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KEY POINTS
- Third party insurance covers you for damage you may do to others’ vehicles and property.
- Comprehensive car insurance also covers damage to your own vehicle.
- While comprehensive insurance covers for more, it also tends to be more expensive.
A car can be a valuable asset, so it’s a good idea to have more than just Compulsory Third Party (CTP) insurance, (also known as ‘Green Slip’ insurance) which only protects you financially if you injure someone while you’re driving. In order to cover your car, as well as the damage done to other people’s cars, you’ll typically need to take out either comprehensive insurance or third party insurance.
What is the difference between comprehensive and third party insurance?
The main difference between comprehensive vs third party insurance policies lies in the level of protection you are buying and the cost of your premiums.
Third party property insurance
Third party property insurance covers you for the cost of damage to other people’s property (including their cars) and any associated legal costs. It does not normally insure you for damage to your own car. Some providers may cover damage to your vehicle if you are involved in an accident where the other driver was at fault or uninsured and you can identify the driver. However, the level of cover for your own vehicle can be quite low, usually between $3,000 to $5,000.
Third party fire and theft insurance
Third party fire and theft insurance provides the protection of third party property policies plus cover – up to a set limit – if your car is stolen or damaged by fire. The level of cover will depend on your car insurance provider. That said, it can be limited, with some providers only covering up to $10,000. This may not be enough to pay for the repairs or replacement of your car, so you could potentially be out of pocket if you need to make a claim.
Comprehensive car insurance
Comprehensive car insurance sits further along the scale and provides the highest level of financial protection for you and your car. It can protect you for the repair or replacement of your car following theft, a collision, fire, malicious and weather-related damage. It can also cover the cost of repairs or replacement of any other vehicles damaged by you in a collision, including damage to property. Some comprehensive policies also offer extras such as roadside assistance, either as part of the standard policy or available as an add-on.
Unlike third party insurance, on some comprehensive policies you may have the option to choose how much your car is insured for – either market value or an agreed value. In comparison, third party policies may only cover you for your car’s market value.
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Is it better to have comprehensive or third party insurance?
There is no one-size-fits-all answer to the question of whether third party insurance is better than comprehensive cover. It all comes down to which is the best option for you. Let’s look at some of the factors to consider when choosing a level of cover.
Cost vs cover
Third party car insurance provides less protection, so it generally comes with lower premiums. Bear in mind that this lower level of protection usually won’t cover your car if it’s damaged in an accident or a weather event. If you take out third party fire and theft cover, you will be covered for damage to your car from fire or theft, with limits applying.
If your vehicle is worth more than what you are covered for, you could be underinsured if you need to make a claim. On the flipside, if you drive an older vehicle with a low market value, you may be happy to opt for third party insurance.
Are you required to have comprehensive cover?
If you took out a car loan or other type of finance to buy the vehicle, your lender may make it a condition that you have comprehensive car insurance in place. This protects you and the lender in the worst case scenario where your car is written off. Your insurance may be able to cover the cost of replacement and/or pay off the remaining loan.
Ways to save on car insurance
Premiums on car insurance are broadly based on a range of factors including:
- The suburb where the car is usually parked.
- The type of car including the make, model and year.
- Any modifications you have made to the vehicle.
- Your age, gender and driving history.
While you can’t necessarily change your suburb or the make of your car, modifying a car can impact insurance premiums. This is something worth considering before you undertake significant alterations to your vehicle. Adding younger drivers to your policy (especially drivers aged under-25) can also bump up your premiums. Maintaining a good driving record however can lead to discounts from certain providers.
It may also be possible to reduce your insurance premiums by taking simple steps such as:
- Parking your car off the street in a secure garage.
- Investing in safety and security devices such as an immobiliser, that can lower the risk of your car being stolen.
- Selecting a higher excess.
No matter whether you choose comprehensive or third party insurance, the golden rule is to shop around and compare car insurance providers. It’s not just about the potential savings on the cost of premiums: policy features and benefits vary widely between providers, and you need to be sure you have the right protection for your needs. Canstar also lists new car insurance deals and offers each month, which may help incentivise your choice of provider.
If you choose comprehensive car insurance, it can be worth looking at how the premium differs between insuring your car for market value instead of an agreed or nominated value. While your car’s insured value can impact the level of cover, it could also be an opportunity to save on premiums.
Cover image source: r.classen/Shutterstock.com
