When buying a car, there are a whole lot of things to remember – transferring the registration in your name, getting a roadworthy certificate or pink slip, paying stamp duty, paying registration, paying insurance and putting a CTP or green slip on.
Think about how daunting that is for a first-time buyer or even others who have been driving for years and have no idea.
In fact, Smith's Lawyers Australia ran a study in 2018 that showed only one-third of their 1500 respondents actually knew what CTP covered them for. The other 66 per cent believed that it covered them for both injury to others and damage caused to vehicles and property.
MCR Australia conducted a further study, finding that young people were the most impacted by the confusion surrounding CTP insurance, a requirement in Australia.
"Most respondents have a basic understanding that CTP Insurance is the insurance paid with their vehicle registration and that it is compulsory. As might be expected, understanding of CTP Insurance tends to increase with age."
But what does this all mean? Why do we have to pay so much for something that seems to cover so little?
Is insurance mandatory in Australia?
Insurance is mandatory in Australia, but not in the way that many may think. All states and territories require compulsory third-party insurance, also known as CTP or a green slip.
New South Wales, Queensland, South Australia, and the Australian Capital Territory all require you to go out and find a CTP provider at the time of registering your vehicle.
Victoria, Tasmania, Western Australia, and Northern Territory cover it under your registration.
Unlike countries such as the United Kingdom and some states in the United States of America, Australia doesn't actually require insurance that covers the cost of repairs on another person's vehicle.
That means that a person is freely able to drive around in Australia without any insurance to cover property damage.
Given that only a small portion of motorists understand what CTP entails, it's likely that many people are driving around with insurance that could cover their vehicle in the event of an accident.
With compulsory third-party insurance and third-party insurance being two different things, what do they actually mean?
What does CTP/compulsory insurance cover?
Compulsory third-party (CTP) insurance is not the same as third-party insurance. Unlike third party, CTP does not cover you for damage done to other people's cars.
Instead, CTP is purely to cover you in the event of injuring or killing someone, basically covering you from being financially liable if a lawsuit for injuries sustained pops up after an accident.
Basically, if you run into the rear of someone, they break their legs, and you only have CTP, your insurance covers their medical bills, but you'll need to fork out the money for repairs on yours and their vehicle.
There are no-fault and at-fault states you need to keep in mind. Suppose your car is registered in New South Wales, Victoria, the ACT, Tasmania, or the Northern Territory. In that case, you are able to claim compensation for your injuries under the CTP even if you caused an accident because they are no-fault states.
So basically, if you hit someone because you're not paying attention and the airbag smashes your nose, then your medical costs are covered under your own CTP.
Then you have at-fault states – Queensland, South Australia and Western Australia, which means that if you crash into someone or something and it's your fault, you have to shell out for your own injuries, but the CTP covers the medical costs of the other person.
What happens if you hit someone's car without insurance?
In the short term, you're not protected by anything. CTP will not cover the damages of your car or another person's car.
If you cannot pay for the damages out of your pocket and you are at fault, the owner whose car you hit or the owner's insurance company may file a lawsuit seeking financial reimbursement from you.
Often, these court cases will end with you needing to make payments each month until the full debt is cleared and, in some cases, will cause you to file for bankruptcy.
There is no legal way out of needing to pay out of your own pocket or filing for bankruptcy.
Zane Dobie comes from a background of motorcycle journalism, working for notable titles such as Australian Motorcycle News Magazine, Just Bikes and BikeReview. Despite his fresh age, Zane brings a lifetime of racing and hands-on experience. His passion now resides on four wheels as an avid car collector, restorer, drift car pilot and weekend go-kart racer.
