Vehicle Insurance in Australia

There are several types of car insurance available. You should consider your own circumstances, as well as local and national stats, in order to establish the level of insurance you should have for your car. Some interesting facts to consider are:

  • Over 13 million passenger vehicles are on Australian roads.
  • According to a recent survey conducted by NRMA Insurance, one in six drivers confess that they wouldn’t leave their details should they hit your car when you weren’t there.
  • Nationally there were an average of 141 motor vehicle thefts per day in 2014/2015
  • One in three vehicle fires attended by NSW fire authorities in 2013/14 were stolen vehicles.
  • Around half of all collisions occurred in the afternoon between 12pm and 6pm.
  • The most common day to have a collision is Friday.

In order to make it easier to understand the scope of cover that each insurance policy provides, we’ve divided them into the three levels.

The Three Levels of Cover

Compulsory Third Party (CTP)

As the name suggests, CTP insurance is compulsory. It is a prerequisite for vehicle owners in Australia and you cannot register a vehicle in Australia without it. In most states and territories it is included as part of your vehicle registration fee but in some places it is an extra product that must be purchased when registering your vehicle.

CTP insures you, or any other driver of your vehicle, against liability for death or injuries you may inflict on other road users as a result of a motor vehicle accident for which you or the driver of your vehicle are at fault. Coverage extends to passengers of all vehicles involved in the accident, pedestrians and cyclists. In some places CTP will only cover third parties who are injured and not an at fault driver who is injured in a motor vehicle accident that they are responsible for.

CTP does not cover any damage to property that you may cause through the use of your vehicle.

Below is an example of what would happen if our friend, Harry, did not take out a separate motor vehicle insurance policy and instead drove his car with only CTP insurance:

  1. Harry crashes his 1985 VW into Paul’s 2015 BMW.
  2. Paul is injured and both cars are damaged.
  3. The injuries to Paul are covered by Harry’s CTP insurance. Any of his medical costs or damages are paid for by Harry’s CTP insurance provider.
  4. Harry has to pay for the cost of repairing Paul’s BMW which is NOT covered by CTP insurance.
  5. In the meantime, damage to Harry’s own car remains. Harry must find the money to fix it himself.

Third Party Property (TPP)

Third Party Property provides cover for property damaged by the policyholder’s vehicle but it does not provide cover for the policyholder’s own vehicle. You would usually take out this cover if you have a low-value vehicle that is not worth paying to insure but you don’t want to be liable to pay for the damage your car might do to a more valuable vehicle or other property that belongs to someone else. In most cases TPP also includes a clause covering damage to your car (usually up to a few thousand dollars) caused by an uninsured driver eg someone driving an unregistered car that crashes into you.

Below is an example of what would happen if our friend, Harry, takes out TPP cover:

  1. Harry crashes his 1985 VW into Paul’s 2015 BMW.
  2. Paul is injured and both cars are damaged.
  3. The injuries to Paul are covered by Harry’s CTP insurance. Any of his medical costs or damages are paid for by Harry’s CTP insurance provider.
  4. The cost of repairing Paul’s BMW is covered by Harry’s TPP insurance.
  5. In the meantime, damage to Harry’s own car remains. Harry must find the money to fix it himself.

Third Party Fire and Theft

This offers all the coverage included in a Third Party Property policy, as well as additional fire and theft protection for your vehicle up to a specified limit (as stated in your policy). This is a limited form of insurance that only covers you for fire damage to, and theft of, vehicles. It does not cover collision damage to vehicles.

As in the example above, Harry would be covered for damage to Paul’s car and Paul’s injury, but not his own car. In addition to the cover provided by TPP, Third Party Fire and Theft also gives Harry some peace of mind if his vehicle was stolen and recovered damaged, or stolen and set alight. He would be covered for the cost of repairs to it or he would receive the cash value for which it was insured.

Full Comprehensive Insurance

Comprehensive insurance offers the greatest peace of mind to vehicle owners. It covers the repair or replacement of your vehicle for events including theft, collision, fire, malicious damage and weather-related damage. It can also cover the repair and replacement of any other vehicles that are damaged by your vehicle in an accident, and damage to property but this will depend on your individual policy.

Comprehensive car insurance is highly competitive, with companies offering a wide range of inclusions and optional extras, ranging from windscreen protection to use of hire cars. Comprehensive Insurance is usually compulsory if your car is financed, that is, you have borrowed the money from a bank or lender to pay for the car. The loan is considered to be a secured loan which has an asset attached to it, therefore the asset must be fully insured just in case something bad were to happen to it.

Using the same example as before, Harry would be covered for damages to Paul’s car, Paul’s injuries as well as the damage to his own car. Comprehensive insurance is the top insurance policy you can get for your car and is highly recommended.

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