70% of motorists don’t know what CTP car insurance actually covers - do you?
Uh oh, Australia - we’ve had another big facepalm moment and this time it’s to do with a potentially very costly concept; compulsory third party (CTP) car insurance.
A survey of 1500 motorists conducted by Smith’s Lawyers found that close to 70% of Australians can’t correctly describe what a ‘green slip’ or CTP vehicle insurance actually covers.
About 50% of respondents thought that this base level of car insurance would cover damage to both a driver and their car if you’re at fault in an accident, and 17% thought it covered just the car and not the driver.
The correct answer however - drumroll please - is that CTP insurance covers just the damage you cause to others and not their vehicle. Unfortunately, the survey results revealed that just 30% of us know this important fact.
“We receive hundreds of enquiries every year from drivers holding CTP only (greenslip) who are not at fault in an accident but have been surprised to find they can't claim for property damage,” said Greg Smith, Principal and Founder of Smith’s Lawyers.
Mind the insurance gap
CTP car insurance is non-negotiable across Australian states and territories which means that, no matter what happens, you’re covered for any damage someone else causes to you physically - but what about your precious set of wheels?
According to Smith, the real issues arise when two underinsured drivers collide on the roads.
“The problem is worse when both drivers lack property damage insurance as there is no insurer to step in and cover the costs,” he said.
“They ask us: 'What if someone crashes into my car and I need to make an insurance claim? or 'What do I do if I hit another car – is my Green Slip enough to pay for the damage to their car as well as mine?'”
The answer to that question is a hard no and leaves drivers falling through the ‘insurance gap’ where, if you haven’t been at fault for an accident but have had your car damaged by someone who is underinsured, you may have to take legal action to recoup the funds necessary to fix your pride and joy.
Choosing the right level of cover for you
The easiest way to avoid a legal battle, is to nab yourself a more comprehensive level of cover.
Above CTP insurance, motorists can usually elect to go with one of two policy types. A cheaper third party property damage policy will cover the damage you cause to another person’s property in an accident, but is often capped at $2,000 or $3,000.
The issue with this, however, is that if the other driver is at fault, you could still be out of pocket.
The second option is to go for a more expensive, but more comforting level of cover in the form of a comprehensive car insurance policy which will cover property damage to both your own car and someone else’s, whether you’re at fault or not.
And the good news is that, here at Mozo, we actually compare a stack of comprehensive car insurance policies. By using our comparison table, you’ll be able to quickly survey the market and find the policy that best suits you and we also let you know what kind of discounts each insurer is offering so that you can save.