Comprehensive versus third-party car insurance: How to choose and understanding the difference

Published September 2024 | 5 min read
Words by Angela Tufvesson

When it comes to car insurance, there are a few main types of coverage. Here’s what to consider and how to make the best choice for you and your circumstances.

Whether you clock up daily kilometres driving to work and ferrying the kids to after-school activities or you get around in an older car only on weekends, car insurance is an important consideration.

It can cover the costs if you damage another vehicle or property in a car accident, as well as repairs to your own car.

There are two main types of coverage: comprehensive and third-party car insurance and understanding the differences can help you decide which type of insurance is best for your circumstances. Here’s what you need to know.

Why you need car insurance

The reason you need car insurance is straightforward: it can cover you if something goes wrong. Car insurance provides financial protection if you’re involved in an insured car accident or there’s a theft or fire in relation to your car. Without car insurance, you could end up paying for repairs or replacements yourself or for damage to someone else’s car or property, which can be expensive – and stressful.

What is compulsory third-party car insurance?

Car insurance doesn't cover the risk of injuring other people in a car accident. That cover is provided separately by compulsory third-party (CTP) insurance. Every driver of a registered car needs to have CTP insurance – or ‘Green Slip’ insurance in NSW – because it’s part of your car registration. This covers you against paying compensation to people injured in a car accident that you caused.

While CTP insurance is mandatory throughout Australia, it works slightly differently depending on your state or territory – so the laws where the accident occurred will be applied.

What is third-party property insurance?

CTP insurance doesn’t cover you for damage caused to other people’s cars or property. This is where third-party property insurance comes in.

Third-party property insurance covers damage you cause to other cars and property – that is, the third party (after you and your insurance company). It’s typically the most basic and least expensive type of car insurance.

What is comprehensive car insurance?

Comprehensive car insurance offers the broadest and best scope of cover for Aussie drivers. It covers repairs to your car and other cars – even if the accident is your fault. It also covers your car if it's stolen or damaged by unfortunate events like flood, fire, hail or vandalism.

Depending on the level of cover or options you choose, comprehensive car insurance may come with extras like towing and emergency roadside assistance, rental coverage while your car is being repaired and coverage for your personal belongings inside the car.

You may be able to choose how your car is valued in the event of a total loss – that is, the amount of money you’ll receive if your car is a total loss or stolen. ‘Agreed value’ is a fixed amount decided at the outset of the policy period by you and your insurer, whereas ‘market value’ is the amount your car would have been worth at the time of the accident.

Working out the level of car insurance you need

The value of your car and how much you rely on your set of wheels will largely determine what type of car insurance you take out in addition to the CTP insurance which is part of your car registration.

If you drive an old car or could just as easily take public transport if something happened to your vehicle, third-party property insurance may be all you need.

While comprehensive car insurance offers the most extensive coverage, for good reason, it's usually the most expensive option compared with other types of car insurance. For many drivers – especially those who rely heavily on their car or are especially fond of it – the peace of mind and financial protection it provides in case of insured accidents, theft or other unforeseen events make it a worthwhile investment.

Ultimately, you’ll need to do your research to decide which type of insurance is right for you.

What is an excess in car insurance?

Excess is the out-of-pocket amount you pay when you make a claim. This amount depends on your policy and other factors, such as your age. For example, younger drivers may need to pay an additional excess, as data suggests they’re more likely to be involved in accidents.

Some insurers allow you to vary your excess. Generally speaking, choosing a higher excess can help to bring down the cost of your cover. However, if you have a higher excess, you will need to pay for smaller repairs yourself.

It’s important to strike a balance and not make your excess so high that it won’t be worth your while to make claims.

We understand the importance of safeguarding your assets against the unexpected. Which is why we’re now offering HCF Car Insurance for your car, ute or SUV. Get a quote today^*.