Young driver holding steering wheel

Car Insurance for Your First Car

Got new wheels? Everything you need to know about getting your first car insurance policy.

Buying your first car can be an exciting time but comparatively tough on your wallet. As you’ve probably realised, the actual cost of a car is only the tip of the iceberg. There are a number of other expenses involved before you can get on the road.

Car insurance is one of the biggest expenses you will face. You must take out a compulsory third party (CTP) car insurance policy in Australia. You will also need to consider what type of damage cover is right for you.

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Details Features
Low-cost, straightforward car insurance aimed at safe drivers.
  • Up to $20 million in liability cover
  • Optional windscreen and window glass only cover
  • Optional car hire replacement cover
  • Fast, simple online claims process
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15% discount for comprehensive policies purchased online.
  • Lifetime Guarantee on all authorised car repairs as long as you own the car.
  • Flexible payment options
  • 24/7 phone & online claims service
  • Up to $1,000 key replacement and lock re-code
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Gold Comprehensive
Gold Comprehensive
Save 15% on Gold Comprehensive when you purchase online. Optional 24/7 roadside assistance with unlimited callouts.
  • New for old replacement for the earlier of 2 years/40,000kms
  • $850 ($100/day) emergency transport and accommodation
  • Cover for replacement of keys up to $1,000
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Buy online to save 15% off your car insurance policy and receive a free 7" Android tablet.
  • New for old replacement for the earlier of 2 years/40,000kms
  • Online discount of 25%
  • $850 ($100/day) emergency transport and accommodation
  • $1,000 cover for hire vehicle following theft (max 14 days)
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Price beat guarantee for comparable comprehensive policies for drivers aged 25 or older.
  • New for old replacement of your car - 24 months
  • Choice of agreed value of car
  • Third party property damage
  • Theft and malicious damage cover
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Benefit from new for old car replacement, cover for fire and theft, plus more.
  • Option for Drive Less Pay Less policy
  • Up to $20 million in legal liability cover
  • New for old car replacement
  • Each policy makes your car carbon neutral
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Price Saver (Comprehensive)
Price Saver (Comprehensive)
Up to 15% discount for comprehensive policies purchased online.
  • Repairs with authorised dealers guaranteed
  • New for old replacement for the earlier of 2 years/40,000kms
  • No Fault Accident, no excess
  • Hail SMS alerts
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24/7 roadside assistance and up to $20 million in liability cover.
  • 24/7 roadside assistance
  • Comprehensive cover for accidental damage
  • Optional hire car provision up to 14 days
  • $20 million legal liability cover
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Comprehensive - Elegant Cover
Comprehensive - Elegant Cover
Save up to 20% when you buy AI car insurance online. Comprehensive cover with affordable pricing for modest vehicles, especially families.
  • New car replacement - 12 months or 20,000 km
  • Accidental damage to own and third party vehicle or property
  • Theft and/or attempted theft
  • Up to $20 million legal liability
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Understanding the different types of car insurance

You only need to worry about four different types of car insurance and they are all very distinct from one another.

  • Compulsory third party (CTP). Compulsory third party insurance will cover liability charges in the event you are involved in an accident. This cover ensures that the driver at fault will always have an insurance policy that can pay for any injuries caused.
  • Third party property (TPP). This is not mandatory, but it’s cheap and extremely important. Third party property covers the cost of property damage you might cause while driving. If you rear end a Mercedes Benz or have a heart attack behind the wheel and drive through the wall of someone’s house, you will most likely be liable for all the costs even if it wasn’t strictly your fault. Even the cheapest TPP car insurance usually covers at least $20 million worth of property damage.
  • Third party property with fire and theft. This policy gives you all the benefits of TPP insurance, along with fire and theft insurance for your car. Fire and theft are two of the most common causes of total car loss, so it’s a good idea to get the protection.
  • Comprehensive. This is the highest level of car insurance cover there is. Comprehensive vehicle insurance includes all the benefits of TPP insurance, as well as protection against fire and theft. What makes it different is that, unlike the other types of car insurance, it covers the cost of storm damage, flooding, hail, vandalism and much more. Depending on the insurer, you can also find a wide range of extras with comprehensive insurance and can customise your policy a lot more.
Compulsory Third PartyThird party propertyThird party property with fire and theftComprehensive
PriceAffordable, regulated pricesCheapRelatively cheapMore expensive
Good forEveryoneVery cheap cars, when you only want the most important types of coverWhen you want a limited range of important cover for your own car, as well as TPP cover, at a low priceEffective all-around protection for your car

What about family car insurance policies?

You might want to consider joining your parent’s car insurance policy instead of taking out your own. You could also look at getting cover through a joint policy if you share a car with housemates. You can do this by adding new drivers to an existing policy or by selecting multiple drivers when taking out a new policy

Family policies refer to joint car insurance policies that are specifically designed to cover multiple drivers in the same household, even if the drivers all have different experience and risk levels. These policies tend to be more expensive than single policies, but may be a more cost-effective way for new drivers to get cover when everyone’s driving the same car. Despite these differences, family policies still come in the same varieties, with similar types of cover, as the ones in the table above.

You should compare joint and family car insurance policies in addition to other options to pick the one that meets your needs the best. Remember to look at the individual merits of specific policies, and not just policy types. Just because most family policies, or most single policies, are preferable for your situation doesn’t mean they all are or that it’s necessarily the ideal option.

How are prices determined?

Car insurance companies set their premiums based on factors that have been proven to make a difference to claim rates. For example, you might receive a discount for having a car alarm installed.

Premiums are higher for younger drivers because the chances of them being involved in an accident are statistically higher. To make matters worse, under 25s are also statistically more likely to be speed offenders, which means accidents involving young drivers are more dangerous as well as more likely to occur.

Others factors include whether you park on the street or in a garage, what colour your car is, how easy is it to get spare parts, whether you have any car modifications and more.

These factors can affect the price of both the premiums and the excess.

  • The premiums. These are the regular, ongoing costs of holding a policy. Typically payable annually, monthly or fortnightly.
  • The excess. This is a flat sum that you must pay whenever you make a claim. If your total excess if $500, for example, then you will need to pay $500 before you can make a claim under your car insurance policy.
Did you know?

How is the excess determined?

The total amount of the excess can be split into two parts.

  • Base excess. This is the core excess cost that come with your policy. You might be able to choose a higher base excess for lower premiums or a higher excess for lower premiums.
  • Additional excesses. These are further costs that may be added onto the base excess. Drivers under 25 will typically have an age-related additional excess, such as an extra $150 added on top. Other additional excesses might apply in certain situations, for example, if your car was being driven by someone not listed on the policy.

The cost of premiums will usually stay at the front of your mind, while the excess fall to the back. However, it’s important to keep both in mind because the cost of the excess is a big part of actually getting value for your money from your car insurance policy.

Example: Car insurance costs broken down for new drivers

If you’re a new driver, your car insurance prices will be determined a bit differently compared to someone who is renewing their car insurance, or switching policies. Consider this example:

Bill is 21 and Ted is 41 years old. Both are taking out a new comprehensive car insurance policy from the same insurer, for the exact same type of car.

  • Bill has just gotten his red Ps and is insuring his first car. He parks on the street and is paying his premiums monthly.
  • Ted is an experienced driver. He is paying premiums annually instead of monthly, and parks in a securely enclosed garage.
  • Bill’s quote. $1,800 per year, $800 total excess
  • Ted’s quote. $1,000 per year, $600 total excess

To find out why there is such a substantial difference between the two quotes, Bill and Ted separately phone the insurer to ask for a price breakdown and then compare the differences. Their base costs start the same, but the total costs end up being very different.

Bill, age 21Ted, age 41
Base cost$1,300 premiums, $600 excess$1,300 premiums, $600 excess
Age related+$200 per year, +$100 excess-$100 per year
Experience related+$200 per year, +$100 excessNone
No-claims bonus$0-$150 per year
Driving record$0+$50 per year
Parking arrangements+$50-$100 per year
Premium payments+$50$0
Total cost$1,800 premiums, $800 excess$1,000 premiums, $600 excess
  • Age. Bill is paying an extra $200 a year in premiums, and is hit with another $100 in additional excess due to his age. Ted is paying $100 per year less in premiums for being part of a statistically safer age group.
  • Experience. As a red P plater, Bill gets additional costs on top of his age-related increase while Ted’s prices are unaffected. When Bill earns his green plates, this penalty will decrease, and when he gets his full license, it will disappear entirely.
  • No-claims bonus. Bill does not get a no-claims bonus because he has no driving history, while Ted hasn’t made a claim for several years and is getting a discount for it.
  • Driving record. Bill has no driving record yet and is, therefore, not getting any bonuses or penalties for it. Ted has a driving record, but also a history of speeding and parking tickets, which increases his price.
  • Parking arrangements: By parking in a secure garage instead of on the street, Ted is paying $150 less per year than Bill.
  • Premiums payments: Bill can’t afford to pay premiums annually and is instead doing it month to month at a total additional cost of $50 a year.

Despite getting the exact same type of insurance policy for the exact same type of car, Bill and Ted are facing very different costs.

The six things you can do to reduce your prices

If you aren’t following any of these steps, it’s safe to say that you’re paying more than you have to.

  • Picking a cheap-to-insure car. Consider this before buying your first car and you can reduce your insurance costs before even taking out a policy. As a general rule of thumb, the cheaper, safer, greener and more common it is in Australia, the less it costs to insure.
  • Maximise discounts and buy online. Many insurers will offer a discount of 25% or more simply for buying your car insurance policy online. Also, many deals and discounts only work for online signups. Make sure you’re taking advantage of all the discounts you are entitled to.
  • Compare policies regularly. Price creep is an unfortunate feature of some car insurance policies. Pay attention to your renewal notices, check whether your prices are increasing for no apparent reason and don’t be afraid to shop around for a new insurer.
  • Maintain your vehicle. Insurers may reserve the right to refuse a claim where damage could arguably have been the result of regular wear and tear or poor maintenance. Keeping your car roadworthy and in good condition is a good idea.
  • Nominate your drivers. The cost of your policy is largely determined by the most at-risk driver on it. For example, if you’re a new driver with a clean record, it might cost you a disproportionate amount to include a driver with a history of speeding tickets or traffic infringements on your policy.
  • Vary your excess. Many insurers will give you a variable excess option, which essentially lets you choose your own excess. Opting for a higher amount can get you considerably lower premiums, while opting for a lower excess can cost less in the event of a claim, but more in premiums.

These are just some of the more significant discounts you might find, but there are many others as well. Look at more ways to save, or start comparing policies online if you’re ready to start looking at options.

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Picture: Shutterstock

Andrew Munro

Andrew writes for, comparing products, writing guides, sniffing out deals and looking for new ways to help people get the most out of their money.

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