Written byCompulsory third party insurance (CTP) is the cover every registered vehicle must carry, paying compensation to people injured or killed in a crash involving that vehicle.
Also known as: CTP, CTP insurance, green slip, compulsory third party
Key points
- It covers injury to people, not damage to vehicles or property: for that you need third party property or comprehensive car insurance.
- CTP is bought with your registration: some states let you choose a CTP insurer, others build a state scheme into the rego bill.
- A lender will require comprehensive cover on top of CTP, because CTP does nothing to protect the vehicle securing the car loan.
- Schemes differ by state on who can claim and how much, including whether a driver who caused the accident is covered.
How CTP works
CTP is a liability cover. If a vehicle is involved in a crash and someone is hurt, the injured person claims against the CTP insurer or state scheme attached to the vehicle at fault, and the scheme pays for medical treatment, rehabilitation, lost income and, in serious cases, lump sum compensation. The driver is not left to pay those costs personally, which is why it is compulsory.
Each state and territory runs its own scheme with its own rules. Some are fault-based, so an injured driver who caused the crash gets little or nothing; others are no-fault and cover everyone hurt, at least for treatment. Motorcyclists, passengers, pedestrians and cyclists are all covered as third parties.
CTP and the rest of your car insurance
CTP is the floor, not the whole building. It pays nothing for the dent in the other car, the fence you hit or your own vehicle. Third party property cover picks up damage you cause to other people's property; third party fire and theft adds those two risks to your own car; comprehensive insurance covers your vehicle as well as the damage you cause.
That is why financed vehicles carry comprehensive cover from day one. The lender's interest is in the ute or SUV itself, and a policy that only covers injuries to other people leaves the security unprotected. Most finance contracts make comprehensive insurance a condition and have the lender noted on the policy.
CTP when you finance a vehicle
It belongs with the running costs, not the purchase price. Registration and CTP are annual, sit outside the loan and vary with the vehicle type, the state and, in some schemes, the driver's age and history; a heavy vehicle or a taxi pays far more than a family hatchback. It is one of the items in a vehicle's total cost of ownership.
On a novated lease or a managed fleet the rego and CTP are usually bundled into the running costs and paid from the budget the lease sets aside, so the driver rarely sees the bill. On a straight car loan you pay them yourself.
Example
An apprentice in Western Sydney buys a used hatchback on her first car loan. The lender asks for proof of comprehensive insurance before settlement, and to register the car she also buys a green slip, the NSW name for CTP, from an insurer of her choice. A few months later she rear-ends another car at a roundabout. The other driver's whiplash treatment is claimed through her CTP insurer, and her comprehensive policy handles the repairs to both cars. Had she only held CTP, the repair bills would have been hers.
Not to be confused with
- Third party car insurance
- third party property insurance covers damage you cause to other people's cars and property, not injuries
- Comprehensive car insurance
- comprehensive cover protects your own vehicle as well, and is what lenders require on a financed car
Frequently asked questions
Is CTP the same as a green slip?
Yes. Green slip is the New South Wales name for a CTP policy, from the colour of the paper certificate insurers once issued. In NSW you buy the green slip from an approved insurer before you can register the vehicle. Other states use the term CTP, or fold the cover into a state scheme paid with rego.
Does CTP cover damage to my car?
No. CTP only covers injury or death to people caused by the use of a vehicle. Damage to your own car, to someone else's car or to property such as fences and buildings is not included. You need third party property, third party fire and theft, or comprehensive car insurance for that.
Do I still need CTP if I have comprehensive insurance?
Yes, both. CTP is a legal condition of registration and covers injuries to people; comprehensive insurance is a voluntary policy that covers vehicles and property. They do different jobs and one does not replace the other. A financed vehicle will normally have both from the day it is registered.
Who pays CTP on a novated lease or company car?
It depends on the arrangement. On a fully maintained novated lease, rego and CTP are usually included in the running costs deducted from the employee's pay. For a company car the business pays them as part of the vehicle's operating costs. Either way the cover attaches to the vehicle, not to the person driving it.
What happens if I drive without CTP?
Because CTP is tied to registration, driving without it usually means driving an unregistered vehicle, which brings fines and can leave you personally liable for injury costs. Injured people in that situation are typically covered by a state nominal defendant scheme, which then recovers the money from the uninsured driver.
Related terms
Comprehensive car insurance
Comprehensive car insurance is the broadest level of motor cover, paying for damage to your own car as well as damage you cause to other people's property.
Read definitionThird party car insurance
Third party car insurance is motor cover for damage you cause to other people's vehicles and property, with no cover for your own car beyond a fire and theft add-on.
Read definitionInsurance
Insurance is a contract where you pay a premium and an insurer covers specified losses, such as damage to a financed asset or a lender's loss on default.
Read definitionCar loan
A car loan is a credit contract used to buy a vehicle: the lender provides the funds and you repay them over time with interest.
Read definitionNovated lease
A novated lease is a three-way car lease where your employer takes over the lease payments and deducts them from your salary, mostly before tax, while you work there.
Read definitionFleet
A fleet is a group of vehicles owned, leased or managed by one organisation for business use, from a few utes and vans to hundreds of trucks and plant.
Read definitionGo deeper
Sources
This article is general information only and is not financial advice.