How Much Does Car Insurance Cost?

Depending on the level of cover you take out and the details of your policy, car insurance can cover the cost of repairing damages to your own vehicle, other cars and property, as well as injuries you and other road users sustain during an accident.

There are three basic levels of car insurance in Australia, but only one—compulsory third party insurance (CTP)—is mandatory. How and when you purchase CTP, its price and coverage will differ depending on where you live, as it is administered or overseen by state and territory bodies. Speaking generally, CTP exists to cover the medical and care costs of people who are injured while using roads, whether they’re drivers, cyclists or pedestrians.

You can elect to take out the next level of car insurance, third party property damage, to cover costs for damages you may cause to other people’s vehicles or property while driving. This coverage type doesn’t protect your own vehicle, but ensures you won’t have to foot a massive bill to repair a pristine Mercedes should you damage it during an insurable incident.

It’s a suitable option if your wheels are a little worse for wear and may not warrant a higher annual premium. If you drive or park in an area with a high crime rate, you may consider adding fire and theft insurance on top of this policy. For an additional fee, this adds a layer of protection for your car if damages or total loss are caused by the two headline events: fire and theft.

Comprehensive car insurance is the broadest level of cover you can purchase (and therefore the most costly), insuring both your own ride and others should they incur damages. These policies are generally more tailored to your car, offer optional extras and increased dollar limits when requested, so premiums can differ significantly depending on what you want covered.

Like any insurance policy, not every event or circumstance will be covered by these car insurance variants. But for most road users, having the peace of mind that there’s financial support during certain emergencies is worth the premium.

Related: How to Find the Best Car Insurance in 2023

This is the age-old question for both insurance companies and their customers. While you may find average costs for car insurance in Australia from various sources, these figures could be very far off what any given individual ends up paying for their cover. This is because there are myriad factors that impact the cost of car insurance.

What is assessed amounts to your insurance risk profile, which gauges how likely you are to make a claim on your policy. Some demographic metrics are outside of your control (your age, for example), but with others you can push the price lever in each direction depending on choices you make. To make things more complicated, each insurance company has their own methods for assessing these risk factors when calculating insurance premiums, so car insurance quotes will differ from provider to provider.

The different levels of car insurance, mandatory and otherwise, are separated by relatively predictable price variations. Broadly speaking, third party policies will be cheaper than comprehensive policies, and the more your policy covers, the more it will cost.

With CTP, pricing depends on how your state or territory classifies vehicle types, and how the insurance is administered (e.g. as part of registration costs through a government body or as an individual fee paid through private insurance companies). For example, NSW operates through a private CTP system that is overseen by the State Insurance Regulatory Authority. This means approved CTP insurance providers in the state have more flexibility in the premiums they charge each driver, with individual factors impacting price.

States or territories which administer CTP through a government body usually operate under a community rating model. This offers set annual CTP prices for certain vehicle classes, regardless of an individual’s driving history or demographics. However, these premiums do generally have upper and lower limits, as factors like driving and parking location can still impact price. For example, if you live in Victoria or NSW, you are likely to pay more than other states, with most drivers in NSW paying average of around $120 in Australia and just under $100 in Victoria.

Find more information on each state system here, and head to the relevant CTP administrative body for your location.

Every insurance provider may apply different risk weighting to various factors when calculating an insurance quote. Below are some of the common factors that impact the cost of car insurance.

• Coverage type: As discussed above, the different levels of elective car insurance come at different price points. A third party policy is generally the cheapest option, with fire and theft cover eliciting a small premium jump, and comprehensive cover coming with the largest annual bill.
• Age: Younger drivers or those new to the road will usually see a higher premium, as insurance companies consider their inexperience risky.
• Gender: Premiums tend to be slightly lower for female drivers, as they are statistically less likely to be involved in road accidents or violate road rules. While this isn’t a hard and fast rule, insurance companies will refer to road crash and casualty statistics that show the gender-based trend.
• Location: You’re likely to see a higher premium if you live in an area with higher levels of crime or road incidents that result in insurance claims.
• Where you park: Expect another premium hike if you park your car on the road instead of secure parking. This leaves it more exposed to vandalism, theft and side-swiping, which could all result in you making an insurance claim and thus enhances your risk profile.
• Driving history: If you’ve been involved in a number of road accidents, have demerit points on your licence or a litany of traffic offences to your name, this could all increase your insurance premium.
• Insurance history: If you make an insurance claim, you’re likely to see a premium bump-up at renewal time. On the flip-side, if you have a long claim-free history, you could see significant car insurance discounts. You could be eligible for further premium cuts if you have stayed loyal to the same insurance provider for a certain number of years.
• Car valuation: When you insure your car for damages it may incur on the road, you and the insurance company must agree on what it’s worth. This could be set at the ‘market value’, which is the price the car would fetch on the open market at any given time you make an insurance claim, or an ‘agreed value’, which is a figure you set for the entire policy period. As market value isn’t based on customer preference and can shift with market conditions, this is generally the cheaper alternative.
• Car type, age & modifications: For fire and theft or comprehensive policies, your car’s specs will all impact insurance quotes, as providers must assess the cost of repairing or replacing your vehicle. Any modifications beyond the standard manufacturer models will also play a part in this assessment of value.
• Excess level: When you make an insurance claim, you usually have to fork out an excess. This is an agreed fee you pay before the policy kicks in to cover the bulk of the costs. For example, if you have a $400 excess and are making an insurance claim worth $2,000, you’ll cover the excess and the insurance company will pay the remaining $1600.  A higher excess will generally decrease your premium, and vice versa.

While rising car insurance premiums are certainly adding to the strain of cost of living pressures, savvy drivers can find ways to considerably cut costs.

As mentioned above, all elective policies come with an excess which you’ll fork out in order for your insurance to kick in. With most insurance providers, choosing a higher excess can help you shave down your premium. Just remember: you’ll need room in your budget to cover this figure if you do want to claim on insurance. There’s no point setting a $1,500 excess if it’s not feasible for you to cover that in an emergency.

The more flexible (and expensive) comprehensive policies present extra options for cost reduction. If you want to fully insure your wheels but don’t drive very often, you might consider a pay-per-kilometre policy which reduces your premium as long as you drive under a set km limit in a given year (usually under 15,000km). As mentioned above, choosing to value your car at its market value (which varies in line with market conditions) instead of an agreed value (which is fixed to a sum for the duration of your policy) can also bring down your car insurance bill.

Beyond taking these premium-cutting actions, there are a range of discounts that can apply to third party and comprehensive policies if you fit the criteria. Common car insurance discounts include:

• Loyalty discounts: After a number of years insuring your car with the same provider, a loyalty discount may kick in. You’ll often see this bonus increase the longer you stay with that company.
• No claims discounts: Insurance customers who can show a history of making no or very few minor insurance claims can score this discount. It usually increases alongside the consecutive years you’re insured without making claims, and can rise as high as 70% in some cases. This track record is usually transferable if you change providers, too.
• Multi-policy discounts: Bundling other insurance products like home, contents or life insurance under the same provider could earn you a discount.
• Multi-vehicle discounts: Similar to the multi-policy equation, if there are multiple vehicles registered to your household and you insure them with the same provider under a multi-vehicle policy, you can score a kind of bulk discount. Be sure to check for any restriction on the numbers of cars you can insure this way.
• Restricted driver discounts: If you can guarantee certain types of drivers that insurance providers consider risky (like young or inexperienced drivers) won’t drive your car, you could shave more off your premium.
• Fuel-efficiency discounts: If you drive a hybrid car or one that has a high fuel-efficiency rating, insurance companies may reward your ‘green’ efforts with a discount.
• ‘Buy online’ discounts: These discounts are offered to new customers who sign up for a policy digitally. You’ll often see between a 5% and 20% savings on your first yearly premium, but the price usually reverts back at renewal time.