Choosing car insurance

Take some time to compare policies, to get the best price and protection with your car insurance.

Being without your car can be a huge inconvenience, so car insurance is a plan for when things go wrong. When you’re buying car insurance, take time to compare the cost and understand what is (and is not) covered by different policies

The types of car insurance

To decide which type of insurance will suit you, think about whether you can get by without your car if it's written off or stolen. Also consider if you can afford to pay for the damage to someone else's car if you have an accident.

1. Compulsory Third Party (you have to have this insurance)
2. Third Party Property Damage
3. Third party property damage, fire and theft
4. Comprehensive
5. Add on car insurances

1. Compulsory Third Party (CTP) 

This covers injuries to people caused by your car. Does not cover damage to cars or property. You must have CTP to register your car. In some states, CTP is included in your car registration costs so you don’t need to buy it separately.

2. Third Party Property Damage

This does not cover damage to your car but covers damage to other people’s cars or property caused by your car – which can really add up. Some policies allow you to pay extra to protect your car if it’s stolen or damaged by fire (see below).

3. Third party property damage, fire and theft

This includes the same cover as Third Party Property Damage (above), plus it covers your car if it’s stolen or damaged by fire.

4. Comprehensive

This covers damage to your car and other people’s cars or property, even if you caused the accident. Also covers your car if it’s stolen or damaged by fire or weather events. It won’t cover everything though – make sure you check what the exclusions are. With comprehensive insurance, you can choose how your car is valued. The value is the amount you'll get if your car is written off or stolen:

• Agreed value — a fixed amount that's decided by you and your insurer.
• Market value — the amount your car would have sold for, at the time of the accident.

If you use the market value, you don't know how much you'll get if you claim, and you can't change the amount. If you use an agreed value, you'll pay a higher premium.

5. Add on car insurances

There are some other car insurance products that cover specific things, like tyre and rim insurance. These are generally offered by car dealerships as ‘add ons’ to a car purchase. Be careful with these kinds of insurances as they can often be hard to claim on, or expensive compared to just fixing the problem yourself.

Ask yourself these questions...

Some questions ask yourself; to help choose the type of insurance that’s right for you.

• Can I afford to be without my car if it’s damaged, stolen or written off?
• Can I afford to repair or replace my car without insurance?
• Can I afford to pay for the cost of other cars or property that I accidentally damage?
• Is my car parked on the street, or at other higher risk of theft or vandalism?
• Do I have a car loan on this car, and could I afford to repay that loan if I also have to pay for another car?
• If my car is financed, is there a minimum level of insurance the lender requires?

Nathan's lack of car insurance gets him into debt

Nathan decided not to get any insurance because his car is very old.

A few months later, he hit a brand-new sports car, which needed $20,000 worth of repairs.

Because he's not insured for damage to other cars, Nathan has to take out a personal loan for $20,000 and work extra hours to pay off the debt over five years.

Cost of car insurance

The amount you pay each year for the insurance policy is called a premium. The insurer works out your premium taking into account the type and value of the car you’re insuring, who will be driving it, how often and far you’re driving it, where you live and where you’ll be keeping your car (e.g. in a garage or on the street).

And it’s also based on the type of insurance you choose and the excess (the amount you pay when you make a claim).

Some discounts you might receive include:

No claim bonus: Some policies include a no claim bonus. This means you pay a lower premium if you don't make a claim for a certain time. Read the insurance policy to understand what claims affect your bonus and if there are any limits.

Multi-policy discounts: Some insurers will offer a discount on the cost of your insurance if you have more than one insurance policy with them. For example, you might have your CTP insurance, your comprehensive insurance and home and contents insurance.

New customer discounts: Insurers are often keen to attract new customers and might offer a discount for the first year of the policy, or complimentary extra cover (for example, free roadside assist) to attract your business.

 Getting the best deal on car insurance

The cost of comprehensive car insurance rose 42% in the five years to June 2024. So, comparing car insurance policies is worth doing! The things covered and cost of the policy can vary a lot between different insurers.

Once you’ve decided on the type of car insurance you need, work through this checklist to help you get the best deal:

Compare the exclusions of different policies, to see what isn’t covered.

For example:

• mechanical failure, depreciation, rust, or wear and tear
• intentional damage (for example, vandalism)
• damage caused by an unlicensed, drunk, or drug-affected driver
• storm damage

Compare the inclusions of different policies, to see what is covered.

For example, some extras may be:

• free roadside assistance if you break down
• free towing, on-the-spot repairs, taxi fare, accommodation and car hire
• cover for personal items that are stolen from the car

Ask what discounts you’re entitled to. For example:

• No claim bonus
• Multi-policy discount
• New customer discount

Check if the insurer always charges an excess.

Even if an accident isn't your fault.

Decide what excess you can afford.

• Weigh up the difference between having a higher premium and lower excess, versus the opposite.
• You may be able to save on your premium by increasing your excess.

Insurance words to know

There’s a lot of words used in insurance policies that have a specific meaning. Here’s the basic meaning of some common ones.

Not sure where to start? Try the Insurance Council’s ‘find an insurer’ service to make a shortlist to compare.