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Comprehensive vs third party car insurance
Which one is best for you?
The perfect car insurance policy would be free. However, since this isn’t an option, you need to look at cost in relation to cover instead.
Let’s break it down…
Do you want the full package, or just the essentials?
- Third party car insurance: The all-important liability insurance.
- Comprehensive car insurance: The full package. If the damage makes a mess of your car or bank account, comprehensive insurance might cover it.
Spot the difference
|Third party car insurance||Comprehensive car insurance|
|Covers third party liability?|
|Covers accident damage?|
|Covers fire, flood, earthquake, storm, hail and similar?|
What is third party liability insurance?
If you rear-end a BMW, then the BMW driver is the third party. The liability is your obligation to cover the cost of damage.
Third party liability insurance pays for your liability on the road. It’s cheap “essential” car insurance because the liability may cost a lot more than your car. Say you have a heart attack while driving and plow into a mansion. Maybe it wasn’t your fault per se, but legally it was and you might have to pay for the damage.
Without liability insurance, it could mean a lifetime of debt and garnished wages and the possibility of a second heart attack when you get the bill! With liability insurance, it means filling out some paperwork instead.
Just as useful, liability insurance may also let you “borrow” a high powered corporate legal team, if some jerk pulls an insurance scam or otherwise tries to hold you liable for property damage.
It makes sense. Sometimes an insurer can save money by fighting a claim or reaching a settlement, rather than paying for the liability. With liability cover, you and the insurer have the same goals.
This is why a car insurance policy typically tells you not to admit to guilt or liability after an accident. It’s so the lawyers can defend you more easily if it comes to it.
What is comprehensive car insurance?
Comprehensive car insurance includes liability insurance as above. It also covers damage to your car.
The main kind is probably accident damage. However, if needed, comprehensive cover may pay out for floods, earthquakes, fire, theft, falling tree branches or being hit by a falling meteor on the freeway. All the usual driving hazards.
There are some catches though. For example, you probably won’t be able to claim for a punctured tyre.
There’s also the excess to worry about. This is a flat sum that you must pay when making a claim. It’s designed to cover administrative fees, prevent customers from claiming for every single nick and scratch, and to make you think twice before claiming.
Are there any other kinds of policy?
Between the two you find third party insurance with fire and theft cover. This is exactly what it sounds like.
Fire and theft are two of the most common types of car insurance claim, other than accidents, so it can be a useful blend.
What else is covered?
You can also find a range of other benefits with car insurance. As expected, you find a lot more with comprehensive than the others.
These can include complimentary roadside assistance; lock and key replacement after theft; a rental car following a claim and many more.
Third party only policies are often a bit sparse on the extras, with the exception of an “uninsured driver extension”.
This is a limited level of damage cover for your car, usually around $3,000 to $5,000, for use in one specific situation. When a driver without third party liability insurance of their own is at fault for an accident and damage to your car.
They need to be found at fault though, so this means you need to get their details like name, address and contact number.
However, for obvious reasons, a driver without insurance might not be keen to stop and swap insurance details after an accident. So, good luck with that.
Compare car insurance options in New Zealand
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