A standard comprehensive car insurance policy is written for personal use. Once you are charging someone money to sit in that car and use it to learn to drive, you have changed what the vehicle is being used for, and most personal policies either exclude that use entirely or require you to declare it. This is the part new instructors most often get wrong, not because they are careless, but because nobody tells them until a claim gets questioned.
Why "I already have car insurance" isn't the full answer
Comprehensive car insurance covers damage to your vehicle and, depending on the policy, damage to others. It does not typically cover the specific risks of paid instruction: a learner panicking and grabbing the wheel, an instructor needing to use dual controls to avoid a collision, or a learner causing an injury to a third party while under instruction. Insurers price personal and commercial use differently because the risk genuinely is different, a learner driver is, by definition, less predictable than an experienced one.
Before your first paid lesson, it is worth a direct phone call to your insurer to ask explicitly whether paid driving instruction is covered, and if not, what policy you would need instead. Getting this confirmed in writing matters more than it might seem, since a verbal assurance is hard to rely on if a claim is ever disputed.
The core policies instructors typically carry
Instructor-specific motor insurance. This is comprehensive cover written specifically for paid driving instruction, usually including cover for dual-control vehicles and for incidents that happen while a learner is at the wheel under your supervision. It tends to cost more than a personal policy, reflecting the higher risk profile, but it is the piece that actually responds if something goes wrong during a lesson.
Public liability insurance. This covers injury to a third party or damage to third-party property that is not directly a car accident, for example if a learner's error causes a fall or damage at a pickup location. Many instructors carry this separately from their motor policy, since it covers a different category of risk.
Professional indemnity insurance. Less universal than the above two, this covers claims that your instruction itself was negligent, for example if a learner argues they were taught an unsafe technique. It matters more for instructors who also do things like endorsed defensive-driving courses or formal assessments, but some general instructors carry it as well.
What state licensing usually expects
Most Australian states that require an instructor licence or accreditation also require proof of appropriate insurance as part of that application, and some set minimum cover amounts. The specifics vary by state and change periodically, so treat anything you read online, including this post, as a starting point for your own check with your state's transport authority rather than a final answer. See how to become a driving instructor in Australia for the broader licensing picture state requirements usually sit alongside.
Independent instructors carry more of this themselves
If you are teaching under a driving school's umbrella, some of this may already be arranged or required by the school as a condition of using their vehicles or branding, worth confirming explicitly rather than assuming. Independent instructors are usually arranging all of it themselves, which is one of the real trade-offs of going independent. See should you go independent or join a driving school for more on that decision.
Treat it as a cost of doing business, not a box to tick
The honest reason this gets skipped is that it is an ongoing cost against income that is already unpredictable when you are starting out. But the entire point of the cover is for the one lesson, out of thousands, where something goes wrong. Budgeting for it from your first paid lesson, rather than planning to "sort it out once things are steadier," is the difference between it being a manageable line item and a problem you discover at the worst possible time. See tax and expense tips for independent driving instructors for how insurance premiums fit into your running costs more broadly.