Is CTP enough? CTP vs third party property car insurance

CTP is not enough for most drivers. It covers people injured in a crash, but if you cause damage to someone else's car, a fence, a shopfront or a traffic light, CTP pays nothing and you are personally liable for the bill. Third party property insurance is the cheapest policy that covers that liability. It does not pay for your own car, but it protects you from the most financially dangerous outcome: a large claim from someone else that you would otherwise have to pay yourself.

This guide belongs to the Australian car insurance overview. For how CTP works in each state, see CTP insurance by state.

The difference in one table

The two policies fit together: CTP for bodies, third party property (or a higher level of cover) for property.

What happens if you cause a crash with CTP only

Without property cover, the other driver's insurer pays its customer and then pursues you to recover the cost. This is called a recovery action. You will typically receive a letter of demand setting out the repair cost, towing, assessing fees and hire car costs, and the insurer may offer a payment plan or start court proceedings if you do not respond.

Worked example (illustrative)

Tom has CTP through his rego but no other insurance. He rear-ends a late-model SUV at a set of lights. Illustrative costs claimed against him:

Tom's own car damage, say $3,200, is also his to pay. His total exposure from one moment is $20,500. If the other vehicle had been a prestige car or a truck, or if he had hit a building, the figure could be many times larger. Third party property cover would have paid the $17,300 after his excess. With an illustrative premium of $420 a year and a $750 excess, his cost would have been $1,170 plus his own car repairs.

Hire car costs claimed by not-at-fault drivers can be significant, particularly when a credit hire company supplies a similar vehicle while repairs are under way.

Why the liability limit matters more than the price

Third party property policies state a maximum liability, usually expressed in millions of dollars. A higher limit costs insurers little to offer because very large claims are rare, but when they happen they can be ruinous. When you compare third party property quotes:

• check the liability limit in the PDS, not only the price
• check whether it applies when someone else drives your car with your permission
• check whether towing a trailer or caravan is covered for third party damage
• check whether business use or rideshare is excluded

The uninsured motorist extension

Many third party property and fire and theft policies include an extension that pays for damage to your car if an uninsured driver causes the crash. It is limited: commonly capped at a few thousand dollars, and usually only if you were not at fault and can give the other driver's name, address and registration. It is not a substitute for comprehensive cover, but it does help in a common scenario. See accidents with an uninsured driver.

When third party property is the sensible minimum

Third party property suits you when:

• the car is worth an amount you could replace from savings without hardship
• it is owned outright, with no finance requiring comprehensive cover
• you mainly want protection from someone else's large claim
• the gap to comprehensive is a large share of the car's value each year

It is usually not enough when the car is under finance, worth more than a few months of your savings, parked where hail, flood or theft are common, or needed for work with no backup car.

To test a specific case, enter your car's value and premiums in the cover level comparison.

Common misunderstandings

• "My rego includes insurance, so I'm covered." Rego includes or requires CTP only. It covers injuries, not property.
• "The other driver's CTP will fix my car." No. Their CTP covers your injuries; repairs come from their property cover, your own comprehensive cover or a claim against them personally.
• "Third party covers me if someone hits me." Only to the extent of the uninsured motorist extension. If the at-fault driver is insured, their insurer should pay you; third party cover's main role is when you are at fault.

Frequently asked questions

Is third party property cover the same as third party, fire and theft?

No. Fire and theft adds cover for your own car if it is stolen or damaged by fire, often to a capped amount. Neither covers your own car in an at-fault crash. See fire and theft vs comprehensive.

Can I be sued personally for damage I cause in a crash?

Yes. If you are at fault and uninsured for property damage, the other party or their insurer can pursue you for the cost, including through the courts.

Does third party property insurance have an excess?

Yes, most policies have a basic excess and may add age or inexperienced driver excesses when the at-fault driver falls into those groups.

Is CTP called something different in some states?

Yes. In NSW it is the Green Slip; in Victoria it is the TAC charge in your rego; in WA it is motor injury insurance. All are compulsory injury cover.

Sources

• Moneysmart — guidance on car insurance types
• ASIC — insurance product disclosure rules
• State Insurance Regulatory Authority — NSW CTP
• Transport Accident Commission — Victorian CTP
• Australian Financial Complaints Authority — disputes, including some uninsured motorist claims