Third party car insurance explained – Forbes Advisor Australia
No driver wants to think of a disaster on the road, but everyone should be prepared for it. Third-party auto insurance ensures that you have financial protections to cover costs related to injuries or damage to the vehicle and property that you may cause while driving.
Compulsory and optional levels of liability insurance generally do not cover you if your own car is scrapped or rendered unusable in an accident. So be sure to assess the value of your ride and the use you make of it before opting exclusively for liability insurance.
If your economy wheels don’t justify the higher annual premium of a comprehensive policy with broader coverage, then a third might be just right for you. To help you decide, here’s everything you need to know about third-party auto insurance.
The different types of third-party car insurance
There are three tiers of third party car insurance in Australia which cover you in different circumstances while driving: Compulsory Third Party (CTP), Third Party Property Damage and Third Party Fire and Theft. Let’s explore each:
Compulsory automobile liability insurance (CTP)
It is compulsory to subscribe to the CTP in Australia. Although its name differs from state to state (sometimes called “green slip” or “traffic accident insurance”) and the precise details of the policy vary, generally speaking it covers your liability and that of anyone who drives your vehicle, for injuries caused to others in a car accident. It also generally covers you for any bodily injury claims resulting from the accident.
See details for your state or territory here:
- New South Wales: The State Insurance Regulatory Authority oversees CTP in New South Wales, where it is also referred to as “green slip”. Drivers purchase cover from private insurance companies, which means prices may differ. The amount and time of compensation vary depending on the severity of the injury, but can continue for life if necessary, regardless of fault.
- Victoria: A transport accident charge is included in the Victoria registration fee, with the Transport Accident Commission (TAC) insuring the drivers. TAC is fault-neutral and providers cover things like medical care, rehabilitation, counselling, home modifications and income support.
- Australian Capital Territory: Motor Vehicle Accident Insurance (MAI) is administered by private insurance companies and supervised by the state government. It is paid upon registration and includes treatment, care and loss of income benefits for up to five years, regardless of who is responsible (including you, other drivers, cyclists and pedestrians).
- Queensland: The Motor Accident Insurance Commission (MAIC) regulates Queensland’s CTP insurance scheme which is administered by private companies. It covers medical care, rehabilitation and “fair compensation”. However, if the injured person is at fault or no one is at fault, the MAIC says you will have to rely on sick leave, Centrelink benefits, Medicare, and the private or public health system.
- Tasmania: CPT is arranged through the government body, Motor Accidents Insurance Board (MAIB), and is payable at the same time as vehicle registration. It provides no-fault medical, disability and income benefits.
- Western Australia: Road accident insurance is arranged through the Western Australia Insurance Commission and must be paid for when registering. It is made up of two parts: the mandatory third party (CTP) and support in the event of a catastrophic accident (CIS). The former covers other drivers for costs related to injury and death, while the latter covers more serious or debilitating injuries that require lifelong care. You can still claim if you were the driver at fault, but there are some limitations to this.
- South Australia: You can nominate a CTP insurance provider at the time of renewal to cover injury or death you cause. You will only be able to claim compensation if you are not responsible for the accident or if you are only partially responsible for it.
- Northern Territory: CTP is included in the cost of restoring your vehicle, covering medical and rehabilitation costs as well as financial support. It is administered by 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 and motorcyclists.
Third party property damage auto insurance
This is the basic level of liability insurance that drivers can purchase if they wish to be covered for damage they may cause to other people. cars or goods while driving. For a single accident, most major insurance companies set a payment limit of $20 million.
Some policies may include a lower amount (usually around $5,000) to cover your own vehicle if the accident was caused by an uninsured driver and you can prove they were fully at fault. But generally, basic liability insurance does not cover your own car.
Third Party Fire and Theft
As the name suggests, this level of insurance adds coverage for damage to your car resulting from fire or theft. Most insurance companies set a limit of around $10,000 for payouts in these circumstances, but you’ll usually be able to choose the exact amount that matches the value of your car. A higher level of coverage will increase your premium.
Some providers include additional types of coverage within this broader framework. This may include covering the cost of towing your fire or thieved damaged car to a repairer, a rental car while it is being repaired or replaced (usually up to 21 days) and certain stolen or damaged valuables inside your car (usually up to $500).
What is not covered by liability insurance?
Even if you have CTP coverage and basic liability insurance, your car will generally not be covered for damage, including wear and tear, electrical or mechanical breakdown, and damage caused during illegal activities (eg. , driving under the influence )—unless you choose fire and theft coverage and the claim falls within these parameters. If you want extra peace of mind, consider comprehensive car insurance.
Third-Party vs Comprehensive Auto Insurance
In short, comprehensive auto insurance includes everything in a liability insurance policy and adds coverage for your own wheels on top for a higher premium. What’s included will depend on your provider, your policy and any optional extras you agree to add (at an additional cost). This can range from full replacement coverage if your vehicle is written off to coverage for towing, travel and accommodation after an accident.
Like third-party coverage, comprehensive policies still don’t cover general wear-and-tear or breakdown costs, and there will likely be other exclusions: be sure to check your Product Disclosure Statement (PDS) for More details.
How to make a third-party car insurance claim
Be sure to write down as many details as possible at the time of the accident, this provides evidence to support your insurance claim. After ensuring the safety of everyone involved and reporting the incident to the police, be sure to collect:
- The name, contact details, license plates and insurance details of all road users involved.
- The date and time of the incident.
- The road conditions and the sequence of events leading up to the accident.
- All photographs of vehicle damage.
- Contact details of any witnesses
To apply for CTP, seek medical treatment as soon as possible (keeping any documentation), then go through the CTP provider or relevant state agency to apply. If you are making a third party property claim, call your provider at the time of the incident to check if there are any actions 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 (FAQ)
How much does third-party car insurance cost?
CTP premiums depend on your location (state and zip code) and the size of your vehicle. There is a flat rate in states and territories where CTP is organized by government agencies, while premiums vary somewhat where private insurance companies administer the policies (although competition is still government-supervised).
Other third-party policies may take additional factors into account when setting premiums, such as your age, gender, driving history, insurance history, and car make and model. You may be able to access discounts if you stick with the same insurer or make no claims on your policy, so be sure to check what you’re entitled to.
How much third party car insurance do I need?
What are the disadvantages of liability insurance?