How Does Car Insurance Work In Australia

Car insurance is a type of insurance that covers you when driving a motor vehicle, helping you meet the costs of any damage to your own car or others in the event of an accident.

In Australia, car insurance is a mandatory requirement to drive legally on Australian roads. At a minimum, you are required to have compulsory third-party (CTP) insurance, however, there are other levels of insurance you can choose depending on your needs and budget.

While many people think motor accidents are the only reason to take out a car insurance policy, that is not the case.

Depending on the level of cover you choose, a car insurance policy can also offer you protection if your car breaks down, such as roadside assistance or emergency accommodation; monetary reimbursements if your car is broken into, and valuables are stolen; and even a new car replacement if your car is written off.

How to Find The Best Car Insurance

Taking out car insurance might be the least glamorous part of purchasing a new car, but it’s essential to protect you and your wheels while on the road.

By paying your car insurance premium each year, you’ve essentially struck a deal stating your insurance company will cover costs related to car accidents and mishaps so you don’t have to foot the bill (within the parameters of your policy, of course).

The key to finding the best car insurance is to scout out a policy that meets your needs at a competitive price. But with inflation driving up the cost of living, this is becoming difficult. In the year to March 2022, the Australian Prudential Regulation Authority recorded premiums across the general insurance industry (which includes car, home and contents insurance) rising by a massive 11.7%.

As we juggle ballooning grocery bills and petrol prices, it’s more important than ever to get the right information on the best deal on car insurance. So, here’s everything you need to know about choosing the right policy for you, cutting down insurance costs while keeping you covered on the roads.


What are the Different Types of Car Insurance?

There are four basic levels of car insurance in Australia:

Compulsory third-party insurance

Compulsory third party insurance (CTP)as the name suggests, is a mandatory requirement for driving on Aussie roads. What it’s called, its price and how you apply for CTP varies across the states and territories, but it broadly covers costs related to injuries or death in motor vehicle accidents.

In NSW, ACT, Queensland and South Australia, CTP is underwritten by private insurance companies. This means prices can differ depending on which provider you choose. Meanwhile, in Victoria, Western Australia, Tasmania and the Northern Territory, it goes directly through the relevant state government and is automatically included in vehicle registration costs.

Insurance is complicated, so be sure to check exactly who is covered (i.e. the at-fault driver vs all impacted parties) by CTP in the state where you live, as well as any limits on how long that coverage lasts as well as dollar caps.

Third-party property damage

This is the most basic and cheapest coverage type. It only covers damages you cause to other vehicles or property while driving, not your own car. If you think the value of your wheels doesn’t justify a pricer policy, but want to ensure you’re not footing the bill if you prang a Porsche, this option may suit you.

Third party fire and theft

This may be a great coverage option for those seeking to cover damage to their own car as a result of damages specifically caused by fire or theft with this policy. It could be useful for those living or driving regularly in high crime-risk areas, especially if you park your car on the street.

Comprehensive insurance

While they differ between providers, these policies cover a broad set of situations that may damage your car, as well as damages to other people’s vehicles and property.

It’s the highest tier of car insurance, but that doesn’t mean it covers everything – be sure to read your product disclosure statement (PDS) for exclusions that may void your policy.

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