year. If, during the year, you think you will drive
further than planned, you can 'top up' your kilometres for an
additional cost. However, if you exceed your elected kilometres and
don't tell the insurer, your level of cover may be reduced.
Need help to factor in the ongoing costs associated with buying
MoneySmart Cars app
Car insurance for people on low incomes
If you are on a low income or your car is not worth much, it's
still worth insuring if you don't have the money to replace it.
Good Shepherd Microfinance has worked with insurance companies to
create affordable and simple insurance policies for cars worth up
to $5,000. These policies have flexible payments options and
premiums can even be deducted from some Centrelink benefits.
Find out more about the Good Insurance program on the Good Shepherd
What type of car insurance do I
By law you amust have CTP insurance.
On top of CTP cover, decide what level of additional cover you
need. Ask yourself:
- If I crash into a luxury sports car could I afford their
- Is my car likely to be broken into?
- How will I get around if my car is stolen or written off?
For most people, having (at least) third party property
insurance is the way to go because it means you won't have to pay a
hefty sum for someone else's damaged vehicle.
Case study: Richie's lack of car insurance gets him into
Richie decided not to get any extra insurance on
top of his CTP because his car was very old. A few months later, he
hit a brand new sports car, which needed $20,000 worth of
Because he was not insured for damage to other cars, Richie had
to take out an expensive personal loan and work extra hours to pay
off the debt over 5 years.
How to choose a car insurance
Insurance policies for cars are based on
either 'agreed' or 'market' value. An agreed value policy has a set
dollar value for your vehicle. Market value policies value your car
based on the make, model and condition. The agreed value is usually
higher than the market value.
Here are our tips to get the best deal on your car
- Shop around and compare premiums for the same
type of cover.
- Weigh up the difference between having a high premium and low
excess versus the opposite. You may be able to save on your premium
by increasing your excess.
- Check if a no claim bonus is
really saving you money on your premium, or see if you can get a
better deal elsewhere.
- See what discounts an insurer offers if you bundle other types
of insurance with them.
- Consider adding security devices to your car, as this may
reduce the premium.
- Don't make unnecessary modifications to your car, as this may
increase the premium.
Car insurance for young drivers
The cost of insurance is determined by the level of risk your
insurer is taking on. As more young drivers are involved in
accidents than older drivers, most insurance companies charge a
higher premium for drivers under 25.
Young drivers may also have to pay an additional 'age excess'
when making a claim, so always check the policy carefully to see
what excesses might apply.
If you are a parent who lets a young driver use the family car,
you will have to pay extra insurance. It's important to tell your
insurer who uses the car, otherwise they may not pay for damage if
the driver has an accident.
Car insurance exclusions
Make sure you understand the level of cover before signing up.
Below are some typical car insurance exclusions to watch out
- mechanical failure, depreciation, rust and wear and tear
- damage caused because your car was unsafe or in a race
- intentional damage
- damage caused by an unlicensed, drunk or drug-affected
- damage caused by a driver who wasn't covered by the
Why you need to be honest with
your car insurer
Making a mistake in the information you give your insurer -
whether it's deliberate or not - can affect the premium you
pay and may result in a claim being rejected.
Inform your insurer if your circumstances change, as they could
also affect your premiums. For example, if you:
- modify your car (e.g. adding rims, tinted windows, woofers, or
lowering the car)
- move house
- have additional drivers
- start using your car for work.
Making a claim on your car
If you have an accident, contact your insurer straight away.
Depending on how serious the accident is, you may need to fill out
a police report. Get details from any other parties involved and,
if possible, take photos of the damage to the vehicles. When you're
making the claim, provide as much detail as possible.
Claims for some incidents may result in you paying multiple
excesses. Check your policy to see what your excess will be for
You should also check the wording of your policy to understand
the impact making a claim has on your no claims discount and
Motor vehicle accident problem solver
The Financial Rights Legal Centre's Motor vehicle
accident problem solver is a tool that helps you to navigate
your car insurance if you have an accident.
Selecting the right insurance for your vehicle
is very important and could save you lots of money if something
goes wrong. At the very least, consider getting third party
property cover so you don't end up in debt if you have an
Last updated: 10 Dec 2018