Compulsory Third Party (CTP) Insurance: What it is and how it works in Australia

What does CTP insurance typically cover?

In short, CTP insurance provides compensation for any third parties who are injured or killed if the insured vehicle is involved in an accident¹. This includes not only other drivers and pedestrians, but cyclists, motorcyclists and passengers as well. As the name suggests, CTP is a compulsory insurance.

The type of compensation available covers  losses, such as hospital, medical and rehabilitation costs, as well as loss of income. The compensation is however limited and there are a number of factors which determine the outcome of any payments made.

In a covered event, the at-fault party’s CTP insurance will typically pay damages. CTP insurance often covers a number of things other policies won’t, such as²:

• Blameless accidents (for example an accident caused by a medical issue, animal, or other unavoidable circumstance);
• Bulk Billing arrangements;
• Accident notification provisions (An early payment provision to cover loss of income).

Keep in mind, the at-fault party is generally not entitled to receive the same benefits as parties impacted by the accident.

What is generally not covered by CTP insurance?

It’s important to remember that CTP doesn’t cover damage to your vehicle, or to any other vehicles or property involved. Nor does it cover damage to your property or damage caused by your car under various other circumstances. To be covered in these instances, you’ll typically require some form of Comprehensive, Third Party Property, or Third Party Fire and Theft insurance, which will come with additional costs.

The party at fault generally cannot claim any of the following under their CTP cover.

Is CTP insurance the same across every state?

While CTP insurance is compulsory throughout Australia, the process, providers and requirements vary across different states and territories. That being said, coverage is the same within each state regardless of provider.

In most states, your vehicle registration fees actually include the cost of CTP insurance. If this is the case in the state you live in, you’re already sorted. In Queensland, NSW and the ACT however, CTP insurance isn’t included with your rego, so you’ll need to research and select your CTP insurance provider. Keep in mind that you’ll need to purchase it prior to renewing your registration.

In Western Australia, and Victoria, your annual registration fee covers your CTP premium with Western Australia’s Motor Injury Insurance Scheme (MIIS) and Victoria’s Transport Accident Commission (TAC) being the sole providers in each state.

So, in summary, your CTP Insurance options are limited depending on what state you’re in, but hopefully you now have a better understanding of what’s required.

How are CTP insurance premiums calculated?

As previously mentioned, CTP is mandatory which means it’s the most basic form of cover and the most affordable as there’s a set allowable price range that all CTP policies must fall within. This price is determined by assessing the risk level of a vehicle and its driver and adjusting the cost to suit. There are a number of factors that can influence this³:

Location and vehicle type:

This is really the same as any other type of vehicle insurance. Firstly, some suburbs or regions are considered a higher risk than others, and the same goes for the vehicle itself. Motorcycles are generally cheaper to insure, cars are more expensive and trucks even more expensive again. Metropolitan areas tend to be cheaper than rural locations and prices also tend to differ from state to state.

Business vehicles are also generally deemed a higher risk due to being on the road for longer periods than private vehicles, while a car parked in a garage is ‘safer’ than one parked on the street.

Beyond the vehicle and location in which it is located, there are also individual risk factors that come into play.

Individual risk factors:

If you’ve ever owned a vehicle in the past, you’ve probably been asked these questions when getting an insurance quote. It’s no different for CTP. Some of the factors insurers will consider are:

• Your accident history;
• Your age;
• The age of your vehicle;
• Whether you have comprehensive property insurance or third party;
• The primary use of your vehicle;
• Whether you’re renewing a policy or taking out a new one.

Generally, the safer you’re deemed to be, the cheaper your premiums could be.

If it’s an option in your state, it’s worth shopping around for CTP insurance. Each insurer calculates their risk factors differently, so your first quote may not always be the lowest.

What are the risks of not having CTP insurance?

First and foremost, you’d be breaking the law. If you’re found driving without it, you could face a heavy penalty. And where in the past you might have gotten away with it, if your vehicle is picked up by a traffic camera it could be identified as unregistered or uninsured, so the risk really isn’t worth it.

And if the worst happened and you were involved in an accident, you’d be solely liable for any damages or injuries suffered by the other party.

Do you need to purchase additional insurance on top of CTP?

If we’re talking legal requirements, then no; CTP is the minimum level of insurance required to own and drive a motor vehicle in Australia. And while having the bare minimum will get you on the road, it can still leave you exposed if anything unfortunate were to happen.

As we’ve touched on, CTP can cover any personal injury claims from an accident you’ve caused. But it doesn’t cover the damage to your or anyone else’s vehicle or property. Given that vehicle damage is the most common claim made in any form of vehicular accident, it’s wise for anyone owning a vehicle to seriously consider Third Party Property, Third Party Fire & Theft or Comprehensive insurance in addition to their CTP. iSelect can help you compare Comprehensive Car Insurance policies from our range of  policies and providers.

Sources:
1. https://moneysmart.gov.au/car-insurance/choosing-car-insurance
2. https://www.greenslips.com.au/about-greenslips/third-party-insurance.html
3. https://www.greenslips.com.au/about-greenslips/setting-prices.html

Last updated: 11/12/2020