Car accidents may cause personal injuries or damage to property and there is insurance to cover both. If an accident occurs, the damage may be handled through a court claim or paid out by insurers. Decisions need to be made by the parties about how they will manage the process.


Adrian Snodgrass

Principal Lawyer, Fitzroy Legal Service

Motor vehicle insurance

Last updated

1 July 2022

Types of insurance

There are different types of insurance that relate to motor vehicles and motor vehicle accidents:

  • Type 1: Insurance relates to personal injuries;
  • Type 2: Insurance relates to property damage.

Type 1: Personal injury insurance

The Transport Accident Commission levy (also known as ‘compulsory third-party’ insurance) only covers claims made against you by other people for their personal injuries. This levy must be paid each year when a vehicle’s registration is renewed.

Type 2: Property damage insurance

Property damage insurance is not compulsory, but it is not advisable to drive without insurance. There are three types of property damage insurance:

  1. Comprehensive insurance: This is the top of the range insurance. It covers you when you damage your own property and when you damage other people’s property.
  2. Third-party, fire and theft insurance: This is the middle range insurance. It covers damage to your vehicle caused by fire or theft. This type of insurance also covers claims made against you by other people for damage to their property.
  3. Third-party property insurance: This is the minimum cover available. It covers claims made against you by other people for damage you have caused to their property. It covers repairs to your vehicle, up to a limited amount only, and only when the other driver caused the accident, can be identified and is uninsured. This limited benefit is known as the uninsured motorist extension. If your vehicle is not worth insuring, or you cannot afford comprehensive insurance, then you should at least have third-party property insurance, since without it you could be liable for enormous amounts (e.g. if you crash into a BMW). This type of insurance costs only a fraction of the amount charged for comprehensive insurance. Also, if you upgrade your property damage insurance in the future, many insurance companies will take into consideration the fact that you previously held insurance and give you a discount. 

Choosing an insurance policy

When choosing an insurance policy, check the benefits and the price of the insurance. Look out for things like whether the vehicle is valued at ‘market value’ or ‘agreed value’, whether a hire vehicle is provided when your vehicle is being repaired, whether you have a choice of repairer, and what amounts are claimable if personal goods are lost.

Always read the policy carefully to check exclusions and/or endorsements. If in doubt, seek clarification in writing from the insurer.

An insurance premium is the cost of an insurance policy.

Losing the right to claim on your insurance

Insurance policies require you to report any accident or damage as soon as possible after the accident or damage has occurred. If you do not intend to make a claim, still report the incident to your insurance company. Be sure to get the name of the person you speak to at the insurer.

Normally, insurance policies state that you are not covered if, at the time of the accident, the vehicle was being driven by a person who:

  • had an illegal blood-alcohol content (BAC); or
  • was driving under the influence of intoxicating drugs; or
  • refused to undergo a breath test.

Your insurance claim may also be unsuccessful if the damage was sustained while the vehicle:

  • was being used for racing; or
  • was overloaded or in an unsafe or unroadworthy condition; or
  • was being driven by an unlicensed driver; or
  • had been modified in any material way from the manufacturer’s specifications.

Also, if you have not told the insurer:

  • the correct purchase price of the vehicle; or
  • your full driving history; or
  • that any drivers of the vehicle are aged under 25,

then your claim may be reduced or denied, or an extra cost may be charged.

For more information about illegal BAC, driving under the influence of drugs, breath tests and unlicensed drivers, see Chapter 6.8: Driving offences.

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