Third party fire and theft vs comprehensive: which suits your car?

Choose comprehensive if you could not comfortably replace your car from savings, if it is under finance, or if it is regularly exposed to hail, flood or storm. Choose third party, fire and theft (TPFT) if the car is worth relatively little, you could absorb an at-fault crash yourself, and theft or fire is the main risk you want to cover. The deciding number is the yearly premium gap compared with the loss you would carry: if comprehensive costs a large share of the car's value each year, the extra cover is expensive.

This guide is part of the car insurance overview. If you are still deciding whether you need more than the legal minimum, read CTP vs third party property first.

What each cover pays for your own car

Event	TPFT	Comprehensive
Damage you cause to others' property	Covered	Covered
Car stolen and not recovered	Covered, often to a capped amount	Covered to agreed or market value
Car damaged during an attempted theft	Usually covered	Covered
Fire, including a vehicle fire after a fault	Usually covered	Covered
At-fault crash damage to your car	Not covered	Covered, minus excess
Hail, storm, flood	Not covered	Usually covered, subject to any waiting period on new policies
Single-vehicle crash (hitting a tree, a kangaroo)	Not covered	Covered
Not-at-fault crash with an uninsured driver	Limited extension in many policies	Covered, excess often waived
Windscreen damage	Not covered	Covered, sometimes with a separate excess

Two rows deserve attention. Collisions with animals are common on country roads, and only comprehensive pays for your own car. Hail, storm and flood are the largest events in Australian motor insurance, and TPFT does not cover them.

The break-even calculation

The comparison comes down to: extra premium per year versus the losses comprehensive would pay that TPFT would not.

Worked example (illustrative)

Priya's car is worth $12,000. Illustrative quotes:

Comprehensive: $1,180 a year, $800 excess, market value
TPFT: $560 a year, theft payout capped at a level that covers her car's value

Premium gap: $1,180 - $560 = $620 a year.

Scenario A, at-fault crash causing $5,000 damage. Comprehensive: Priya pays $800. TPFT: she pays $5,000. Comprehensive saves her $4,200 in that year, which is more than six years of premium gap ($4,200 / $620 = 6.8).

Scenario B, hail damage of $3,500. Comprehensive: $800 excess. TPFT: $3,500. Comprehensive saves $2,700.

Scenario C, no claim. TPFT saves $620.

Break-even probability: comprehensive pays off if the chance of a claim like Scenario A in a given year is above roughly $620 / $4,200 = 15%. That is a rough guide only; the more important question is whether a $5,000 to $12,000 loss would cause Priya real hardship. Insurance is valuable precisely for losses you cannot absorb.

You can repeat this for each scenario in the cover level comparison.

The car value rule of thumb, and its limits

People often suggest dropping to TPFT once a car's value falls below a certain figure, or once the comprehensive premium exceeds a set percentage of the car's value. These rules are a useful prompt, but they ignore three things:

Your savings. A $6,000 car is a small loss to one household and a serious one to another.
Your location. Garaging in a hail-prone region, a flood-affected area or a postcode with frequent car theft changes the odds sharply.
Your dependence on the car. If losing the car means losing income, the cost of being without it is larger than its market value.

A better test is: if this car were written off tomorrow, how would I replace it, and how long would it take? If the honest answer involves borrowing, comprehensive is usually the safer choice.

When the car is under finance

Car loans and leases usually require comprehensive cover for the term, and the lender may be noted on the policy as an interested party. Dropping to TPFT while the loan is running can breach the loan contract. If the car is written off, the payout may go to the lender first; if it is less than the loan balance, you still owe the difference.

Check the fire and theft limits

TPFT policies commonly cap the payout for fire or theft of your own car, and some policies also limit cover for accessories and modifications. Before choosing TPFT:

find the maximum payout for fire and theft in the PDS and compare it with your car's market value
check whether keys left in the car or an unlocked car affect a theft claim
check whether the policy pays market value or a lower amount for older cars
check whether there is a separate theft excess

Mixed households

Many households insure the newer car comprehensively and an older second car with TPFT or third party property. If you do this, make sure each policy lists the right regular drivers; a young driver who mainly uses the older car must be listed on that policy, not the other one. See young driver car insurance.

Frequently asked questions

Does TPFT cover my car if it is damaged by a storm?

Generally no. Storm, hail and flood damage to your own car is covered under comprehensive policies, not TPFT. Check the PDS because definitions differ.

Is comprehensive always agreed value?

No. Comprehensive policies are offered as agreed value, market value or with a choice. See agreed value vs market value.

Can I switch from comprehensive to TPFT mid-year?

Usually yes, by changing or cancelling the policy. Check how any refund is calculated and whether cancellation fees apply. See switching insurer mid-term.

Does comprehensive cover hitting a kangaroo?

Comprehensive generally covers collisions with animals as accidental damage, minus your excess. TPFT and third party property do not cover your own car in that situation.

Sources

Moneysmart — choosing a level of car insurance
Insurance Council of Australia — catastrophe events and general insurance information
ASIC — PDS and target market rules
Australian Financial Complaints Authority — disputes about cover and claims