How does car insurance work?
A car insurance policy is a contract between you and your insurance provider. You pay the premium, the provider covers you for damages covered under your policy.
Here are the main concepts you need to understand how car insurance works.
Your level of cover
In Australia, you'll generally come across four types of car insurance, and each covers you for different vehicle-related incidents. The level of cover you choose determines what combination of damages you’re covered for: your car, their car, other types of property, injuries or some combination of these.
Compulsory third party (CTP). Also called a green slip, CTP is mandatory in all states. This at-fault driver’s CTP insurance will cover the medical costs of anyone injured in the accident.
Comprehensive. The first of three optional policies you’ll add your CTP. It provides the most extensive coverage, including accidental damage, theft and liability for injury to other people or property.
Third-party fire and theft (TPFT). If comprehensive isn’t up you’re alley, the option providing the next highest level of cover is third-party fire and theft. This covers you for damage to other people's cars and property, as well as your own car if it's stolen or damaged by fire.
Third-party property (TPP). The lowest-tier option is third-party property only. It covers the damage that your car causes to other peoples' car or property.
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💡 When your policy covers you for damages it can refer to:
Damages to your car (caused by you or by nature) Financial damages you incur by damaging someone’s car or property with your car Financial damages you incur by injuring yourself, another person or animal with your car Damage uninsured drivers cause to your car
Exactly which of these you're covered for depends on your level of cover.
If an insured driver causes damage to you, that’s when their insurance kicks in. But it’s still important to keep your insurance company in the loop so they can help work on your behalf.
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The car insurance excess
When your insurance company pays a claim according to your policy, you usually share a small portion of the costs. Your portion is called the excess. Here are some key points to remember about excesses.
The excess amount. Most policies offer a range of excess amounts you can choose from. A higher excess means lower premiums since you’ll be paying more toward any claim…and vice versa. Most policies offer a range of about $500-$2000 for your standard excess, although you will find some that offer as low as $0 or as high as $5000.
Additional excesses. The standard excess applies whenever you need to claim, regardless who is driving the car. But additional excesses can be stacked on top of this for things like unlisted drivers and young and/or inexperienced drivers.
LEARN MORE ABOUT EXCESS
The car insurance premium
The premium is how much your policy costs, paid either monthly or yearly - sometimes with a discount if you pay yearly. It’s calculated based on your level of cover, the excess and a whole host of behavioural and situational factors including:
Situational factors |
Behavioural factors |
Your age |
How much you drive |
Your gender |
Your driving history |
Your postal code |
Your claims history |
The car you drive |
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Your parking arrangements |
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Any discounts and bonuses |
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How to compare car insurance quotes
These days, the process of getting quotes and choosing a car insurance policy is easier than it’s ever been. Within the time it takes you to finish your coffee, you can narrow down your options, compare a few quotes and dig into the finer details of your soon-to-be policy.
The streamlined approach goes like this:
Create your shortlist. Scroll to the table at the top of the page where we list out more than 50 policies and highlight the major features of each. Create a shortlist of the car insurance policies you like the best.
Get quotes. Fill out the insurance company’s online quote form with all relevant details about you and your car.
Read the PDS. If you like the price and features from 1 or 2 of your quotes, skim through the product disclosure statements (PDS) of the ones you like to get a little better feel for these policies. The next section explains more about how to locate and read a PDS.
If you’ve entered in all of the correct details, including your rego, driver’s licence number and you don’t have any major driving infractions that might be especially concerning, you can often buy your policy immediately after getting your online quote.
But don’t be alarmed if you’re prompted to contact the insurance company if they need more information to complete your purchase.
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💡 Top tip. Use quotes for research. It’s obligation-free, quick and straightforward. You just fill in the details, click ‘get quote’ and within seconds you’ll get an estimate of your premium.
It’s completely up to you if you want to take the next steps and make the purchase.
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LEARN MORE ABOUT QUOTES
The car insurance PDS
PDS stands for Product Disclosure Statement, and it basically outlines in detail the contractual obligations and responsibilities of both you and the insurer.
There you’ll find what you’re covered for (and not covered for), how much cover it gives you, and under what circumstances you’re entitled to a claim - as well as what could void your cover. Think of it as your policy’s single source of truth.
Thanks to financial regulations, you can access the PDS of any car insurance policy on their website, whether you’re a member or not.
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💡 Top tip. Downloading and leafing through the PDSs of any policy you’re considering is a great way to understand these policies in a more organised and comprehensive manner, versus browsing car insurance websites.
The insurer will usually have a link at the bottom of their policy page, which leads to a section of the site where you can download the PDS of any live policy.
Or you can use our table above to compare major high-level features, and then consult the PDS of those you are interested in.
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LEARN HOW TO READ A PDS
Getting into an accident or suffering other damage
Let’s call this the incident phase, since car accidents aren’t the only type of incident you might need to claim for - weather-related damage and theft are other examples of car-related incidents that can cause damage.
The way you respond after an accident plays a key role in all the investigations, reports, negotiations and settlements that follow.
That’s where documentation is of utmost importance. It helps you back-up your claims and it helps your insurance company advocate on your behalf in potential disputes over who’s at fault.
Documenting a car accident. In any accident, your fault or not, you need to take proper precautions to avoid further damage and to document everything. Our handy guide on what to do after a car accident explains how to go about documenting the evidence you need following an accident.
LEARN WHAT TO DO AFTER AN ACCIDENT
Documenting weather-related damage. If you’re covered for weather-related damage, take pictures of the damage and jot down any weather events for that location and time.
Documenting theft. If someone steals your car, go straight to the police and file a report. Then contact your insurance and await further instructions from both.
Your policy may have separate conditions for minor mishaps (eg, a pebble cracks your windshield). Your PDS should explain what to do in these situations. Or call your insurance company directly.
Making a car insurance claim
Making a claim is how you ask your insurance company to keep their promise and cover the costs of an incident that’s covered by your policy. Submitting one involves notifying your insurer of the accident, filling out your insurer’s claim form, including all required documentation and submitting a claim.
There are multiple ways to submit including online and via email, but we recommend calling your insurer first, especially if it’s a major accident where you’ll need guidance on what to do and not do in those immediate circumstances.
💡 Top tip. If you ring your provider at the phone number listed in the PDS, they can open your claim right away, provide you with a case number and help advise you on the best way to submit your documentation based on your circumstances. |
LEARN MORE ABOUT THE CLAIMS PROCESS
Settling a car insurance claim
This is when your policy approves or denies your claim, and pays out the damages that satisfy the conditions of your policy. This takes place after they’ve investigated the circumstances of the incident, reviewed all the evidence, consulted with third parties like the police or other guy’s insurance company, assessed damages and arrived at a decision.
If they deny your claim or you disagree with certain other decisions, you have two opportunities to appeal, in this order:
Internal appeals process. The insurance company will have an internal disputes resolution department, entirely separate from the department that originally denied your claim. The first step is to appeal to them. The process will be outlined in your PDS.
Australian Financial Complaints Authority. If that doesn’t work, the AFCA provides free and independent complaints service . Just come prepared with all your evidence and make sure you have your facts straight.
What’s the best car insurance?
When our expert insurance experts and analysts evaluate policies to determine the best car insurance policies in Australia, we place them into two categories:
Exceptional value. Policies that hit that sweet spot between price and the must-have features.
Exceptional quality. Policies that stand out for their generous perks and flexible options, price aside.
Your idea of best may differ from someone else’s, so decide which category describes you best. Then check out our top picks in those categories featured on our 2023 Mozo Experts Choice Awards page.
CHECK OUT OUR TOP PICKS
What’s the cheapest car insurance?
You can’t go wrong checking out our Exceptional Value picks mentioned above. They’re the cheapest we’ve found based on our requirement that they contain all the essential features most drivers need.
But if you want more help, our guide to cheap car insurance can help you bring your premiums even lower.
CHEAP CAR INSURANCE GUIDE
