Different types of car insurance explained
Learn what each level of cover offers
Expert tips for choosing the right type of car insurance
Compare the Market’s car insurance expert, Adrian Taylor, has these tips for car owners looking to choose a level of cover for their vehicle.
Adrian Taylor
Executive General Manager – General Insurance
Consider adding a fully comprehensive cover to your car
Even if you use your car infrequently, having complete cover will save you money if you accidentally get into a car accident with another motorist or damage someone’s property whereas other levels of insurance could leave you having to pay out of your own pocket for any expenses.
Consider adding optional extras to your policy
Even with comprehensive cover, your car may still be vulnerable to being completely insured, if, for example, you are towing a trailer you would want covered or you are letting younger family members use the car safely with cover in case they have an accident.
Increase your excess to decrease your premium
Raising your standard excess payment on your policy reduces your upfront premium (this is not always available for every level of cover). Before you make any big changes, though, ask yourself: if you raise the excess, would you be able to afford to pay the higher price during an insurance claim?
Make sure you compare at least every 12 months
Every 12 months you should be comparing your existing car insurance policy and not just when you receive your renewal notice. What was a great deal for you 12 months ago may now be surpassed by a better deal in the market.
Always read a policy’s PDS for all restrictions and exclusions
As there are three different types of car insurance that offer varying degrees of cover, it’s vitally important to read the Product Disclosure Statement (PDS) and Target Market Determination (TMD) to make an informed decision for your individual needs.
The different types of car insurance
What is comprehensive car insurance?
A comprehensive car insurance policy insures your own car for a wide range of events and incidents that can damage it, potentially helping you to minimise costly out-of-pocket expenses if something happens to your vehicle.
Being the top level of car insurance out there, comprehensive policies typically have a higher insurance premium compared to third party car insurance and other policies. They do have a much wider range of benefits for this higher price, such as accidental damage and hail damage, in addition to what’s included in the other, lower types of car insurance. You might also have the choice of paying for extra benefits that can extend your cover.
If you have a luxury vehicle, an older classic or a collectible car, it would pay to look into a comprehensive policy as some will provide for an agreed value. This should give you some comfort that it is insured for its true value should it be damaged in an accident. Not all insurers can cover you for a rare vehicle, but out of all the insurance options, comprehensive cover is the one that provides the broadest cover if it’s damaged.
What is Third Party Fire and Theft insurance?
Third Party Fire and Theft (TPFT) insurance covers your liability for damage your car causes to other people’s property and motor vehicles. It also provides coverage for your car if it’s stolen, damaged due to an attempted theft or a total loss destroyed by fire. Depending on your policy and insurer, you might be covered for the cost of a hire car if your vehicle is stolen.
What is Third Party Property Damage insurance?
Third Party Property Damage (TPPD) is the lowest level of car insurance and covers you for damage you cause to other vehicles and property. It doesn’t cover your own vehicle for any damages or losses, except in very limited circumstances (e.g. the accident was caused by an uninsured driver).
What is Compulsory Third Party insurance?
Compulsory Third Party (CTP) insurance covers the costs of injuries or deaths as a result of a road accident you’re liable for. It’s something all cars in Australia must have and is usually part of your registration; in NSW, though, it’s purchased as a separate policy and is known as Green Slip insurance.
In some states (such as QLD, NSW, the ACT and SA), drivers have the option of choosing their CTP insurer when paying for registration. In other areas, such as the NT, there is only one option.
Car insurance coverage by type
The table below provides a quick visual breakdown of the key events that are covered by the different types of car insurance. Keep in mind that there can be other benefits and features covered by car insurance too, as well as exclusions and limitations to your cover.
| Type of incident | Comprehensive | TPFT | TPPD | CTP |
|---|---|---|---|---|
| Damage to your vehicle from an accident | ✔ | ✖ | ✖ | ✖ |
| Damage to other vehicles and property | ✔ | ✔ | ✔ | ✖ |
| Theft | ✔ | ✔ | ✖ | ✖ |
| Fire damage | ✔ | ✔ | ✖ | ✖ |
| Storm damage | ✔ | ✖ | ✖ | ✖ |
| Flood damage | ✔ | ✖ | ✖ | ✖ |
| Liability for the injury or death of others | ✖ | ✖ | ✖ | ✔ |
Be sure to read the PDS of any policy before purchasing for details on exactly what’s included, as well as the TMD to check if the policy is suitable for you.
Car insurance extras, features and options
Car insurance optional extras
While car insurance policies have built-in coverage that comes as standard, you might be able to purchase optional extras for more coverage. Examples of these add-ons can include:
- Hire car after an accident. If your vehicle is out of commission (either stolen or damaged in an accident), this benefit can provide you a temporary replacement car while yours is being replaced or repaired.
- Windscreen excess cover. Windscreens can get damaged easily, so having this extra could help reduce the excess or waive an applicable excess.
- Roadside assistance. To help you get your car moving again or towed to a mechanic if it needs to be fixed. It’s also sometimes available as a separate, standalone policy.
The optional extras available to you will depend on the varying types of car insurance you have and your insurance provider, and some of these typical extras might come as a standard feature in your insurance policy. Always read your insurer’s PDS for specific information on what’s covered by your policy.
Discounts and policy choices
You may have some choices when taking out your car insurance which allow you to tailor your policy. This includes things such as:
- Adjusting your excess. Depending on your car insurance policy, you may be able to choose the amount of your excess. Just remember that while reducing your excess may save you money on your claims, it will cost you more in premiums.
- Low kilometre policies. If you don’t drive your car often, you might be able to restrict the number of kilometres you drive on your policy to reduce the price of your insurance.
- Restricted age drivers. To save money on higher premiums, you can restrict people under a certain age from driving your car.
- Online discounts. Some insurers offer discounts if you purchase your policy online. Be mindful that these discounts usually only apply for the first year of holding the policy.
Also, you may have a no claims discount (NCD) based on your driving history, which can help you save money on your car insurance.
Meet our car insurance expert, Adrian Taylor
As Executive General Manager of General Insurance at Compare the Market, Adrian Taylor is passionate about demystifying car insurance for consumers, so they have a better understanding of what they’re covered for. Adrian’s goal is to make more information available from more insurers, to make it easier to compare and save.