Extended car insurance: third-party property damage

Known better as the “green slip” in New South Wales, compulsory third-party (CTP) insurance is a state government sanctioned insurance policy for all drivers of motor vehicles. Introduced in 1988 through the Motor Accidents Authority (MAA), the CTP scheme aimed to prevent injustice to innocent drivers involved in accidents with uninsured other parties. This compulsory cover has enforced the bare minimum (but most important) protection for blameless parties by covering all incurred medical costs. Whilst this protection has been crucial in either reducing unfair costs of insured, honest drivers (if involved in an accident with an uninsured third-party) or, more importantly, reducing health risks if emergency care is needed but cannot be afforded, this type of indemnity still may not be enough, especially considering it won’t cover your own vehicle even if an accident is not your fault. So what are the alternatives?

Third-party property insures drivers for instances where damage is caused to another party’s vehicle. Whilst this may not seem like it requires too much concern, it’s worth considering if paying several thousands of dollars (for damage to an expensive third-party vehicle, perhaps) would be easily managed without the assistance of an insurance policy? If not, the assumption that a crash simply won’t happen to you is best avoided.

Third-party property damage cover

Third-party property damage insurance, in its extended form, is a varied beast depending on which state you reside in. Western Australia, for example, has third-party insurance built into car registration costs, with fire and theft (extended coverage) available as a separate item via various insurance companies such as the Royal Automobile Club of WA (RACWA).

New South Wales has a separate policy for third-party, where one shops around to get the best CTP or “green slip” insurance and then hunts once again to find an extended policy (third-party property damage plan) best suited to their personal circumstances (taking age, previous driving history, etc, into account).

Extended third-party coverage will safeguard you against damage to your vehicle if another party is to blame for an accident but doesn’t have insurance. Your insurance provider will usually try to recover costs from the other driver. This cover will usually only be for up to $3000 or $4000, however, depending on your policy. For more complete cover – and considerably higher levels of protection in such a situation – a comprehensive car insurance plan would be a far better bet. This thorough form of car insurance, whilst being the most expensive option, doesn’t limit indemnity for damage to your vehicle, third-party vehicles or injury to third parties.

When considering which type of extended third-party car insurance is right for you, Victorian Legal Aid group provides these guidelines for different insurance types:

• Third-party property damage insurance covers you if you cause damage to another vehicle. Your vehicle, however, will not be protected
• Third-party fire and theft cover protects your vehicle against accidental fire damage and theft of your vehicle or items within your vehicle. This is usually the same as third-party property damage insurance, only adding fire damage and theft to the same terms that a third-party property damage plan offers
• Comprehensive car insurance will also cover your vehicle for fire damage and theft, damage that your vehicle causes to other vehicles, and damage to your vehicle by an uninsured driver, but it will also fully cover your vehicle for any damage caused in an accident, whether your fault or not

It’s important to note that any claim would almost certainly be disqualified if it referred to an accident that occurred whilst you were under the influence of alcohol or drugs (or both).

Cost watch: rate variations of compulsory third-party insurance

Before you can consider additional property damage insurance for your vehicle, you need to consider the cost of compulsory third-party insurance, as CTP rates can be somewhat unpredictable. NRMA’s online quote service produces some interesting results (with all of the following examples assuming that no other insurance applies and no previous crashes have occurred with any of the drivers). A 21 year-old vehicle owner living in the lower Blue Mountains and driving a 2006 sedan would be quoted a CTP fee of just over $530. On the other hand, a CTP with or without fire and theft cover for the same driver and vehicle in Blacktown is $610.00. The same vehicle built in 1980, also in Blacktown and with the same driver, is exactly the same price. Moreover, if the driver is instead 40 years-old, living in Blacktown with the same vehicle, CTP remains at $610.00. Unlike most insurance policies, CTP does not appear to be affected by previous accidents, nor does it appear to vary based on the vehicle, rather it seems that location is the main influence.

On the whole, as with all insurance policies, personal circumstances will affect what you pay for car insurance, particularly with more complete cover. Naturally, it’s wise to speak to a number of companies to get an overall view of what’s available. Most importantly, be very careful to read the fine print.