Third-Party Car Insurance: Benefits and Considerations

While third-party car insurance offers essential coverage, understanding its scope is crucial. Discover the benefits and key considerations to ensure you're adequately protected.
Woman on the phone with her insurer after a car crash

Understanding basic third-party car insurance

Choosing car insurance is about getting the cover you need at a price you can afford.

For cost-conscious drivers, basic third-party car insurance may be an attractive option. It comes with fewer protections than other plans like comprehensive car insurance, but for certain people it might be a good fit.

In this article we’ll take a closer look at a simple form of third-party car insurance, what it includes, and what it doesn’t. While there are fire, theft and third-party policies available, we’ll be referring to the basic form of third-party car insurance unless otherwise stated. If you’re considering whether third-party car insurance suits your needs, you’ll want to continue reading.

What does basic third-party car insurance cover?

Third-party car insurance, as its name suggests, mainly covers damage to other people’s property caused by your car. This might also be referred to as third party liability car insurance. You’ll want to note that third-party car insurance is different to compulsory third-party insurance (CTP) insurance. The CTP you’re required to purchase when you register a car covers liability related to injury or death of another party but not property damage.

Imagine a situation where you collide with another car. Both your car and the other car have damage. If you were at fault and the incident met the criteria of your third-party cover, after payment of any applicable excess, the insurer would take care of the costs to repair the other party’s vehicle.

What happens to your vehicle? If you’re at-fault you will be responsible for paying to fix your own car.

On the other hand, if the other party was at fault, and uninsured, your third-party cover may cover the cost of some damages to your car. 

What are the benefits of basic third-party car insurance cover?

Affordability is one of the key perks of third-party insurance. It’s usually cheaper than comprehensive insurance, but it also covers less. Someone who is willing to cover their own vehicle repair costs may find this cover suitable. Also, drivers with a low value vehicle may not feel like they need cover beyond third party car insurance. This might be especially true if they don’t believe their car is worth repairing after an incident.

For example, let’s say you rear-end the car in front of you. This isn’t an ideal scenario under any circumstances. Adding to this inconvenience is the fact that this car is a late model BMW. Without insurance, you will be responsible for all the repair costs to this expensive car. On the other hand, if you did hold a third-party car insurance policy at the time of the incident, your insurer would cover these costs for you. Third-party car insurance, like all insurance, acts as somewhat of a financial safety net for the unexpected.

Considerations when relying solely on basic third-party car insurance

No coverage for own damages when you are at fault

As mentioned before, with third-party insurance, you’re responsible for costs to your car. This is a key limitation of third-party cover.

Potential financial implications

It’s crucial you understand all the potential costs for yourself after an incident. This might include car repair, car replacement or even use of a hire car while you wait for your own car to be repaired.

No coverage for natural disasters or thefts

Basic third-party car insurance does not cover events like fires, floods, or thefts. You’ll have to upgrade your third-party policy to another type of policy to obtain protection for these specific events.

Balancing cost with coverage

It’s helpful to weigh the savings of third-party insurance against potential out-of-pocket expenses. Also, consider your own driving habits, where you live (urban or rural area), and the type of vehicle you own. These elements can influence the level of coverage you may need.

The value of exploring your options when it comes to cover

Hopefully you now better understand third-party cover – what it does and what it doesn’t do. Still, it’s normal to take your time to weigh the options. This might be the right moment to do a comparison between basic third-party cover, third-party cover that includes fire and theft, and comprehensive insurance.

While the features found in third-party fire and theft policies and comprehensive policies do usually come with a higher up-front cost. For many, the added protection makes sense for their needs.

It’s important when taking out third-party car insurance you have a good understanding of the upsides and potential pitfalls. Sure, upfront costs are a consideration, but you still need to look at the entirety of your circumstances to determine whether a basic third-party car insurance is right for you.

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Things to note

The information in this article has been prepared for general information purposes only and is not intended as legal advice or specific advice to any particular person. Any advice contained in the document is general advice, not intended as legal advice or professional advice and does not take into account any person’s particular circumstances. Before acting on anything based on this advice you should consider its appropriateness to you, having regard to your objectives and needs.

Insurance products (excluding Travel Insurance) are issued by RACQ Insurance Limited ABN 50 009 704 152 (RACQ). Conditions, limits and exclusions apply. This is general advice only and may not be right for you. This information does not take your personal objectives, circumstances or needs into account. Read the PDS and any applicable Supplementary PDS before making a purchase decision on this product. You can also access our Target Market Determinations on this website.