Types of Car Insurance

Online Loans

November 2, 2020

‘You don’t need it until you really need it’. This sums up car insurance pretty well.

OnlineLoans explains the main types of car insurance in Australia and answers some common questions:

Types of Car Insurance
Other Car Insurance Information
Aussie Road Quick Stats
  • There are 19.8 million registered motor vehicles in Australia

  • The world average for road fatalities is 18.2 deaths / 100,000 people

  • Australia’s average is 5.4 deaths / 100,000 people

  • Speeding is the highest cause of road fatalities at 31%

  • Alcohol is the second highest cause of road fatalities at 19%

Compulsory Third Party (CTP)

What it covers: Medical expenses and treatment in the event you injure or kill another person
Payment: Paid with registration

Known as a Green Slip in NSW and Transport Accident Commission (TAC) in Victoria.

CTP is, hence the name, compulsory in all states and territories in Australia. The fees that drivers pay are used to pay for treatment and support for people injured in transport accidents.

This kind of insurance does not cover damage to property. In other words, in an accident that damages a vehicle and injures the occupants, only the medical bills for the occupants are covered, not the damaged vehicle.

Third-Party Property

What it covers: Damage to other vehicles or property
Payment: Typically monthly or yearly (not compulsory)

This form of insurance is not compulsory. It is often one of the cheaper insurance options as it does not cover your car or property in the event of an accident.

Drivers of low-value vehicles looking for cheap insurance options often select third party property insurance.

Third-Party, Fire & Theft

What it covers: Damage to another person’s property (as listed above), damage to your car in the event of a fire or if your car is stolen.
Payment: Typically monthly or yearly (not compulsory)

This type of car insurance covers damage to other vehicles and property, as in third party property insurance but also fire and theft.

For example, a fire in a garage where a car is parked or if a car is stolen and sustains damage or is written off. This insurance covers vehicles up to a specified dollar amount.

Comprehensive Car Insurance

What it covers: Third-party property, fire, theft and damage to your vehicle.
Payment: Typically monthly or yearly (compulsory for cars on finance)

This type of car insurance provides the most cover and is, therefore, the most expensive. If you’ve made your dream car a reality, this type of car insurance offers peace of mind.

It covers repairs or the replacement of your car for situations including accidents, theft, fire, malicious damage and even damage from the elements.

Comprehensive car insurance is compulsory for all cars on finance in Australia. When you purchase a vehicle using a car loan, you’re offered insurance options that last the life of the loan.

Car Insurance Extras

Many insurance companies offer other incentives to their clients. For example, a No Claim Bonus which provides discounts each time you renew your policy if you haven’t made any claims. Keep the value of your car high and avoid making claims for small things.

Other common extra features included in car insurance
  • Emergency accommodation. Covers accommodation expenses if you have an accident or theft far from home.

  • Hire car.

  • Personal property that was inside the car and got damaged or stolen.

  • Transport, towing and storage. Covers these expenses if your car is rendered unsafe to drive.

What can void car insurance?

There are certain conditions that car insurance policyholders must adhere to. Failing to meet these requirements can result in your insurance becoming void.

Here are some common situations that can void insurance
  • Driving without a licence

  • An illegally modified vehicle

  • Driving an unregistered vehicle

  • Accidents from participating in street racing

  • Intentionally lying to your insurance provider

  • Driving under the influence of drugs or alcohol

  • Driving an unroadworthy or overloaded vehicle

Drivers who have been previously convicted of any of the above may find it difficult to get insurance or be charged higher premiums.

How premiums are calculated?

A premium is basically the cost of the insurance policy. The cost reflects the risk to the insurer covering you and any administration costs.

A lot of data is needed to calculate insurance premiums. Here are some key factors:

Vehicle value
  • Replacing or repairing cars is an expensive business. Select the right car type for your lifestyle as the higher the car’s value, the more expensive the premium is. Insurance companies will have to pay to fix the damage if you make a claim. It can include expensive modifications and features too.

  • Where you keep your car makes a difference. Parking in a suburb with a high crime rate with many car theft reports raises the risk and insurance companies to increase premiums. Even malicious damage like smashed headlights is covered by some insurance policies so other kinds of crime, not just car theft, make a difference.

Tip: If you change address during your insurance cover, you may be entitled to a refund if you move to a safer area or may have to pay more. Always notify your insurance company if you move.

Claim History / Driving Record
  • If you’ve had any driving convictions or at-fault accidents, premiums are often more expensive. On the flip side, a clean driving record can keep premiums lower.

Driver Profile
  • Age and gender also play a part in calculating premiums. Insurers use their own data and data from the government. If they have data showing young males are more likely to be involved in accidents, these drivers will have higher premiums.

What is a Certificate of Currency?

This is a document, often a PDF, that confirms the details of an insurance policy. It states all necessary information such as the vehicle, commencement and expiry dates and your details.

These documents are things to consider when getting a car loan because finance companies require copies. When cars are bought on finance, the lending institution is listed as an interested party.

Car Insurance Conclusion

Car insurance is considered by many motorists to be a necessity. Having your car insured can really help when you need it. Arguably, comprehensive is the ‘best’ type of car insurance but it might not match your circumstances. Make sure to compare the offers available and take your vehicle and transport needs into consideration.

Car Insurance Stories

We asked some recent OnlineLoans customers about any past car insurance experiences they may have had – good and bad. Here are some standouts. Names have been altered to protect personal information.

I gave my insurer a thank you card – Jasmine, Canberra ACT

“I missed a scheduled car service by a few months which meant my car insurance was void. This was because I made a claim for accident damage but realised (to my horror) that the missed service meant my insurance wouldn’t cover me.

Luckily, they told me not to worry and covered all the accident damage to help me out. I went to their office and handed them a thank you card in person.”

I made a claim the day I got insurance – Antonio, Gold Coast QLD

“When I bought my first car, I organised third party property insurance only – I was a student at the time. That same day, I side-swiped a new Mercedes in a supermarket car park. The owner was nice about it but the damage bill came to about $8,000 – twice the value of my car!

Luckily, my insurance company didn’t try to back out of the policy (which was hours old) and paid for the Mercedes’ repair bill. My car never got fixed though!”

Hindsight is 20/20 – Sharon, Bendigo VIC

“Back in 2003, I didn’t have any insurance – only the compulsory one (CTP) with my registration. It was a huge mistake.

I got distracted and ran into the back of another car at a red light. The driver behind me also hit the back of my car. The pile-up was my fault. My car and one of the other cars were written off, the other one was badly damaged. The total bill was around $55,000, all of which I had to pay.

It took me about 14 years to get back to where I was before I got distracted for that one moment. Now, I always have the best comprehensive insurance available.”

Sign Up to the OnlineLoans.com.au Newsletter

Get offers, contests and promos delivered straight to you inbox