Car insurance is designed to protect you, your assets, other people and their property in case of an accident, collision or theft. Most states make it compulsory for you to have third party car insurance (CTP) but is that enough cover? While that is sufficient as mandated by law, it is always a good idea to opt for additional cover as this could save you from dipping into your pocket if you’re involved in a car pile-up or if you’re responsible for damaging property.

If you own more than one car, you must insure each registered vehicle with CTP insurance. In most states, insurance is automatic when you register your vehicle. However, in NSW, ACT and QLD, you’ll need to get the insurance yourself.

Is car insurance a legal requirement?

Besides CTP, other forms of insurance aren't compulsory. However, it may be worth considering getting extra cover to keep yourself from getting into financial trouble in case of an accident.

Here's why:

  • Paying for the damage caused to someone's property can be expensive. Even if you leave out the damage to your own car, you'll still have to shell out plenty of money for damaging other people's cars and property.
  • There could be situations where CTP will not cover your car – if you cause the accident, you are hit by an uninsured driver, a hit-and-run, someone steals or wrecks your vehicle, or you face a natural disaster.
  • In case you’ve borrowed money for your car, your lender might insist you take up additional cover to protect the loan.

What insurance do I need for my car?

There are three types of extra insurance that you can opt for in addition to your CTP.

  • Third party property damage (TPPD): For damage caused to someone else’s property, including cars, homes, land, pets and personal items.

  • Third party fire and theft (TPFT): Includes two more specific events that can damage your car – fire or theft.

  • Comprehensive: As the name suggests, this gives you cover for everything above, and includes every other way your car could get damaged – natural disasters, vandalism, uninsured drivers, hit-and-runs and even crashes you cause.

You can compare car insurance providers to find the best cover for you.

How much insurance do I need for my car?

While it may be helpful to get some form of additional insurance in the event you cause damage to someone's property, not everyone requires the highest cover. It depends on several factors, such as the make of the car or the driving record.

Here’s how you can determine which level of cover is right for you:

  1. If you've taken out a loan for the car, there's a good chance your lender will ask for comprehensive car insurance. You may want to consider comprehensive cover even if the lender doesn’t ask for it. Without it, you will need to continue paying your earlier loan while getting a second loan to finance a replacement car.
  2. If getting a new car wouldn't be too heavy on the pocket, third party property cover may be good enough. It might not cover your vehicle but may undoubtedly save you from massive bills if you crash into a Ferrari, for example.
  3. If you travel by car a lot, comprehensive car insurance may help if an accident leaves your car unusable. You may get a vehicle on hire and get a hotel room if stranded.
  4. If you live in a disaster-prone area, you may want to opt for a level of insurance that covers those risks. TPFT may be beneficial if you live in a bushfire-prone area. If your home is in a flood zone or experiences cyclones, a comprehensive cover may do the trick.

Is comprehensive insurance required for an old car?

It may be worth considering getting at least third party property protection if you drive an older model. It can cause just as much damage, if not more, to an expensive car as any other newer vehicle since older cars are heavier and the impact will be harder.

Another reason to get additional cover, like TPFT or comprehensive, is to consider whether you will be in a financial position to replace your old car if it were to get damaged.