Taking out car insurance and keeping it up to date is essential for any car owner. But what level of cover do you need to take out? And what other types of insurance are worth getting to make sure you, your loved ones and your car are all fully protected?
Understanding the different types of insurance on the market can be pretty confusing, especially if you’re new to car ownership. Here’s an overview of the types of car insurance available and what they cover you for. By being aware of your options, you can choose the right insurance to fit your needs and budget.
Compulsory Third Party (CTP)
Also known as Green Slip insurance in NSW, CTP insurance provides cover for legal liability for injury and death resulting from an accident for which you or the driver of your vehicle is responsible. Provided your vehicle is registered, your CTP policy will cover you for compensation claims made by other drivers, passengers, pedestrians and cyclists. These claims might include things like:
CTP doesn’t cover damage to your own or someone else's property. With a few limited exceptions, it also does not cover any injury the driver of your vehicle may cause to themselves.1
Your CTP insurance is linked to the car, not the driver, which means you need to take out CTP insurance for any vehicle you own that is registered in Australia. It then covers anyone who drives the vehicle anywhere in Australia.
CTP schemes differ from state to state. In New South Wales and Queensland, for example, you can choose your insurer, but other states and territories include the cost of CTP insurance in annual vehicle registration fees.2
Third Party Property Damage Cover
If you or the driver of your vehicle damages another vehicle or someone’s property while you’re driving, Third Party Property Damage insurance (also known as Basic cover) will cover any costs you’re liable for, up to the amount specified in your policy.
Many insurers give you the option to add Fire and Theft cover to your Third Party Property insurance, to protect you if your car is damaged by fire or stolen. This is also known as Intermediate cover.
Comprehensive
In addition to third party cover, Comprehensive insurance covers the cost of damage or loss, including theft, to your vehicle.
Although policies differ between insurance providers, taking out Comprehensive insurance can give extra financial security by also covering the cost of things like:
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transportation costs and towing
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emergency accommodation costs following an accident, or if your vehicle suffers malicious damage or is stolen
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a rental or loan car following an accident
When you're buying Comprehensive insurance, you may prefer a policy that allows you to use a repairer of your choice. Or you may prefer a policy that guarantees that only genuine manufacturer parts, whcih are engineered to precise specifications, will be used in the repairs.
Other insurance options
If you buy or lease a car with vehicle finance, there are ways to get even more financial protection through your finance provider. Options may include:
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Asset Equity Cover — to help bridge any gap between your insurance payout following a total loss and the balance on your lease or loan if your car is stolen or written off (up to the sum insured selected)
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Purchase Price Cover — to pay the shortfall, up to a specified limit, between the insurance payout following a total loss and the cost of your new car
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Loan Protection Cover — to help you or your family keep up with your car repayments if you lose your job, become seriously ill or injured, or pass away.
Remember, owning a car is a big investment, which is why it’s worth getting the right level of insurance. That way, you and your loved ones won’t be left out of pocket if the unexpected happens. If you buy your car from a dealership, be sure to ask the dealer about insurance options to suit your needs and budget.
1 In NSW, certain catastrophic type injuries are covered by the Lifetime Care and Support Scheme regardless as to whether the injured person was responsible for their injuries. The Motor Accidents Compensation Act in NSW also allows up to $5,000 worth of immediate medical expenses to be claimed by parties injured in a motor vehicle accident regardless as to whether they were at fault. In NSW and QLD, some CTP insurers also offer additional insurance to qualifying CTP customers that provides limited cover for certain severe injuries sustained by the driver at fault. This added benefit is offered at no additional cost.
2 ‘Compulsory Third Party/Greenslip Insurance’, Compare the Market, 2013.