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Types of car insurance
Types of car insurance
Written by
Kervin Mathew
Edited by
Andrew Kemp
Reviewed by
Adrian BennettCompare car insurance policies the easy way
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Long story short
Three types of car insurance can cover property damage
Third‑party property, third‑party fire and theft, and comprehensive cover protect cars and property.
Compulsory third-party (CTP) insurance is legally required to register your car
CTP insurance only covers injuries or deaths caused in a car accident but won’t cover damage to your car or someone else’s car.
The level of cover you choose affects both protection and cost
Comprehensive cover offers the maximum protection but comes with higher premiums.
What are the different types of car insurance?
In Australia, three types of car insurance can cover damage to cars or property: third-party property, third-party property, fire and theft and comprehensive. Compulsory third-party (CTP) insurance covers liability for injuries caused by an accident and is mandatory for all drivers.
While you need CTP when driving anywhere in Australia, it’s worth remembering that it won’t cover damage to your own car or someone else’s car. iSelect doesn’t compare CTP insurance policies, but we can help you weigh up other types of policies, including comprehensive car insurance.
Third-party property
Third-party property car insurance mainly helps cover the repair or replacement costs for accidental damage to other people’s cars or property. A third-party property policy won’t cover your own car in an at-fault accident, but it can offer limited cover (say, up to $5,000) for accidental damage caused by an uninsured vehicle.
As a cheaper car insurance option, a third-party property policy might suit someone who’s willing to cover the cost of repairing or replacing their own car after an accident while avoiding the risk of having to cover somebody else’s more expensive ride.
Third-party property, fire and theft
Third-party property, fire and theft insurance has everything found in a third-party property policy while adding accidental damage to other people’s property and cars. While it doesn’t cover damage to your own car, it can offer protection if it’s stolen or damaged from attempted theft or fire.
Third-party property, fire and theft cover might suit someone who can ‘self-insure’ for accidental damage to their car, but lives in an area prone to car thefts or bushfires. And like third-party property cover, a third-party property, fire and theft policy also offers a limited amount of cover if your car is damaged by an uninsured vehicle in an accident.
Comprehensive car insurance
Comprehensive car insurance provides the highest level of protection, helping cover your car’s repair or replacement costs either after an accident or theft. It can also help with costs related to third-party property damage and is the only type of car insurance that can cover your car for damage due to weather events, vandalism and at-fault accidents.
While it’s unlikely to cover you for everything under the sun, a comprehensive policy might offer exclusive features such as new car replacement. Some insurers even offer optional extras such as a hire car following an at-fault accident or choice of repairer, which allows you to pick your own mechanic for repairs.
CTP insurance, also known as a Green Slip in New South Wales (NSW), is a mandatory form of insurance for all cars registered in Australia. It can help cover personal liability and compensation claims made against a person who accidentally injures or kills anyone while driving.
CTP insurance premiums are usually included in car rego costs, but in NSW, for instance, you’ll need to get a Green Slip before you register your car. If your state or territory requires you to buy CTP insurance separately, you can do so from insurance providers licensed by your CTP insurance regulatory authority.
Whatever the type of car insurance, there are bound to be limits or exclusions to the cover it offers. It’s worth checking the Product Disclosure Statement to find what car insurance covers before you decide the level of cover you need.
| Car insurance type | Damage to your car, including accidents, fires, floods and storms | Damage to someone else’s car or property | Damage or loss due to theft or attempted theft of your car | |
|---|---|---|---|---|
| Third-party property | No | Yes | No | No (but covered by your CTP) |
| Third party property, fire and theft | Loss or damage from fire only | Yes | Yes | No (but covered by your CTP) |
| Comprehensive | Yes | Yes | Yes | No (but covered by your CTP) |
| Compulsory third-party (CTP) | No | No | No | Yes |
Helpful tip
When deciding on the level of cover you need, bear in mind that comprehensive insurance can be more expensive, but it gives you access to many more benefits than third-party policies. There’s also a way to offset the higher costs, and that’s opting for a pay as you drive or low-kilometre policy, which offers a lower premium if you limit your driving to a certain number of kilometres over the policy term.
Adrian Bennett
General Manager for General Insurance
How do the different types of car insurance work in Australia?
Car insurance customers in Australia pay a premium in return for financial protection against unexpected damage to their car and others’ cars. The type of car insurance you choose will determine your level of cover and cost, with comprehensive policies offering the most protection while also having higher premiums.
So, if your policy covers you for an event like a car accident, you can make a claim with your insurer. The insurer will assess your claim and then may decide to pay for the repairs or to replace the car, depending on how severe the damage is. After a claim decision is made, you may be asked to pay an excess for your policy to kick in and do its thing.
How the car insurance claim process works
Here’s how a claim typically plays out:
- Before making a claim, you must first notify your insurer about the incident and collect as many details about it as possible.
- You can then submit a claim with your insurer along with other supporting documents and evidence you’ve collected. The insurer may then send an assessor out to assess the damage or other evidence related to the incident.
- Your insurer has 10 business days from the time you submit your claim to let you know whether they’ve accepted your claim, or to contact you and request for more information.
- If your insurer accepts your claim, you’ll need to pay any excesses that may apply to receive cover for repairs, replacement costs and other benefits such as a hire car, personal effects cover or similar. Your insurer will then provide the benefits specified under your policy’s terms and conditions.
If an accident isn’t your fault and involves another motor vehicle, it’s important to take photos of the accident, get the other driver’s insurance, licence and rego details, along with any witness accounts and contact details. If your car’s been stolen, your claim will require a police report as one of the supporting documents.
Key car insurance terms
Understanding some of the key terms in car insurance, such as premiums, excesses, agreed or market value, and optional extras, can help you decide on the level of cover you need as well as manage your policy.
Premiums
A premium is the amount you pay to be covered by car insurance over a policy term. Premiums are decided based on a range of factors like your age, the car you drive, where you live and your driving and claims history. You can generally expect to pay higher premiums for higher levels of cover. That said, you could lower your premium by choosing a lower level of cover or paying a higher excess.
Excesses
An excess is how much you pay out of pocket if you make a car insurance claim. For example, if your excess is $500, you’d need to pay $500 towards the cost of repairs after a crash, then your car insurance provider would pay the rest. There are usually two kinds of excesses: basic and additional.
Basic is the usual excess you’d pay to make a claim, while additional excess might apply under certain conditions, like if someone under 21 or who wasn’t listed on your policy had an accident while driving your car. You might not need to pay an excess if an accident was not your fault and the at-fault driver’s insurance covers your car.
Agreed value and market value
If your policy covers you for a total loss claim (that’s if your car is written off or stolen), your insurance provider needs to know what the vehicle was worth when calculating your payout. This could be what your car would sell for on the open market at the time of the claim or its market value, which is influenced by factors like its make and model, age, kilometres driven and condition. Agreed value, on the other hand, is a fixed price agreed upon between you and your insurance provider at the time you took out the policy that can at time be reviewed at renewal.
Optional extras
Comprehensive policies typically offer extra cover options that could add more value to your policy. At the same time, though, they may drive up your premium. As such, it’s a good idea to think carefully about which extras might work for you.
Popular optional extras on car insurance can include:
- a hire car if your car is being repaired after an at-fault accident
- reduced or zero window excess if only your windscreen or window glass is damaged
- choice of repairer if you have a preferred mechanic or repairer to fix your car after an accident.
Another popular extra is roadside assistance, but only some insurers offer it as a standard policy feature. Still, you can get roadside assistance as a standalone service from an independent provider or even through an insurance provider.
Where can I compare different car insurance policies?
You can compare a range of policies from well-known car insurance brands on a comparison website such as iSelect. Just use our online comparison tool to weigh up policy features and premiums side by side to save time and effort. If you’ve narrowed down your search to the policy you like, you can sign yourself up and get your car insured in minutes!
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