Young drivers car insurance: how it works and what you need to know

Under 25 and gearing up for a drive? Before you zip off for beach trips or late-night snack runs, let’s get you sorted with a car insurance policy that’s got your back for everything from bumper bingles to major oopsies.

Whether you're under 25 with your own car or using a family vehicle, the starting point in Australia is the same: Compulsory Third Party (CTP) insurance is a legal requirement for all drivers. If you’re driving your own set of wheels, you’ll need your own CTP policy, which protects you from civil liability if you injure someone in an accident. However, you won’t need your own CTP policy if you’ll only be driving the family car. In that case you just need to convince your parents to add you to their policy as a listed driver. Just be aware that this can increase their premiums, since younger drivers are statistically riskier to insure.Since CTP only covers injuries (and not anyone’s car or other property), higher levels of insurance are available. That’s what we’ll discuss next.

Once the CTP requirement is met, additional insurance choices come into play, all of which are optional. Like CTP, If you're primarily driving a car owned by your parents, you can be added to their policy. However, if you own your own car and decide you want this higher level of coverage, you’ll need your own policy.

Third-party property (TPP) 

Third-party property is the basic defence against dinging someone else's car or property. It doesn't cover any damage to your own ride, but it can save you from out-of-pocket expenses if you cause an accident that damages someone else's vehicle or even their fence.

Third-party fire and theft (TPFT)

A level up from basic third-party property insurance, TPFT covers everything the third-party property insurance does, but with a tiny bit of protection for your car. What does it protect your car from? You guessed it: fire and theft. This is a good option if you don’t want to spring for comprehensive cover yet you reside in areas prone to bushfires or have high crime rates.

Comprehensive car insurance

Comprehensive car insurance is the all-in-one package covering everything the third party options do, but it also protects your own car against accidents, theft, fire and even those random acts of nature like hail storms or falling trees. If you're keen on keeping your car in top shape or you've invested a fair bit into your set of wheels, this is the way to go. It's the most expensive option, but it offers the broadest level of protection.

All else being equal, car insurance for young drivers is usually higher than average, since younger drivers are statistically more likely to cause an accident. 

However, experience also plays a role. So, for example, if you're under 25 with P-plates, you'll find yourself at the higher end of the premium scale. Shedding those P-plates for a full licence might offer a slight reprieve in costs, but you should still expect to pay more than a middle-aged adult. 

Of course that’s not all that plays a role: the car you drive, where you live, your parking situation and even your gender are taken into account.

So while we can’t give you an exact cost, we have identified a few insurance policies that offer the best value for younger drivers. Let’s take a look:

Every year, we hold our Mozo Experts Choice Awards, where we identify the insurance providers that consistently offer lower premiums than the competition. For young drivers seeking cheap policies and manageable excesses, here are our top picks from our 2023 awards:

As you can see, it’s certainly possible to get cheap car insurance as a young driver; however, it’s important to note that other factors like your age and where you live, or your car's make and model can impact how much your policy costs.

And it’s not always about price! Sometimes, the best young driver car insurance isn't always the cheapest option. While price matters, it's essential to consider the overall value you receive from policy. Striking the right balance is key.

It’s one thing to simply compare premiums, and another to compare value for money – and that's all about what your car insurance covers you for and the dollar limits on that coverage. Some car insurance companies will offer all or only a few of these features as standard within a policy.

So if you’ve narrowed down your search and are hung up on a couple of options, make sure you ask if it’s already in an existing policy.

Emergency or roadside assistance

This is for that moment when you're broken down on the highway and need some help with the engine. With most comprehensive policies you’ll have to opt-in and pay extra for roadside assistance, or take this out with an entirely different company.

Optional car hire

Many policies will cover you for a certain period or dollar amount if you require alternative transport after a not-at-fault accident or theft. Others will include post-accident hire car as an optional extra, whether or not you were responsible for the incident. Check your Product Disclosure Statement (PDS) for details.

Optional rating protection

It's not a common feature, but one worth asking about. If you’re in an accident, you may pay an annual fee to keep your premium or no claim bonus intact. Check the fine print on this one.

Market value vs agreed value

If your car is only worth $9,000 (according to your insurance provider) and you insure it for $20,000, then that’s an agreed value. Market value is the amount the insurance company deems your car could be sold for at the time you take out the policy. Not all policies will offer you a choice between these options, and picking one over the other could cost you more. Read more about the details of this feature in our guide market vs agreed value car insurance.  

Instalment payments

You're usually asked to pay for your annual policy in one lump sum but some insurance providers will also offer the option to pay in monthly or even weekly instalments. Some providers offer this at no charge but with others it comes with a processing fee, but your payments may be easier to manage. 

As a young driver in Australia, your premium is likely to be more expensive compared to an older driver with a good driving record and a full licence. Here are some important car insurance factors you'll want to consider as a young driver.

Basic car, basic premium

Generally speaking, the simpler your car, the less you pay on car insurance. In most instances, you will not be allowed to drive a high-powered car until you have your full licence. If caught driving one, you may lose your licence, get penalised, and if at fault in an accident, your insurance company may void your policy altogether. 

Keep your driving record clean and well-oiled

If you have a clean driving record while on your P plates, you may be rewarded with a discount on your policy. If you complete a ‘safe driving course’ you could see further discounts for your conscientious efforts.

And if you’ve been driving everyday since you were 17 and you’re now 23 years old, that’s six years driving experience. And if you have a pretty good track record when it comes to safe driving, then you could be entitled to car insurance premium discounts. No harm in asking.

Compare quotes

Car insurance is probably the last thing on your mind when purchasing a new car, but it should never be rushed. Take the time to compare quotes, as you could save heaps every year by finding the best value coverage available for you.

You can start this research mission by checking out the best car insurance policies as crowned by Mozo's expert judges. The list includes options that are ideal for young drivers.

For drivers of any age, there are a bunch of things not covered by car insurance, including claims like mechanical failures, worn tyres, and rusting. The main things to be aware of is that negligence and illegal activities are never covered by car insurance, at any age.

So if you don't take care of your car, or if you get caught doing something dodgy and lose your young licences, it could void your car insurance policy.

There are heaps of young driver restrictions in general, from passenger limits to types of car models you’re allowed to drive, and even the time of day your insurance will cover you for. You can get your head around it all by reading up on the RMS licence rules.

For now, let's take a look at what actions might void your cover depending on the type of licence you hold while you're a young driver.

Learner Driver

• Driving with any amount of alcohol or illicit drugs in your system.
• Driving unsupervised, or supervised by an unsuitable person (e.g. a learner, provisional licence holder or someone with a disqualified licence).
• Exceeding permitted speed limit.
• Using a tow-bar.
• Using your mobile in any way, including hands-free.
• Misleading your provider with the type of car you drive.

P1 Licence

• Driving with any amount of alcohol or illicit drugs in your system.
• Exceeding permitted speed limit.
• Misleading your insurance company with the type of car you drive.
• Using your mobile in any way, including hands-free.
• Exceeding the permitted weight when using a tow-bar.
• Carrying passengers under the age of 21 during restricted times.

P2 Licence

• Driving with any amount of alcohol or illicit drugs in your system.
• Exceeding permitted speed limit.
• Supervising a Learner driver.
• Driving a high-performance car.

It's clear that staying within the lines—not just on the road but with your insurer's rules—is key to keeping your cover in check. Dive into those details, read your PDS, drive safely - and your car insurance will have your back.