burger-menu icon close-icon

What are the different types of car insurance?

image for What are the different types of car insurance?

If you have forked out on a new set of wheels, to protect your asset, you may look to consider opting for car insurance - but which type of insurance should you choose?

If you have forked out on a new set of wheels, to protect your asset, you may look to consider opting for car insurance - but which type of insurance should you choose?

To protect you on the road, car insurance is an insurance policy designed to provide financial protection in the event of an accident or incident. In Australia, all cars registered are legally obligated to be insured with compulsory third party insurance (CTP) or green slip insurance as it is known in New South Wales.

While CTP insurance is the most basic level of insurance available, it pays to consider other options including:

  • Third Party Fire and Theft Insurance.
  • Third Party Property Damage Insurance.
  • Comprehensive Insurance.

These options can not only provide an extra layer of protection for your vehicle, but can provide peace of mind to you as the driver in the event an accident or incident occurs. Just some of the reasons why you should consider opting for car insurance includes coverage of medical bills in the event of an accident, costs of repairs, costs of damage inflicted to property, theft and fire protection.

Importantly, if you are purchasing a car with the help of a car loan, some lenders require you to have comprehensive car insurance in order to meet loan requirements.

Types of car insurance

Compulsory Third Party (CTP)

As the name suggests, CTP insurance is compulsory, paid at the same time as vehicle registration. CTP insurance covers the driver's legal liability for injury or death as a result of an accident for which the insured is responsible. This includes coverage for drivers, passengers, pedestrians, and cyclists.

It's important to note that CTP insurance does not cover any damage to vehicles or property resulting from a crash, nor does it cover any injuries sustained by the person who caused the accident. For this reason, drivers who choose to only pay for CTP should carefully consider whether they would be able to afford any necessary repairs or compensation for damages to their own car, property, or that of a third party.

Third Party Fire and Theft Insurance

Third Party Fire and Theft insurance provides coverage for the damage that you may cause to other people's property and motor vehicles while driving, as well as protection for your own car if it happens to be stolen, vandalized, damaged, or destroyed by fire.

Typically Fire, Theft & Third Party is worth considering if you: 

  • Live in a densely populated area.
  • Park on city streets.
  • Live in an area that is prone to fires.

Third Party Property Damage Insurance

Third Party Property Damage Insurance is similar to Fire and Theft, however as the name suggests, it doesn’t cover loss or damage to your own car by fire and theft. Instead, this form of insurance is structured to cover damage caused to a third party’s vehicle or property in a crash where you’re the at fault driver.

If your car is older high kilometres and signs of wear and tear, you may consider opting for Third Party Property Damage Insurance to protect your financesin the event that you happen to cause an accident as the at fault driver.

Comprehensive Insurance

Comprehensive insurance provides coverage for everything that is covered by third-party, fire, and theft insurance. It also covers the repair or replacement of your vehicle in the event of damage caused by almost anything. Including weather events such as hail, natural disasters, or damage caused by uninsured drivers.

In addition to comprehensive coverage, you can also add optional extras to your policy, such as roadside assistance, hire cars, windscreen replacement but these come at an extra cost.

Cost of car insurance

The cost of car insurance is also known as a premium, which is the amount you are required to pay each year. The insurer will determine your premium by assessing your risk level based on a number of factors. These can include:

  • The type of insurance you’ve taken out, its excess and optional extras.
  • The age and gender of the driver/s.
  • Driver record and previous insurance history.
  • The make, model and year of the vehicle being insured.
  • Where the vehicle is stored overnight and during the day.
  • Whether the vehicle is used for private or commercial use.
  • Whether you have nominated a market or agreed value for your vehicle.

The latest figures from the Australian Automobile Association (AAA) Transport Affordability Index provide an average cost snapshot of comprehensive car insurance for each Australian capital city to 2023.

Rank City Rank City
1 Adelaide $43.38 $2,255.76
2 Melbourne $42.51 $2,210.52
4 Brisbane $40.11 $2,085.72
5 Sydney $35.34 $1,837.68
6 Canberra $28.95 $1,505.40
7 Hobart $24.73 $1,285.96
8 Perth $18.29 $951.08
  Capital Average $34.22 $1,779.44


The excess is the amount you’ll have to pay in the event you make a claim on your insurance, and either you were at fault, or no-one was. If another person was at fault for damages, you won’t have to pay anything. 

Generally the greater the excess on an insurance premium, the cheaper the insurance policy will be. For example, if your insurance policy has an excess of $1,200, you will generally pay less annually than another with an excess of $500.

Effectively, when you agree to pay the excess in the event of an accident, the insurance company will cover the rest. For instance, if you’re at fault for a crash with damages of $5,000, and your excess is $500, the insurer could pay $4,500. 

No claim bonus

Some insurance policies include a no claim bonus. This means your risk level as a driver is reduced and can result in you paying a lower premium if you don't make a claim for a certain period of time.

How to get car insurance

Signing up to a car insurance policy will typically involve the following steps:

  1. Determining the type of coverage needed: Consider factors such as the age and value of your car, your driving history, and your budget to determine what type of car insurance coverage you need.
  2. Shopping around for quotes: Contact various insurance companies or use online comparison tools to get quotes for different car insurance policies. Compare the coverage options, premiums, deductibles, and discounts offered by each company to find the best deal.
  3. Provide necessary information: Once you've selected a policy, you'll need to provide information such as your car's make and model, your driving history, and personal information such as your name and address.
  4. Fill out an application: Fill out an application for the car insurance policy you've chosen, providing all the necessary information and making sure to read and understand the terms and conditions.
  5. Pay the premium: Once your application is approved, you'll need to pay the premium to activate your coverage.
  6. Receive proof of insurance: The insurance company will provide you with a proof of insurance document, which you may be required to provide your lender to fund a car loan.

It's important to review your car insurance policy regularly to make sure it still meets your needs and provides adequate coverage. Consider reviewing your policy whenever you make significant changes to your vehicle, your driving habits, or your personal situation.

If you are on the hunt for a new car, before purchasing car insurance consider opting for a competitive rate car loan offered by loans.com.au. Chat to one of our lending specialists today to help get you started.

Apply now

About the article

As Australia's leading online lender, loans.com.au has been helping people into their dream homes and cars for more than 10 years. Our content is written and reviewed by experienced financial experts. The information we provide is general in nature and does not take into account your personal objectives or needs. If you'd like to chat to one of our lending specialists about a home or car loan, contact us on Live Chat or by calling 13 10 90.

Welcome to loans.com.au _

Just in case we lose you, may I ask for your contact details....

Loading Form