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Car insurance is one of those things that everyone knows about, but not everyone truly understands. You watch the commercials and calculate your costs, but the exact nuances of what you’re paying for can seem complicated and confusing. Do you really have enough coverage? Are you going to owe money after an accident? What happens if you damage someone else’s property? These are all reasonable questions you should be asking as you go shopping around and purchase your car insurance policy.

Certain places around the world require different types of coverage and offer alternate plans. Today, let’s focus on Australia and the different requirements in each of its states. When you break it down and unpack the options, you’re left with about four different types of car insurance that are available. Certain pieces are absolutely required, while others are optional but encouraged for both your safety and your peace of mind. Let’s unpack exactly what these four types of insurance are so you can have a better idea of exactly what you are paying for.

Compulsory Third-Party

In all parts of Australia, Compulsory Third-Party (CTP) insurance is required. From car insurance QLD to Sydney, you’ll need this first and foremost. CTP is the insurance that covers the costs of bodily injury of any victims of an accident that you caused. Having this coverage means you won’t have to pay out of your own pocket if you injure someone while behind the wheel. This covers other drivers, pedestrians, and passengers.

If you are ever on the other end of an accident, you can also take advantage of CTP and maybe even file a Green Slip Claim. This claim is for victims of an accident who need compensation to cover medical bills, property damage, or loss of income due to injury. You need to file this claim within 28 days of the accident to get your full payout and compensation from the driver’s insurance company.

Comprehensive

While CTP is required in all Australian states, there are important policies that are greatly encouraged. Comprehensive coverage is one of these options. This part of your policy covers the costs of repairs on your car. It can even cover a full replacement of your vehicle. Rather than worrying about paying to fix any property damage, your comprehensive coverage has got you, well, covered. This is the case whether you were at fault for the accident or not.

Third-Party Property

In the case of most motor vehicle accidents, more than one person is usually involved. You want to invest in insurance that covers the third-party costs so you don’t have to pay a lot if you end up damaging someone else’s vehicle. While this doesn’t cover the cost of your personal vehicle or repairs, third-party property insurance covers legal fees and compensation you would owe to another individual driver.

Third-Party Fire and Theft

Accidents usually happen on the road, but they can really happen anywhere. You want to be covered in case of a fire, natural disaster, or theft. Specific third-party fire and theft insurance is there for you in case an unexpected fluke should cause damage to your vehicle.

The truth is that car insurance can get expensive. Especially now in 2020, when you’re managing your finances during a pandemic and trying to make ends meet effectively, you need to get maximum coverage at the most reasonable price. Understanding your specific needs can help you make the most informed decision. Make sure you aren’t overpaying or investing in something you don’t truly need. Instead, do your research and commit to making the best choice for you, your family, and your vehicle.