What are the Different Types of Car Insurance?

AF By Alexi Falson September 27, 2021

image for What are the Different Types of Car Insurance? Peace of mind when owning a car is something that is absolutely impossible without one form of car insurance.

It would be reckless to finalise a transaction the size of a vehicle purchase and not protect yourself financially as you move into the future, which is why car insurance is the common-sense approach to protecting your finances in the event of an accident, regardless of who is at fault. 

The problem with car insurance, however, is that it can often be difficult to tell exactly what you’re covered for, which is why we’ve put together this helpful list of things to understand while looking at different types of car insurance.

It’s important to note, though, that while the information on our list here covers the fundamentals of car insurance, it’s essential that you contact your insurer directly for their product disclosure statement (PDS) to get a clear picture of exactly what they’re willing to cover. Comprehensive policies, for example, will often include the main pillars of a comprehensive policy, however some insurers cover areas that other insurers are unwilling to provide protection for. 

Having said that, though, let’s start our overview of the different types of car insurance policies here in Australia, and see what you’re covered for. 

Comprehensive Insurance

Comprehensive insurance, as the name would suggest, is the most effective option when it comes to protecting your vehicle and your financial bottom-line in the event of an accident.

In a nutshell, comprehensive car insurance gives you the highest-level of all-inclusive protection for your vehicle. It’s a policy that covers not only your vehicle, in most cases, it will also cover any damage caused to another vehicle or property damage that you would otherwise be liable for paying in the event of an accident. 

This is in addition to cover in the event of extreme weather events like fire, floods and hailstorms, as well as vehicle theft and potentially coverage for towing and accommodation expenses in the event of an accident or breakdown and coverage for any valuable items left in the vehicle at the time of the accident or theft. 

Comprehensive insurance policies typically cover: 

  • Damage, repair, and potentially replacement costs for your vehicle 

  • Damage to another vehicle and property damage 

  • Protection in the event of a stolen vehicle 

  • Damage from extreme weather events like hail, floods and fires

  • Towing costs in the event of an accident or breakdown  

  • Coverage for any valuable items lost while stored in the car

  • Legal costs 

Third Party Fire & Theft 

Sitting below comprehensive insurance policies, third party fire and theft (TPF&T) policies still offer a broad range of coverage that can save you thousands in the event of an accident.

It’s important to note, however, that any damage incurred to your vehicle will not be covered by the policy, but if you were to have an accident involving a third-party’s expensive vehicle, your coverage protects you from serious financial harm. 

In a nutshell, third party fire and theft insurance will pay for damages to another vehicle in the event of an accident, but it also covers damage inflicted to your vehicle in the event of a fire, or if it is stolen.

TPF&F policies can also cover damages to your vehicle incurred by an unregistered vehicle, and both towing and accommodation costs, however, it’s important to check with your insurer to know exactly what you’re covered for. 

Third-Party Fire & Theft Policies Typically Cover: 

  • Damage to another vehicle in the event of an accident 

  • Damage to your vehicle in the event of a fire 

  • Protection if your vehicle is stolen 

  • Damages to your vehicle incurred by an unregistered vehicle or uninsured driver  

Third-Party Property Damage

Third-party property insurance policies offer less protection than third-party fire and theft, although they’re one of the most significant policies you can buy, considering just how much they can potentially save you. In short, a third-party property insurance policy will cover the financial cost to another person’s vehicle in the event of an accident that you’re deemed at fault for. It also covers the financial cost of damages to a third-party’s property if, for example, you were to damage someone’s house in the event of an accident.

They often also include protection for your vehicle in the event of an accident involving an unregistered vehicle, but again, this should be confirmed with your insurer in the product disclosure statement. They can also include legal costs and expenses from any liability proceedings that make their way to court, but again, check the PDS first. 

Third Party Property Policies Typically Cover: 

  • Damage to another person’s car 

  • Damage inflicted to a third-party’s property, for example, a house 

  • Damage to your vehicle that is the result of an uninsured driver 

  • Potentially legal costs and expenses of a liability court proceeding 

Compulsory Third Party (CTP) Insurance 

Compulsory third party, or CTP insurance, is an insurance policy that all road-goers must purchase in order to drive on Australian roads legally. While the name might change from state to state, the basics of the CTP scheme remain the same across the country. In short, CTP insurance covers the driver from financial liability in the event of an accident that causes serious harm, or even death to another road user. It’s important to note that the term road user encompasses not only other drivers, but pedestrians and cyclists that you share the road with.

This covers the cost of any hospital bills or rehabilitation costs of those involved in an accident, as well as financial protections stemming from the loss of work after an accident. Note that CTP insurance policies do not cover any damages incurred to another vehicle or property in the event of an accident. 

These CTP policies also change from state to state, so it’s important you check with your home state’s CTP coverage terms to get a full understanding of the coverage. 

Compulsory Third Party Insurance Policies Typically Cover:

  • Your personal liability for injuries and death to another road user 

  • Medical expenses and rehabilitation costs post-accident 

  • Post-accident payment covering lost income while recovering 

What are the main exclusions of car insurance policies? 

Typically, there are a number of problem areas that can cause an insurer to refuse payment when making a claim, if certain criteria in the product disclosure statement aren’t met. These include any damage inflicted to the vehicle that is intentional, or if the car doesn’t meet that state’s requirements for a road-worthy car at the time of an accident. Other exclusions include the presence of illegal drugs in the bloodstream, or a driver that is under the influence of alcohol at the time of the event in question. Finally, any damage inflicted to your vehicle or a third-party’s vehicle by an unlicensed driver is unlikely to be covered by any insurance policy. 

What is the Best Type of Car Insurance? 

The best insurance policy is entirely subjective, and remains dependent on your personal preference for coverage. If, for example, you have recently purchased a new car, comprehensive insurance is the most logical option, because it covers any damage inflicted to your vehicle, regardless of who is deemed at fault. For those that are driving a used car that is not too valuable, though, a policy like third party property could be the best option, which saves you from paying huge amounts of money in the event of hitting an expensive vehicle. We can see, then, that the ‘best’ type of car insurance remains circumstantial, however some of the most competitive policies will include benefits like no-claim discounts and electing your chosen excess amount. 

How can I save money on my car insurance? 

The best way to ensure you’re getting the best possible price for your insurance policy is to obviously get multiple quotes from multiple insurers, as well as look at modifying the policy in a way that can save you money. There are a number of online platforms that can help connect you with the cheapest insurer, and we’d encourage you to get a quote from every operating insurance company in Australia to get an idea of the pricing landscape for your policy. Other simple ways to save money on your car insurance policy is to potentially increase the excess that you’ll pay in the event of an accident, which can reduce your overall policy cost. 

What type of car insurance is cheapest? 

Compulsory third party (CTP) insurance is the cheapest form of insurance that you’re required to purchase in order to be a legal driver on the road here in Australia. For elective insurance policies, however, third party property policies are the cheapest type of car insurance due to their limited coverage terms. As a general rule, the more coverage on offer in the policy, the more expensive it will be, which is why comprehensive insurance policies are the most expensive form of insurance, but they offer the largest pool of benefits in the event of an accident. 

How can I make my car insurance quote cheaper? 

As we’ve already discussed, shopping around is absolutely essential in finding the cheapest car insurance quote. While you can’t change your driving history, there are, however, some other things you can do to minimise the cost of your quote across the board with insurers.

These include things like asking for multi-policy discounts, avoiding sports cars and performance vehicles, ensuring your vehicle is garaged, if possible, enquiring about pay-as-you-drive policies if you don’t drive very often, and even increasing your excess in the event of an accident. 

Have any questions? Call us on 1300 719 925