Types of Car Insurance
Insurance is not known for being simple. What covers what? We find out.
Here are the four main types of car insurance in Australia:
Key Types of Car Insurance:
- Compulsory Third Party (CTP)
- Third Party Property
- Third Party, Fire and Theft
- Comprehensive Car Insurance
Compulsory Third Party (CTP)
What it covers: Medical expenses and other bills in the event you injure or kill another person.
These types of car insurance are compulsory in all Australian states and territories. You pay it when you pay your registration so in a nutshell, if your car is registered, you have CTP.
CTP does not cover damage to property and, depending on the situation, often does not cover drivers of a single-car accident – an accident where only 1 car is involved.
Example: A driver accidentally reverses into a pedestrian, the pedestrian’s medical bills are covered by the driver’s CTP insurance.
Third Party Property
What it covers: Damage to another person’s property.
If a holder of this insurance policy hits another car, the damage bill for the other car is covered. It also includes damage to other property, for example; bicycles and homes. If you accidentally hit another person’s home or fence, for example, you’re covered.
It does not cover your car.
Example: A student hits a high-end luxury car causing thousands of dollars in repair bills, it’s this kind of insurance that really helps.
Third Party, Fire and Theft
What it covers: Damage to another person’s property (as listed above), damage to your car in the event of a fire or if your car is stolen.
Holders of this insurance receive the same cover as Third Party Property but are also covered if a fire damages or destroys their vehicle. For example, a fire in a garage where the car is parked.
Holders of these policies usually nominate a value for replacing their vehicles in the event of fire and theft and therefore the price of the insurance varies. The location where the car is kept also affects the price. Often, street parking will result in a higher premium than a locked garage.
Example: A car is stolen and written off by the criminals. The policyholder is paid the pre-arranged sum of replacing the car.
Comprehensive Car Insurance
What it covers: Third party property, fire, theft and damage to your vehicle
(Aka: ‘full-comp’). Although policies vary between providers, these types of car insurance typically cover any damage sustained to your vehicle and other people’s property. In other words, you’re covered in pretty much all circumstances unless you break the law – like drink driving for example.
Often, policies cover flood damage, hail and all repair costs. Insurance companies offer extras like windscreens and car hire while yours is off the road.
Example: Two cars reverse into each other in a busy car park. One of the drivers holds comprehensive car insurance – both cars are covered, no matter who’s fault it is.
Things that typically void insurance:
As an insurance policyholder, you must meet some conditions. Failing to can result in some types of car insurance being void. Make sure to check your policy but they often include:
- Driving an unregistered vehicle
- Driving without a licence
- Driving under the influence of drugs or alcohol
- Driving an unroadworthy or overloaded vehicle
- An illegally modified vehicle
- Participating in street racing
- Intentionally lying to your insurance provider
Which type of car insurance is best?
The short answer is comprehensive car insurance. It covers more situations than other types of car insurance.
However, this may not always be the case. For example, if you own a cheap car that you only drive once a month on a Sunday, Third Party, Fire and Theft might be more economical. Talk to your insurance provider to find out what policy matches your situation.
Make sure to check your insurance policy and read the fine print so you know exactly what’s covered.
Insurance Myths Debunked:
Myth: CTP covers other people’s cars.
Fact: It covers you for medical bills in the event you injure or kill another person. It’s a third party, not ‘third party property’.
Myth: Car insurance doesn’t cover modified cars.
Fact: Car insurance can cover legal modifications. Insurance companies need to know about the modifications and may request a roadworthy certificate.
Myth: Personal belongings are covered if they’re in your car when it’s stolen.
Answer: Right (depending on policy).
Fact: Some policies will cover property stolen or damaged in a car up to a specified amount.
Myth: Car colour affects the cost of insurance.
Fact: Most insurance companies don’t even ask for the colour of the vehicle. Brightly coloured cars that ‘might get noticed more so will have fewer accidents’ pay the same as all colours. If you have an expensive custom paint job listed as a modification, you may pay more for insurance.
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