Ten Car Insurance Myths Australians Still Believe
Car insurance attracts folklore. Some of it is harmless; some of it costs people thousands at claim time. These are the ten that come up most often in Australia, and what's actually true.
Myth 1: Red cars cost more to insure
Colour is not a rating factor. Australian insurers price the make, model, year, engine, safety features, repair cost and theft statistics of the vehicle — not its paint.
The myth persists because of a correlation: performance cars are expensive to insure, and performance cars are disproportionately sold in red. The premium is tracking the car, not the colour. Change the paint and nothing on the quote moves.
Myth 2: CTP covers damage to my own car
CTP covers injuries to people. It does not cover your vehicle, and it does not cover damage you cause to someone else's vehicle or property.
This is the myth that does real financial damage. Every registered vehicle in Australia carries CTP, which leads people to assume they're insured. Cause a three-car collision with CTP only, and you personally owe for every vehicle involved including your own. The cheapest fix is third party property damage, which is inexpensive precisely because it doesn't cover your car either. Our state-by-state CTP guide covers how it's bought in each jurisdiction, and the cover comparison shows what each level adds.
Myth 3: If my car is written off, I get back what I paid
On a market value policy you're paid what the car was worth the day it was lost, after depreciation — not the purchase price. Only an agreed value policy pays a figure set in advance.
New-for-old replacement exists on some comprehensive policies but is normally limited to the first two or three years and to the original owner. If the gap between market value and what you owe on finance worries you, that's the specific problem gap or shortfall insurance addresses.
Myth 4: Everything in my car is covered if it's stolen
Personal effects cover on a motor policy is capped, often at a few hundred dollars, with exclusions for cash, jewellery, electronics and tools of trade.
Valuables generally belong on a home contents or specified-items policy. Tools of trade almost always need business cover. Check the sub-limit in your PDS before assuming a laptop in the boot is insured — see our theft and vehicle security guide for how theft claims actually run.
Myth 5: If someone else crashes my car, their insurance pays
In Australia the policy generally follows the car, not the driver. Your policy responds when someone drives your car with permission.
Whether it responds well depends on your policy terms. An unlisted driver, or a driver under an age limit you nominated, can attract a substantial additional excess. Nominating a restricted driver list to save money and then lending the car freely is a false economy.
Myth 6: Minor damage and small modifications don't need disclosing
You have a legal duty to take reasonable care not to make a misrepresentation to an insurer. Modifications, prior damage and incidents you chose not to claim are all material.
The consequence of getting this wrong is disproportionate: a claim can be reduced or refused, and the policy can be treated as though it never existed. Disclosure is free; non-disclosure is discovered at the worst possible moment. The Insurance Council of Australia publishes consumer guidance on buying cover and disclosure duties.
Myth 7: Car insurance is cheaper for women
Individual risk factors dominate modern pricing. History, age, vehicle, postcode and annual kilometres move a quote far more than gender does.
Myth 8: Roadside assistance means I don't need comprehensive
They solve different problems. Roadside assistance handles breakdowns — flat battery, flat tyre, lockout, a tow to a mechanic. It covers no damage to your vehicle from accident, fire, theft, hail or flood.
Having roadside assistance through a motoring club and comprehensive cover through an insurer is a common, sensible combination — just don't pay for roadside assistance twice by adding it as a policy extra when you already hold it.
Myth 9: My policy covers me for work driving
A private-use policy covers private use. Carrying tools between jobs, visiting clients, making deliveries or driving rideshare is business use and must be declared.
Rideshare is the trap of the last decade — driving for a platform on a private policy risks a denied claim, and most insurers now offer a specific endorsement or product. Commuting to a single regular workplace is normally fine; everything beyond it deserves a phone call.
Myth 10: My renewal is the same policy at the same price
Premiums move every year on factors you don't control — your postcode's updated risk data, industry-wide repair and catastrophe costs, reinsurance, and each insurer's competitive strategy. Product terms change too.
Auto-renewal is where loyal customers quietly pay the most. Read the renewal notice, compare the sum insured and excess against last year, and get two or three competing quotes before it rolls over. See what drives your premium and why catastrophes raise everyone's rates.
Two more worth correcting
"A dashcam or CCTV footage won't make any difference to my claim." It frequently does. Liability disputes turn on whose account the insurer accepts, and footage converts an argument into a fact — which is why installers field the question so often that Defensor's own FAQ covers what footage is worth keeping and for how long. Retention is the catch: many systems overwrite within days, so export the file before it's gone.
"Comprehensive means everything is covered." It doesn't. Comprehensive is the broadest cover, not unlimited cover. Wear and tear, mechanical failure, tyre damage from ordinary use, driving unlicensed or over the limit, and deliberate acts are excluded on essentially every policy. Our glossary unpacks the wording.
Frequently asked questions
Does the colour of your car affect insurance in Australia?
No. Paint colour is not a rating factor for Australian insurers. The myth survives because high-performance cars are both expensive to insure and commonly sold in bold colours — the premium follows the performance, repair cost and theft rate of the model, not the paint.
Does CTP insurance cover damage to my own car?
No, and this is the most financially dangerous misconception in Australian motoring. CTP covers injuries to other people only. It pays nothing towards your car, and nothing towards damage you cause to anyone else's property. For that you need third party property damage, third party fire & theft, or comprehensive cover.
If someone else crashes my car, does their insurance pay?
Usually not — your policy responds, because the policy follows the car. How well it responds depends on whether that driver falls within your policy terms. An unlisted or under-age driver can trigger an additional excess, and in some circumstances cover can be reduced or refused. List your regular drivers.
Do I have to tell my insurer about modifications?
Yes. You have a duty to take reasonable care not to make a misrepresentation when you buy and renew a policy, and vehicle modifications are material. Undeclared modifications can reduce or void a claim — including claims unrelated to the modified part.
Is car insurance cheaper for women in Australia?
Not as a rule. Modern Australian pricing models weight individual factors — driving and claims history, age, vehicle, garaging postcode, kilometres — far more heavily than gender. Apparent differences usually trace back to the cars people drive and how much they drive them.