- Every driver in Australia needs to have insurance that covers injury or death to another person from a traffic collission they caused.
- On top of that, drivers can add other insurance that covers them for other circumstances.
- It's usually advisable to get comprehensive insurance so you're prepared for every eventuality.
There are a few different types of car insurance available in Australia, all covering different things.
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CTP Insurance
Compulsory third party (CTP) insurance is the legal minimum for car insurance required in Australia, hence the name. In NSW CTP insurance is referred to as Green Slip insurance, while in the ACT it's called the Motor Accident Injuries (MAI) scheme and works slightly differently, but the principle is the same.
CTP covers drivers for injuries or deaths caused in an accident they are responsible for. Importantly it doesn't cover you for any damage to your vehicle or someone else's, just injury to the person.
You generally pay CTP or MAI insurance as part of your registration, except for in NSW where you need to organise it separately. In Queensland and South Australia generally can choose between a few different insurers, who by law are required to offer the same policy of insurance, but can compete on price. In Victoria, Western Australia, Tasmania, the ACT, and the NT, CTP/MAI insurance is handled by the state government or government owned entities rather than by private insurers.
Third party property insurance
Third party property insurance (TPP) covers damage caused by your vehicle to other vehicles or property when you're at fault. Hence the name, it only covers third parties, so if your own vehicle is damaged you'd have to pay for the repairs yourself if you only have TPP. Some insurers will also cover potential legal costs that arise from disputes after an accident.
Third-party fire and theft
Third-party fire and theft (sometimes called third-party property, fire and theft) covers you for everything that third-party property insurance does, plus damage to your vehicle caused by fire or theft.
As you'd expect given the expanded coverage, adding fire and theft to your third party cover usually means paying higher premiums.
Comprehensive
Comprehensive insurance covers everything third-party, fire and theft covers, as well as other circumstances your vehicle could get damaged in including a collision where you're at fault. The Product Disclosure Statement provided by your insurer (which it's legally required to do) will outline what you're covered for exactly, but in general it will include damage to your vehicle from an accident you're at fault in, weather damage like hail, vandalism, etc. Some insurers have flood cover as an optional extra you have to pay more for, while others will have it included.
Depending on your policy you can also have optional extras like roadside assistance, hire cars and no excess windscreen replacement added, which can present extra value.
There still may be some things comprehensive insurance won't cover - for example, many insurers specify the coverage doesn't apply if the damage is caused by war or civil unrest.
What’s covered by each type of car insurance?
Type Damage to your car Damage to other people’s car/property Damage or loss caused by theft/fire Injuries or death to other people in an accident CTP NO
NO NO YES Third-party property NO
YES NO NO Third-party property, fire and theft NO YES YES NO Comprehensive YES YES YES NO
How much does car insurance cost?
Comprehensive insurance can be expensive. The Australian Automobile Association’s AAA March 2024 Transport Affordability Index found the average annual cost of comprehensive car insurance in Australia's eight state/territory capitals was $2,632.
Below are the average car insurance costs in each capital city:
| Rank | City | Average annual insurance cost |
|---|---|---|
| 1 | Melbourne | $3,501 |
| 2 | Sydney | $3,282 |
| 3 | Darwin | $2,660 |
| 4 | Canberra | $2,549 |
| 5 | Brisbane | $2,395 |
| 6 | Adelaide | $2,335 |
| 7 | Perth | $2,267 |
| 8 | Perth | $2,069 |
| Capital Average | $2,632 |
Source: Australian Automobile Association Transport Affordability Index (2024)
Savings.com.au’s two cents
In every state or territory you're legally required to get CTP or MAI insurance. Beyond that it's up to you, but you probably won't find many people that recommend going without third-party insurance at the very least. No matter how safe a driver you think you are, you can't be sure something won't happen, so comprehensive cover is nearly always a good idea. Some lenders will even refuse to write a car loan without adequate insurance.
What else affects your premiums?
There are a few other factors that can affect how expensive your insurance premiums will be:
The excess
Some policies allow you to adjust your premiums and your excess - pay a higher excess and lower premiums or the other way around.
The excess is what you have to pay when you make a claim. It usually only applies if you're at fault, although you may have to pay excess if you were at fault if your insurer can't recover the costs from the driver who was at fault.
Increasing your excess can lower your premiums, but you might live to regret it if you do end up having a bad accident.
What drivers are on the policy?
The listed drivers on the policy can also have a big impact on premiums. More drivers usually means more expensive premiums, while it can also be more expensive to insure higher risk drivers. A history of accidents or temporary bans from driving might mean paying more, while men under 25 are also typically deemed higher risk.
Market value and agreed value
When insuring your car you may have the option to insure the car for either 'market value' or 'agreed value'. Market value is the value your vehicle would fetch on the open market, while agreed value is a fixed sum you agree with your policy provider when the policy gets written.
Agreed values can mean higher premiums, but you'll have greater peace of mind over your payout should you lose your car. Market value might have a lower premium but you might get less of a payout than you're expecting.
How are my premiums calculated?
A premium is the amount you pay an insurer for insurance cover and reflects the insurer’s estimation of how risky you are to them. How premiums are calculated differs between each insurer, but some of the things commonly taken into account are:
- The type of insurance you’ve taken out, its excess and optional extras
- The age and gender of the driver/s
- The driver record and insurance history of the driver/s
- How many drivers are to be covered
- The make, model and year of the vehicle being insured
- Where the vehicle is stored overnight and in the day
- Whether the vehicle is used for private or commercial use
- Modifications to the vehicle
- Whether you have nominated a market or agreed value for your vehicle
How can I reduce my premiums?
There are plenty of ways to reduce premiums, including:
- Driving less often
- Only having one driver insured to drive the vehicle
- Parking your car in a garage or off-street parking
- Maintaining a clean driving record
- A higher excess
- Insuring for market value instead of agreed value
