What is comprehensive car insurance?

Confused about the difference between comprehensive car insurance and third-party car insurance? Here's what you need to know.

Choosing the right level of insurance for your car is a necessary – but often overwhelming – process.

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If you've seen phrases like 'compulsory third party' and 'comprehensive car insurance' but don't quite understand what they mean, here's what you need to know.

An insurance premium is simply the fee you pay your insurer in exchange for their cover.

Typically, you pay your premium on a fortnightly, monthly or annual basis.

Your premium can be impacted by your age, the type of car you drive, where you park your car and your driving history, among other factors.

An insurance excess is the amount you have to pay out of pocket when making a claim with your insurer.

For example, if your policy has a basic excess of $650, that's what you'll pay when making a claim and your insurer will cover the remaining cost of the repairs.

Some insurers offer the ability to adjust your excess. Typically, a higher excess results in a lower premium, while a lower excess results in a higher premium.

Comprehensive car insurance is the highest level of cover, and insures your car across multiple scenarios, often regardless of whether you're at fault or not.

This tends to mean comprehensive car insurance is more expensive than other types of insurance.

If you opt for comprehensive cover, you'll be insuring yourself for damage incurred to both your own car during accidents, theft, vandalism or natural disasters, as well as any damage you may cause to other people's cars or property.

Often, comprehensive car insurance also comes with extras depending on the level of cover you choose, like loan cars, temporary accommodation, replacement keys or a 24-hour contact.

Check the specifics of your policy carefully as some insurers may exclude some scenarios as a means of lowering your premium.

The key difference between comprehensive and third-party car insurance is that comprehensive covers both your car and other cars, while third party only covers damage you cause to other cars and property.

Not to be confused with compulsory third-party insurance (more on that in a moment), third-party insurance is typically the most basic level of insurance cover you can get.

You can also opt for third-party fire and theft insurance, which will cover you if your car is damaged by fire or involved in a theft.

Compulsory Third Party (CTP) insurance, also known as ‘Green Slip’ insurance in New South Wales, is compulsory in every Australian state in order to register your vehicle.

CTP insurance is essentially a liability cover, which will provide compensation to other people if you injure or kill another person in a car accident.

In some states CTP insurance is included in your vehicle registration fee, but in New South Wales you must purchase a CTP policy separately to allow you to register your vehicle.

Whether or not you can shop around for your CTP provider also depends on where you live, with some states like Queensland and NSW allowing you to select your own provider, while others like the Northern Territory only offer one option.

Disclaimer: Levels of cover vary from insurer to insurer, so read the product disclosure statement carefully. Your ability to claim will also be affected by the individual circumstances of the incident in question.