Car insurance types, and which one your car actually needs

Only one of the four car insurance types is compulsory. The other three are optional, and the broadest of them averages about $1,560 a year, according to Mozo. Which one you should buy comes down to what your car is worth.

• Which car insurance is compulsory in Australia?
• What does each level of car insurance cover?
• How much does CTP cost in your state?
• Should you choose agreed value or market value?
• How does the excess work?
• Which level of cover suits your car?

Which car insurance is compulsory in Australia?

Compulsory third party insurance, usually shortened to CTP, is the only cover you are legally required to hold, and it pays for injuries to people rather than damage to cars. It meets the compensation you become liable for when you hurt someone in a crash you caused, which can run to their treatment, their lost earnings and their rehabilitation, and it reaches passengers, other drivers and other people on the road. Where someone dies, CHOICE says it can also pay dependants and funeral costs.

What CTP never does is fix a car. “CTP insurance doesn’t cover damage to your car or any other cars.” That is Jane Bardell, writing for CHOICE. Every dent, every write-off and every repair bill sits outside it.

The other three levels all deal with property rather than people, and all three are optional. Mozo ranks full cover first for breadth, treats fire and theft as a middle option aimed at older vehicles, and treats third party property damage as a bare minimum for cars with almost no value left. One warning before you compare them: a heavily modified vehicle can fall outside a standard car policy altogether, which is why a van conversion needs campervan insurance rather than car insurance.

What does each level of car insurance cover?

Each level adds one more thing to the one below it. CTP covers other people’s injuries, third party property damage adds their cars and property, fire and theft adds your own car when it burns or is stolen, and full cover adds your own car after a crash you caused.

The table below sets the four side by side. The cover limits used as reference points come from CommBank’s third party policy, where legal liability for other people’s property reaches $20 million and theft of your own car is capped at $10,000. Limits differ between insurers, so read the Product Disclosure Statement for the policy you are actually quoted.

Cover	Compulsory	Other people’s injuries	Other people’s property	Your car, fire or theft	Your car, at-fault crash	Agreed value available
CTP (Green Slip in NSW)	Yes	Yes	No	No	No	No
Third party property damage	No	No	Yes	No	No	No
Third party fire and theft	No	No	Yes	Yes, to a capped amount	No	No
Full cover (top tier)	No	No	Yes	Yes	Yes	Yes

Compulsory third party (CTP)

CTP is injury cover, and mostly it pays other people rather than you. What the at-fault driver can claim depends on the state: Queensland, South Australia and Western Australia generally shut an at-fault driver out unless the injuries are catastrophic, and NSW cuts the compensation an at-fault driver receives, CHOICE reports.

Two gaps catch people out. A driver facing a serious charge, drink driving being the usual example, normally gets nothing from CTP for their own injuries. And in South Australia, a driver is left uncovered in a no-fault crash, such as hitting a kangaroo.

Third party property damage

Third party property damage pays for the damage you cause to other people’s cars and property, and nothing else. It exists because the car you hit might be worth ten times yours, and that bill does not shrink just because your own car is cheap.

Your car gets nothing under this level, whether you crash it, burn it or lose it to a thief. Mozo treats it as the floor rather than a real choice, suited to cars with very little value left in them. Check the legal liability limit, and check whether the policy gives you anything at all when an uninsured driver hits you, because that varies between insurers.

Third party fire and theft

This level is third party property damage plus two specific risks to your own car: fire and theft. On CommBank’s version, theft or an attempted theft pays out to a ceiling of $10,000, fire damage counts and takes in bushfire and weather events, liability for other people’s property stretches to $20 million, and there is up to $5,000 if an identified uninsured driver damages your car. Fire claims do not apply in the policy’s opening 24 hours, with limited exceptions, so signing up as a fire front approaches will not help you.

Extras differ by insurer. Finder lists Budget Direct’s version as carrying the same $5,000 of uninsured driver cover, plus a hire car if yours is stolen, worth as much as $1,500 across a maximum of 21 days.

Finder pitches this level at drivers who want more than the bare minimum but will not pay top-tier premiums, including owners of older, lower-value cars and people living where bushfire is a real risk. The limitation is the obvious one: crash damage to your own car is not covered, and never will be at this level. CommBank’s policy also rules out driving for Uber or other ride-share work, and its personal property cover leaves out phones, computers, work tools and cash.

Full cover

Full cover, the broadest level insurers sell, is the only one that repairs or replaces your own car after a crash you caused, and it covers other people’s cars as well. It is also the only level that lets you choose agreed value instead of market value, and the only one most lenders will accept on a financed car.

It is the expensive one. Mozo, citing Finder research, puts the national average at about $1,560 a year, roughly $130 a month, and the NSW average at $1,698 a year. Mozo also reports that premiums rose 4.4 per cent nationally in the year to January 2026.

Your own quote will sit either side of those averages, because an insurer prices your postcode, your claims record and the car before it prices the cover level. Treat the averages as a sanity check on a quote, not a prediction of one.

How much does CTP cost in your state?

CTP costs roughly $275 to $849 a year depending on where the car is registered, and how you pay for it depends on the state too. NSW is the odd one out. There, CTP is a standalone policy, the Green Slip, bought when the registration comes due, with six insurers selling it under rules set by the State Insurance Regulatory Authority. The figures below are CHOICE’s September 2026 survey of a Class 1 car or station wagon in each state and territory, as reported in its guide to CTP.

State or territory	How you pay	Annual CTP cost
NSW	Separate Green Slip policy, 6 insurers	$579 average
Victoria	TAC charge inside registration	$472 to $606 by postcode
Queensland	Chosen insurer, paid with registration	$412 to $425
South Australia	Chosen insurer, paid with registration	$275 to $287
Western Australia	Motor Injury Insurance in registration	$521 for 2026/27
Northern Territory	Included in registration fee	$849 for a 1.5 to 2 litre four-cylinder
Tasmania	Included in registration fee	$305 including registration, $244 with a concession
ACT	Annual purchase with registration, 4 insurers	$397 to $424, community rated

If you are in NSW, this is the one insurance price you can shop in a single sitting. The State Insurance Regulatory Authority runs a Green Slip Price Check tool, which hands back a quote from every NSW insurer for your vehicle and saves you ringing around, as CHOICE points out in the same guide. Everywhere else the amount simply arrives with the registration notice, and there is little or nothing to choose.

Should you choose agreed value or market value?

Choose agreed value for a newer, low-kilometre or financed car, and market value for an older car that has already done most of its depreciating. The setting decides what lands in your account if the car is written off.

Agreed value locks the payout in when the policy starts, and the figure appears on your certificate of insurance. Write the car off and that is what you are paid, less the excess and any premium still owing, whatever the car’s resale value has slipped to since, RACV explains. Market value works the other way. The insurer pays what the car was worth immediately before the loss, judged from the model, its age and odometer reading, its condition, any modifications and what comparable cars are selling for nearby. The same things that set what your car fetches on the used market set the payout.

RACV steers newer and near-new cars towards agreed value, along with low-kilometre cars and anything fitted with accessories or modifications, because the payout is a known number. It makes the same call for a financed car, where a market value settlement can land under the loan balance and leave you owing money on a car you no longer have. An older car that has already shed most of its value is the case for market value, especially if you would accept some uncertainty and replace it with a similar used car.

Three limits are worth knowing. Agreed value is normally tied to full cover, so you cannot have it on a third party property policy, on a fire and theft policy, or on CTP. An insurer can also cut the agreed figure when the policy renews, which is why RACV tells owners to check it every year instead of assuming it has held. And on which option costs more, RACV will not put a number on it: get a quote for each and compare them directly.

How does the excess work?

The excess is the amount you contribute to your own claim before the insurer pays the rest, and it comes off the payout rather than arriving as a separate bill. On a CommBank fire and theft claim you pay the basic excess plus any additional excesses that apply to you, and those amounts live in the Product Disclosure Statement rather than on the product page, so look there before you buy.

It applies to a write-off as much as a repair. RACV describes an agreed value settlement as the agreed figure with the excess and any unpaid premium taken out, which is the number worth checking before you sign anything.

That matters most on cheap cars. Hold the excess up against what the car is actually worth, because if the two are close, a top-tier policy returns very little after an at-fault crash, and you will have paid the higher premium for years to get there.

Which level of cover suits your car?

An older car you could replace out of savings suits third party property damage or fire and theft, while a newer or financed car suits full cover with agreed value. Cost is the deciding factor: a full cover policy averages about $1,560 a year while the average NSW Green Slip is $579, on the Mozo and CHOICE figures above, so the optional cover is usually the largest line in an owner’s insurance bill.

Best for: full cover with agreed value suits a newer or financed car, where a market value payout could leave you with a loan and no car.

Not for: full cover is poor value on a car worth little more than its excess, where third party property damage or fire and theft still covers the bill you genuinely cannot absorb, the damage you do to someone else.

If you are between the two, third party fire and theft is the practical middle. It keeps the liability cover, adds a capped payout if the car is stolen or burns, and on the policies Finder lists, adds a few thousand dollars against an identified uninsured driver. Price all three for your own car and postcode before you decide, because the gap between the levels moves with your rating, your address and the car itself.