What is Car Insurance?

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What’s car insurance?

How does car insurance work in Australia?

Why might I need car insurance?

Is car insurance compulsory in Australia?

What are the main types of car insurance in Australia?

How do I choose the right car insurance policy?

How do I save on car insurance?

Where can I compare car insurance policies?

Long story short

Car insurance protects you from some of the unexpected costs of car ownership

It can cover accidents, theft, weather damage, towing, and even hire car costs.

Comprehensive cover offers the broadest protection for your car

It includes at-fault accidents, theft, natural disasters, and gives you the option to select optional extras.

CTP insurance is compulsory but only covers personal injuries, not property damage

Additional cover like comprehensive or third-party car insurance is optional but useful to have.

Compare policies regularly to find the right fit and potentially save money

Consider your budget, driving habits, and lifestyle to choose the best cover for you.

What’s car insurance?

Car insurance is designed to protect you from some of the unexpected costs around car ownership. If you get into a car accident, especially one with huge financial liabilities, car insurance could be something you can fall back on to help ensure you’re not indebted for a long time.

Depending on the type of policy you go with, car insurance might be able to cover:

• accidental damage involving your car
• weather damage
• replacing your car if it’s written off or stolen
• hire car costs after an accident or theft
• personal belongings stolen from your vehicle
• towing costs and trailer damage.

How does car insurance work in Australia?

Car insurance operates on a simple principle: you pay a premium for ongoing coverage over a policy term, which is usually 12 months. In return, you’re covered for a list of insured events, like if your car damages another car in an accident.

If an insured event occurs, you can make a car insurance claim on your policy. If your insurance provider accepts your claim, you pay any applicable excess. Then, the insurer steps in and – poof – makes it all go away (kind of!).

Of course, the details can be a little more complicated than that. So, here are some must-knows to help you wrap your head around car insurance.

Why might I need car insurance?

Two words: accidents happen – even to the most careful drivers. Not to mention damage from natural disasters, which, unfortunately, are a standard feature of living in some parts of Australia.

Then there’s the possibility of your car being stolen, given the worrying headlines around car-related crimes making the news far too often.

Without car insurance, you could be facing thousands in repair bills, liability costs, and much more should things take an ugly turn. Having the right car insurance to back you up can provide that peace of mind from knowing that you’re covered if the unexpected happens.

Is car insurance compulsory in Australia?

Yes, but only one sort: compulsory third-party (CTP) insurance is legally required to register your car.

CTP insurance covers injuries to people caused by your vehicle but doesn’t cover property damage or repairs to your car. Additional cover like comprehensive or third-party car insurance isn’t legally required, but it’s a good idea if you want to avoid expenses out of the blue.

Helpful tip

If you’ve bought yourself a brand-new car, getting comprehensive car insurance to cover it can work on many levels – one being a feature called ‘new car replacement’ cover. With this feature, if your new car is written off within a specified time or kilometre limit – say, two years from the day you bought it or before you’ve driven it 40,000 kilometres – your insurer might be able to replace it with a new one of the same or similar make and model.

Adrian Bennett

General Manager for General Insurance

What are the main types of car insurance in Australia?

Third-party property

Third-party property car insurance is basic coverage that takes care of damage your car causes to other people’s vehicles or property. A run-of-the-mill third-party property car insurance policy offers:

• cover for damage you cause to someone else’s vehicles and property
• cover for your own car (within a limit) only if it’s damaged by an uninsured driver
• usually no additional features (such as a hire car) nor optional extras. 

Third-party property, fire, and theft

Third-party property, fire, and theft insurance is what you could call mid-tier cover. It covers damage to other people’s cars or property, with a little something on the side for your own vehicle. A third-party property, fire, and theft insurance policy typically includes:

• cover for damage you cause to someone else’s vehicle and property
• cover for your own car for fire damage, if it’s stolen, or if it’s damaged by an uninsured driver (within a limit)
• usually fewer additional features and optional extras than comprehensive cover.

Comprehensive

Comprehensive car insurance is the highest level of cover you can get. Typically, a comprehensive policy could cover your car in the event of accidental damage, fire damage, theft, weather damage, vandalism, and more. It can also cover damage to other people’s motor vehicles and property. In essence, comprehensive car insurance includes:

• cover for damage to your car, even if you were at fault  
• cover for damage to other vehicles 
• a variety of optional extras. 

Compulsory third-party (CTP)

CTP insurance, or Green Slip if you’re in NSW, is mandatory for all registered vehicles. It’s meant to cover personal injuries to drivers, motorists, and pedestrians in a motor accident.

CTP insurance rules can apply differently depending on the state or territory you’re in. There are at-fault CTP insurance schemes that don’t cover the drivers who caused the accident. On the other hand, no-fault schemes offer full or partial CTP insurance benefits to anyone injured in an accident, including at-fault drivers.

Unlike third-party or comprehensive car insurance, CTP insurance cannot cover property damage. Another difference is that CTP insurance is tied to your vehicle and will transfer to the new owner if you happen to sell your car.

And it’s safe to say, you won’t have to rack your brains too much when choosing a CTP insurance policy, as the cover is pretty standard across the board. In some states, it’s even included in your car’s rego.

How do I choose the right car insurance policy?

Choosing car insurance can feel like ordering pizza – you’ll have to consider how hungry you are (how much cover you need) as well as toppings (optional extras) that do your taste buds justice!

But at the end of the day, you might want to pay a little more attention to the details of your insurance policy than to your pizza order. Car insurance is an important buying decision – after all, your car might be the biggest asset you’ll insure if you don’t own a house.

A great way to scope out whether a policy is right for you is to look at the target market determination policy document. In addition to that, here are a few other things to consider before you put your money down for a policy.

How do I save on car insurance?

Pay your premium annually

Going with annual payments means you pay for your policy up-front. It can work out cheaper overall than if you pay for your car insurance by the month or fortnightly.

Increase your excess

One way to potentially avoid higher premiums is by agreeing to pay a higher excess. Just be sure it’s an affordable amount so you don’t have any issues paying it if you need to make a claim.

Set driver restrictions

Possibly the riskiest part of driving a car is the driver themself. Restricting your car to only experienced drivers can help lower the risk taken by your insurance company and might result in lower premiums.

Keep a clean driving record

If you’ve made a few claims or you’ve broken a bunch of traffic rules, this can be a red flag telling you’re high risk. On the other hand, if you’ve kept a clean slate, insurers might decide to reward your safe driving with lower premiums.

Park your car in a secure place

The chances of your car being stolen or suffering damage due to, say, moving traffic or extreme weather are lower if you park it in a secure garage or under a carport – as opposed to on the street.

Compare policies regularly

Instead of going the set-and-forget route and sticking with one insurer, try shopping around regularly for better deals. After all, it doesn’t hurt to look, and it can be a potential game-changer if you want to pay lower premiums.

Where can I compare car insurance policies?

It’s true that comparing car insurance policies isn’t for the faint of heart. There’s heaps to take in and consider, from policy exclusions to optional extras to industry jargon. So, instead of hopping from website to website (or phone call to phone call) with multiple insurers and risking going down a rabbit hole, try our comparison tool and weigh up several policy options all at once. 

For a little more context, here’s a snapshot of what type of car insurance most people chose to compare with iSelect in 2024–25.

Also, be sure to give the product disclosure statement (PDS) and other policy documents a good read, so you’re sure about the cover you’re getting. And whether you choose comprehensive cover or a basic third-party policy, the right insurance can protect you from unexpected costs and give you peace of mind on the road.