What Is Not Covered by Car Insurance in Australia? Common PDS Exclusions
A plain-English guide to common car insurance exclusions in Australia, including unlisted drivers, wear and tear, mechanical failure, illegal use, modifications, and PDS checks.
- What an exclusion is: An exclusion is a specific circumstance where your policy will not provide cover. If an exclusion applies, the insurer can reduce or deny your claim.
- Exclusions vary by insurer: Every underwriter defines its own exclusions in its Product Disclosure Statement (PDS). Cover varies between insurers.
- Common exclusion categories: Unlisted or underage drivers, mechanical or electrical breakdown, wear and tear, driving under the influence, undeclared modifications, commercial or rideshare delivery, racing or track days, and leaving keys inside an unattended vehicle.
- PDS and Schedule are controlling: Your policy schedule lists your vehicle details, excesses, and driver restrictions, while the PDS contains standard legal terms and general exclusions. Both documents must be read together.
Exclusions, Conditions, Limits, and Excesses: What Is the Difference?
Understanding your motor policy requires distinguishing between four related legal terms commonly found in Australian insurance contracts:
- Exclusion: A situation or risk where no cover exists at all. For example, damage occurring while the driver is over the legal blood-alcohol limit is completely excluded.
- Condition: A rule you must follow to maintain cover, such as keeping the car roadworthy and reporting accidents promptly.
- Sub-Limit: The maximum dollar amount or timeframe an insurer will pay for a specific benefit, such as $500 for personal items or 14 days of hire car use.
- Excess: The out-of-pocket contribution you pay toward an otherwise covered claim before your insurer pays the remainder.
Common Car Insurance Exclusions in Australia
While policies vary between underwriters, most Product Disclosure Statements share common exclusion categories.
1. Unlisted and Underage Drivers
Insurers price policies based on nominated driver profiles. If an unlisted driver is behind the wheel during a crash:
- Insurers apply an unlisted driver excess (often $1,000 to $2,500) on top of standard excess.
- Cover may be denied entirely under strict nominated-driver policies or for drivers under 25.
2. Mechanical, Electrical, and Electronic Failure
Car insurance covers sudden accidental damage, not mechanical warranties. Insurers exclude:
- Engine, gearbox, or cooling system failure.
- Computer, battery, or electrical system faults.
- Structural fatigue or wear during normal driving.
3. Wear, Tear, Gradual Deterioration, and Rust
Gradual deterioration is excluded across all policies. This includes:
- Surface rust, faded paint, and sun damage.
- Worn brake pads, bald tyres, and perished seals.
- Pre-existing panel damage or lack of routine maintenance.
4. Driving Under the Influence of Alcohol or Drugs
Every Australian motor insurer excludes claims if the driver of your vehicle:
- Exceeds the legal blood-alcohol limit in the state or territory where the collision occurs.
- Is under the influence of illegal drugs, prescription medications warning against driving, or intoxicating substances.
- Refuses to undergo a breath, blood, or drug test requested by police.
5. Undeclared Modifications and Non-Standard Accessories
You must declare all modifications, including suspension lifts, turbochargers, and aftermarket accessories. Undeclared modifications that alter vehicle risk can lead to claim denial or reduced payouts.
6. Unapproved Commercial, Rideshare, and Delivery Use
Private policies cover domestic and commuting driving. They exclude commercial activities without a business endorsement:
- Driving for rideshare platforms such as Uber or Didi.
- Delivering food, parcels, or fast food for compensation.
- Hiring your car to others via peer-to-peer car sharing platforms without notifying your insurer.
7. Racing, Track Days, and Competitive Driving
Motor policies exclude damage occurring during:
- Track days, timed laps, or circuit driving.
- Street racing, burnouts, or illegal stunts.
- Off-road driving outside manufacturer guidelines.
8. Leaving Keys in an Unattended Vehicle
Insurers require policyholders to take reasonable precautions. Leaving keys in the ignition or console while unattended in public can result in claim refusal for reckless lack of care.
Summary Table: Common Exclusions at a Glance
The table below illustrates common exclusions across Australian motor insurance policies. Check your individual PDS for specific definitions and endorsements.
| Common Exclusion | What It Usually Means | Why It Matters |
|---|---|---|
| Unlisted drivers | Someone not named on the schedule drives the car | Triggers high unlisted excesses ($1,000–$2,500) or total denial for under-25s |
| Mechanical breakdown | Engine, gearbox, or electrical component failure | Insurance covers collisions and weather, not mechanical warranties |
| Wear and tear | Gradual rust, faded paint, tyre wear, or rotting seals | Maintenance is the owner's responsibility, not an insurable accident |
| Driving under influence | Blood-alcohol over limit or driving on illicit drugs | Total claim denial; you remain liable for third-party property damage |
| Undeclared modifications | Performance tuning or alterations not on schedule | Insurer can decline claims or cancel policy for non-disclosure |
| Commercial / rideshare use | Delivering food, parcels, or ridesharing on private cover | Private policies exclude business activities without endorsement |
| Track days & racing | Driving on race circuits, drag strips, or closed tracks | High-risk driving is excluded; requires specialist motorsport insurance |
| Unsecured vehicle | Leaving keys in ignition or car unlocked in public | Claims may be refused due to failure to take reasonable care |
How to Find Exclusions in Your PDS
The Product Disclosure Statement (PDS) and Policy Schedule are the governing legal documents of your cover. Follow this 4-step framework to verify your policy:
- Examine Your Policy Schedule: Check named drivers, excess amounts, vehicle use classification (private vs business), and declared accessories.
- Locate 'General Exclusions' in the PDS: Search the table of contents or PDF text for 'What we do not cover' or 'General exclusions'.
- Check Specific Section Exclusions: Review individual cover modules, such as windscreen protection, hire car benefits, or towing limits.
- Verify Driver Age Rules: Confirm whether family members, household drivers, or colleagues under 25 are permitted to drive.
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Frequently Asked Questions
Does car insurance cover unlisted drivers in Australia?
In most Australian motor policies, cover for unlisted drivers depends on your policy restrictions. While standard policies may cover unlisted drivers subject to a substantial additional excess (often $1,000 to $2,500), strict nominated-driver policies or policies with under-25 driver exclusions will completely deny cover if an unlisted or underage person is driving.
Does car insurance cover mechanical failure?
No. Standard comprehensive, third party, and fire and theft car insurance policies in Australia strictly exclude mechanical, electrical, structural, and electronic breakdowns, as well as general engine or transmission failure. Insurance covers sudden, unforeseen accidental damage from external events, not internal mechanical failure.
Does car insurance cover intentional damage?
No. Every Australian motor insurer excludes deliberate or intentional damage caused by you, anyone driving with your permission, or anyone acting on your behalf. Additionally, incidents occurring while participating in street racing, burnouts, or illegal activities are strictly excluded from cover.
How do I find exclusions in my car insurance PDS?
Open your insurer's Product Disclosure Statement (PDS) and search for the dedicated section typically titled 'General Exclusions' or 'What We Do Not Cover'. You must cross-reference this with your individual Policy Schedule or Certificate of Insurance, which lists specific driver restrictions, excess amounts, and policy endorsements.
Sources and further reading
ASIC General Advice Warning: This guide provides general educational information only and does not consider your personal objectives, financial situation, or needs. PolicyLens AU does not sell insurance, provide quotes, or offer personal financial advice. Exact cover, exclusions, sub-limits, and excesses depend entirely on your underwriter, policy type, state, and Product Disclosure Statement (PDS). Before making any insurance decision, carefully review the relevant PDS, Target Market Determination (TMD), and Financial Services Guide (FSG) issued by the insurer.