Written byThird party car insurance is motor cover for damage you cause to other people's vehicles and property, with no cover for your own car beyond a fire and theft add-on.
Also known as: third party property damage, third party fire and theft, TPPD
Key points
- Third party property damage is the basic level: it pays the other driver when you are at fault, and nothing toward your car.
- Third party fire and theft adds limited cover for your own vehicle if it is stolen or burnt out.
- Compulsory third party differs: injury cover needed to register a vehicle, included with rego in most states, a green slip in New South Wales.
- Many policies include a capped amount for damage caused by an uninsured driver, set out in the product disclosure statement.
- A lender financing a car loan will usually require comprehensive cover instead, because the vehicle is its security.
What third party car insurance covers
The point of the cover is other people. If you rear end a new car, third party property damage pays to repair or replace it, along with any fence, wall or shopfront you hit. Damage to your own car is your problem, so a single at fault accident can leave you without a vehicle and still paying for it.
Fire and theft is the middle rung of motor insurance. It adds a payout if your car is stolen and not recovered, or destroyed by fire, but still leaves collision damage uncovered. Excesses, uninsured driver limits and age restrictions vary widely, so compare the wording rather than the headline.
Third party, CTP and comprehensive
Compulsory third party is tied to your registration, included in the rego bill in most states and bought as a separate green slip in New South Wales. It covers injury to people, not damage to cars. It is not optional, and it does nothing for panels. Third party property damage is the voluntary policy that covers the other party's property, and comprehensive adds your own vehicle on top.
Which one suits comes down to what your car is worth and whether you could replace it. Owners of older cars often weigh the premium against the likely payout, factoring it into the total cost of ownership. Anyone with finance, including a novated lease, should read the contract before downgrading cover.
Example
A student in Canberra drives a twelve year old hatchback worth a couple of thousand dollars. Comprehensive cover on the car would cost a meaningful share of what it is worth, so she takes third party property damage instead. When she misjudges a roundabout and hits a near new SUV, her policy pays the twenty thousand dollar repair bill on the other car. Her own bumper and headlight are hers to fix, which she accepts as the trade off she chose when she bought the policy.
Not to be confused with
Frequently asked questions
What does third party car insurance cover?
Damage you cause to other people's vehicles and property when you are at fault, including repair costs and their associated expenses. It does not pay for your own car. A fire and theft version adds limited cover for your vehicle if it is stolen or burnt out.
Is third party insurance enough?
It depends on whether you could replace your own car tomorrow. Third party protects you from the biggest risk, which is a repair bill on someone else's expensive vehicle. What it leaves exposed is your own car, so it suits older vehicles more than newer or financed ones.
What is the difference between CTP and third party property insurance?
CTP is compulsory and covers injury to people hurt in a crash. It is included with registration in most states and bought as a green slip in New South Wales. Third party property damage is optional and covers damage to other people's cars and property. Neither repairs your own vehicle.
Does third party insurance cover my car?
No, not for collision damage. Basic third party property damage pays only for what you damage belonging to someone else. Third party fire and theft adds a payout if your car is stolen or destroyed by fire. For your own crash damage you need comprehensive cover.
Is third party car insurance cheaper than comprehensive?
Generally yes, because the insurer carries less risk. The gap can be smaller than people expect for some drivers and vehicles, so it is worth quoting both before deciding. Weigh the premium difference against what you would lose if your own car was written off.
Related terms
Broader term: Insurance
Insurance
Insurance is a contract where you pay a premium and an insurer covers specified losses, such as damage to a financed asset or a lender's loss on default.
Read definitionCar loan
A car loan is a credit contract used to buy a vehicle: the lender provides the funds and you repay them over time with interest.
Read definitionSecurity (collateral)
Security (collateral) is an asset or legal interest a borrower grants a lender, which the lender can take and sell to recover the debt if the borrower defaults.
Read definitionProduct disclosure statement (PDS)
A product disclosure statement (PDS) is the document a product issuer must give a retail customer before they buy a financial product, setting out its features, risks, fees and costs.
Read definitionWrite-off
A write-off is an accounting entry that removes an asset or unpaid customer invoice from the books because it no longer has recoverable value, recording the loss against profit.
Read definitionNovated lease
A novated lease is a three-way car lease where your employer takes over the lease payments and deducts them from your salary, mostly before tax, while you work there.
Read definitionGo deeper
Sources
This article is general information only and is not financial advice.