Car insurance is a legal requirement as per the laws in Australia. It is not only mandatory, but also a complete necessity that provides safety and security from any damage that is caused to you and third party, in case of any accident. However, you should be very careful while selecting the type of car insurance for your needs, as different categories cover different needs.
Basically there are two types of car insurance policies; third party insurance and comprehensive insurance. Both these types of car insurance vary in the type of cover they offer and the cost of premium payments. So, when looking for an insurance policy for your car, you should be clear about the advantages of each type of insurance policy and your own requirements.
What is the difference between third party and comprehensive car insurance?
Third party and comprehensive insurance are the 2 main options available for car owners in Australia who want to insure their car. Here is the difference between third party and comprehensive car insurance coverage.
a. What it is?
Third party car insurance : Third party car insurance is the most basic insurance coverage available for your car. It will cover the damages caused by you to another vehicle and its passengers. However, third party insurance does not cover you or your vehicle.
Comprehensive car insurance: A comprehensive car insurance covers almost all the damages caused to your vehicle that is not caused by collision. For example, comprehensive policy covers damages to the car as a result of unforeseen events like theft, fire, vandalism, riots, natural calamities, and so on.
Third party car insurance: Third party car insurance covers all damages, particularly injuries that the driver and passengers in the other car might have suffered as a result of an accident. It is called third party insurance because it deals with third parties, that is the driver and the passengers who are not at fault during the accident, but are injured because of it. Third party insurance kicks in when the policy holder is accountable for the accident or damage, and not only cover the injuries caused during the accident but also helps to pay the legal fee if any legal action results from an accident.
Comprehensive car insurance: Comprehensive car insurance covers non-collision events. It covers the driver and the vehicle, as well as the third party vehicle, driver, and property. The comprehensive car insurance covers the following:
i) Theft: Comprehensive car insurance coverage will pay for all the damages caused to a vehicle due to theft or vandalism. However, it does not cover the items in the car. For example, it will not pay for an aftermarket stereo system stolen from the car or a sporting equipment stolen from the trunk of the car.
ii) Weather damage: Damage caused to the car due to bad weather conditions like a hurricane, earthquake, tornado, or hailstorm are covered under comprehensive car insurance.
iii) Animal damage: Comprehensive car insurance also covers the damage caused to the car after collision with a deer or other animals. A broken windshield due to bird collision is also covered under comprehensive car insurance coverage.
c. What is not covered:
Third party insurance: Damages that are caused to the policyholder’s car or injuries to the policyholder are not normally covered under third party car insurance. For situations like this, other types of collision insurance coverage’s are available but they come with additional cost.
Comprehensive car insurance: Comprehensive car insurance does not cover damages to your car as a result of collision or accident with another vehicle.
d. Legal requirements:
Third party car insurance: Third party car insurance is mandatory for all car owners in Australia in order to legally drive. While most regions have their own decision about car insurance requirements, they have uniformly required that car owners show proof of third party insurance. Since, it is the most basic level of insurance coverage, it is the least expensive car insurance coverage available to car owners.
Comprehensive car insurance: In Australia, it is not compulsory for the car owners carry comprehensive car insurance. However, if you are living in a high risk area, then it is advisable to have one. High risk areas are places that are more likely to suffer from natural disasters or areas with high theft rates.
Third party insurance: Third party car insurance is affordable to most drivers, as it is very cheap compared to comprehensive insurance coverage. While there are many cars in the road that are well-worth taking full insurance coverage, there are still some cars that are either too damaged or too old to be worth the cost of paying the full premium amount. In such cases, third party insurance would apply the best.
Comprehensive car insurance: Comprehensive car insurance is useful when you have a new or an expensive car. Although, taking comprehensive insurance is optional , most lien holders will require car owners to get one if they purchase the car on loan or on lease.
f. Premium cost:
In third part insurance coverage, the insurers are at a great risk of high payouts as the cost of a lawsuit and compensation far exceeds the cost of repairing an insured car. For this reason, third party insurance premiums are always higher than comprehensive car insurance.
In Third party car insurance, there is no deductible. However with comprehensive car insurance, the insured has to pay higher deductible which is normally agreed at the start of the insurance contract. A higher deductible minimizes the premium paid by the insured, thus making the insurer to take very low risk as possible.
Taking car insurance can protect you from getting sued when you injure someone or damage other’s property, or even damage your own vehicle. While people buy car insurance, the coverage normally falls under two main categories, the third party and the comprehensive car insurance. While third party car insurance is required by law, people can also choose to buy comprehensive coverage to protect their car against weather and other non-collision damages. For further information, this link would come in handy.
David Toms is a car insurance consultant from Melbourne, Australia.