Third Party Car Insurance explained – Forbes Advisor Australia

No driver wants to think about disaster striking on the road, but everyone should be prepared for it. Third party car insurance ensures you have financial protections in place to cover costs related to injuries or vehicle and property damage you may cause while driving.

Both mandatory and optional levels of third party insurance generally don’t cover you if your own car is scraped up or rendered useless in a crash. So, be sure to assess the value of your ride and how you use it before opting exclusively for third-party insurance. 

If your budget-friendly wheels don’t warrant the higher annual premium of a comprehensive policy with broader cover, then third party could suit you just right. To help you decide, here’s everything you need to know about third party car insurance.

Different types of third party car insurance

There are three tiers of third party car insurance in Australia that cover you for different circumstances while driving: compulsory third party (CTP), third party property damage and third party fire and theft. Let’s explore each:

Compulsory third party car insurance (CTP)

It’s mandatory to take out CTP in Australia. While its name differs between states—sometimes it’s called a ‘green slip’ or ‘motor injury insurance’—and precise policy details vary, it broadly, speaking, covers your liability, and anyone who drives your vehicle, for injuries caused to others in a motor vehicle accident. It also generally covers you for any personal injury claims arising from the accident.

See the details for in your state or territory here:

• New South Wales: The State Insurance Regulatory Authority oversees CTP in NSW, where it’s also referred to as a ‘green slip’. Drivers purchase cover through private insurance companies, meaning prices can differ. The amount and timeline of compensation differs depending on injury severity, but can continue for life if required, regardless of fault.
• Victoria: A transport accident charge is included in Victorian registration costs, with the Transport Accident Commission (TAC) insuring drivers. TAC doesn’t consider fault, and providers cover for things like medical care, rehabilitation, counselling, home modifications and income support.
• Australian Capital Territory: Motor Accident Injuries (MAI) Insurance is administered by private insurance companies and overseen by the state government. It’s paid at registration, and includes treatment, care and lost income benefits for up to five years no matter who was at fault (including you, other drivers, cyclists and pedestrians).
• Queensland: The Motor Accident Insurance Commission (MAIC) regulates Queensland’s CTP insurance scheme that’s administered by private companies. It covers medical treatment, rehabilitation and ‘fair compensation’. However, if the injured person is responsible or nobody is at-fault, the MAIC says you’ll need to rely on sick leave, Centrelink benefits, Medicare and the private or public health system.
• Tasmania: CPT is organised via the government body, Motor Accidents Insurance Board (MAIB), and is payable alongside vehicle registration. It provides medical, disability and income benefits on a no-fault basis.
• Western Australia: Motor injury insurance is organised through the Insurance Commission of Western Australia and must be paid at registration. It’s made up of two components: compulsory third party (CTP) and catastrophic injuries support (CIS). The former covers other drivers for costs related to injuries and death, while the later covers more severe or debilitating injuries that require lifetime care. You can still claim if you were the driver at-fault, but there are some limitations around this.
• South Australia: You can nominate a CTP insurance provider at rego time for cover for injuries or death you cause. You’ll only be able to claim compensation if you were not at-fault in the accident or only partially responsible.
• Northern Territory: CTP is included in your vehicle rego fee, covering medical and rehabilitation costs as well as financial support. It’s administered through the NT Motor Accidents Compensation Commission and is a no-fault scheme (meaning anyone can receive benefits regardless of fault) covering pedestrians, cyclists, drivers, passengers, motorcyclists.

Third party property damage car insurance

This is the basic level of third party insurance which drivers can opt for if they want cover for damages they may cause to other people’s cars or property while driving. For a single accident, most major insurance companies set a pay-out limit of $20 million.

Some policies may include a smaller amount (usually around $5000) to cover your own vehicle if the accident was caused by an uninsured driver and you can prove they were completely at fault. But generally, basic third-party insurance doesn’t cover your own car. 

Third party fire and theft

As the name suggests, this level of insurance adds on coverage for damages to your car that are the result of a fire or theft. Most insurance providers set a limit of around $10,000 for pay-outs in these circumstances, but you’ll generally get to choose the exact amount to match the value of your car. A higher coverage level will increase your premium. 

Some providers include additional types of cover within this broader umbrella. This could include covering costs for towing your fire or car damaged by thieves to a repairer, a hire car while it’s being repaired or replaced (usually up to 21 days), and cover for certain valuables stolen from or damaged inside your car (usually up to $500).

What Isn’t Covered by Third Party Insurance?

Even when you have CTP cover and a basic third-party policy, your car generally won’t be covered for any damages, including wear and tear, electrical or mechanical faults, and any damages caused during illegal activities (e.g. driving while under the influence)—unless you opt for fire and theft cover and the claim fits those parameters. If you want extra peace of mind, consider comprehensive car insurance. 

Third Party Car Insurance vs Comprehensive

In short, comprehensive car insurance includes everything in a third-party policy, and adds cover for your own wheels on top for a higher premium. What’s included will depend on your provider, policy and any optional extras you agree to add (for an extra fee). This could span from total replacement cover if your vehicle is a write-off, to cover for towing, travel and accommodation after an accident. 

Like third party cover, comprehensive policies still don’t cover costs related to general wear and tear or breakdowns, and there will likely be other exclusions: be sure to check your product disclosure statement (PDS) for details. 

How to Make a Third Party Car Insurance Claim

Be sure to note down as many details as possible at the time of the accident—this provides evidence to support your insurance claim. After you have ensured the safety of everyone involved and reported the incident to police, be sure collect:

• The name, contacts details, car registration plates, and insurance information of all involved road users.
• The date and time of the incident.
• The road conditions and sequence of events that led to the accident.
• Any photographs of damage to vehicles.
• Contact information of any witnesses

For a CTP claim, seek out medical treatment as soon as possible (saving any documentation), then go through the relevant CTP provider or state body to make a claim. If you’re making a third-party property claim, call your provider at the time of the incident to check if there are any steps you need to take (like having damaged cars towed to a specific repairer). Then, submit your claim with accompanying evidence as soon as possible.

Frequently Asked Questions (FAQs)

How much does third party car insurance cost?

CTP premiums are dependent on your location (state and postcode) and the size of your vehicle. There’s a flat rate in states and territories where CTP is organised through government bodies, while premiums vary somewhat when private insurance companies administer policies (although competition is still overseen by government).

Other third-party policies may take extra factors into account when setting premiums, such as your age, gender, driving history, insurance history and the make and model of your car. You might be able to access discounts for staying loyal to the same insurance provider or not making any claims on your policy, so be sure to investigate what you’re entitled to.

How much third party car insurance do I need?

Every driver must take out CTP, but the rest is optional. Even if your car is on its last legs, it’s advisable to at least hold basic third-party property cover so you don’t rack up a huge repair bill for other people’s vehicles and property. If you live or drive in areas with a higher crime rate, you may want to consider a fire and theft policy, especially if you park your car on the street where it’s more vulnerable to vandalism.

What are the disadvantages of third party insurance?

Like any insurance policy, there are always circumstances in which your cover may not apply. But the most obvious drawback is that your own car generally has no protection with this kind of insurance.