Difference Between Comprehensive Insurance & Third-Party Insurance

Unless financed, buying a car—new or used—doesn't require Car Insurance. However, to avoid substantial out-of-pocket expenses, insuring your vehicle is strongly recommended. Insurers offer Comprehensive Car Insurance and Third-party Insurance, leading many to wonder which is better for them.

At Budget Insurance, we wouldn't want you to make this decision without understanding the differences between the two types of insurance. In this article, we will discuss these, helping you make the right choice for your needs.

What's covered under Comprehensive Car Insurance?

As you would imagine, Comprehensive Car Insurance offers the most extensive coverage for your vehicle. It also offers the most peace of mind, as you know you are protected against the widest range of risks and the financial stress that comes with them.

With Comprehensive Insurance, accident damage to your vehicle is covered, regardless of who is at fault. Whether you're involved in a minor fender bender or a more serious collision, you'll be covered for repairs or even a replacement if necessary. Additionally, when you're at fault in the accident, damage to someone else's vehicle or property is covered.

Unfortunately, vehicle theft is a major concern in South Africa, but with full Comprehensive Insurance, you're covered if your car is stolen. More than that, you're also covered against attempted theft and damage caused during a break-in or by vandalism.

Your insurance coverage extends to fire damage, whether it was the result of an electrical fault in your car or an external fire. And while you'd never want your car damaged by floods, hailstorms, or falling trees, you are covered if it does happen.

Depending on the insurer, Comprehensive Car Insurance usually includes additional benefits that enhance the cover or offer some convenience.

These might include:

• Roadside assistance: If you're ever stranded by a flat battery or tyre, or even an empty fuel tank. Your insurer will arrange for assistance.

• Towing and storage: If your car can't be driven following an accident, your insurer might arrange to have it towed and stored until repairs are approved.

• Medical assistance: Some insurers also offer access to emergency medical assistance for injuries caused by an accident.

As with any insurance policy, you should take the time to carefully review the terms and conditions so that you fully understand the scope and limits of the cover.

What's covered under Third-party Insurance? 

Third-party Insurance offers basic cover. It is mostly intended to ensure that the financial burden doesn't fall solely on the other party involved if you're responsible for an accident.

This means that Third-party Insurance covers the cost of damage or injury to another person or their property if you are at fault in an accident. However, you would still be responsible for the cost of damage to your vehicle.

As an example, Susan is driving down a busy street and collides with another vehicle. In the process, she loses control of her car and crashes through a glass storefront. The other vehicle is significantly damaged, as is Susan's car and the business she also crashed into. Susan only has Third-party Insurance, so her insurer will cover the cost of repairs to the other vehicle and the business. If anyone other than Susan was injured during the incident, her insurance would also cover their medical expenses. In this scenario, Susan would still need to pay for repairs to her car. However, without Third-party Insurance, the financial burden on Susan would have been much worse.

You could also consider Third-Party Car Insurance that includes cover for fire and theft as an insurance option. While this still leaves you responsible for the cost of accidental damage to your vehicle, it does offer protection against your vehicle being damaged by fire or if it is stolen. Unlike Comprehensive Insurance, it doesn't cover the cost of damage to your car following an attempted theft. And if your windscreen is damaged by hail and needs to be replaced, you will need to pay for that. Unless you included windscreen cover as an add-on to your policy.

Third-party Insurance is a budget-friendly option, but it is essential that you understand the limits of the cover and the risks you will be exposed to.

What is better - Comprehensive or Third-party Insurance?

There is no one-size-fits-all answer when asking which of the two types of insurance is better. By offering different levels of cover, each serves a different purpose. Which one is better for you depends on your circumstances and your risk tolerance.

When Comprehensive Car Insurance makes sense

• You have a new or expensive car: If you have just invested in a new car1—or a high-value vehicle—then Comprehensive Car Insurance would be the sensible choice. You want extensive coverage against a wide range of risks, including total loss of your vehicle.

• You have a low tolerance to risk: Comprehensive Car Insurance is the better option when you value peace of mind and don't want to worry about unexpected expenses.

• You want extra benefits: If you travel frequently, having roadside and medical assistance is a benefit you value, along with the cost of towing and storage being covered following an accident or breakdown.

When Third-Party Insurance might be appropriate

• Your car is old, with a lower value: If the car you need to insure is old and has a lower market value, Third-party Insurance would offer essential cover at an affordable price.

• Your tolerance of risk is high: If you're comfortable assuming the risk of covering potential damages to your own car, Third-party Insurance would offer lower premiums while still shielding you from the cost of damages to someone else's property.

•  Your budget is constrained: There are times when your budget could be a little tight, and you need to adjust. Having no insurance is never ideal2, and Third-party Insurance could suit your budget while never leaving you without any cover.

When it comes to choosing between Comprehensive and Third-party Car Insurance, don't focus exclusively on affordability. Rather, you need to carefully consider the level of risk you are willing to be exposed to along with the factors in the next section.

 Top factors to consider when choosing an insurance plan

You've carefully evaluated your needs and now know what type of Car Insurance you need. But there are a few other factors to consider before finalising your insurance:

• Coverage: Regardless of whether you've settled on Comprehensive or Third-party Only insurance, you should still carefully assess what is covered by the policy and what is excluded. Consider the impact on liability, collision, personal injury, and uninsured/underinsured motorists

•  Premiums: Insurance premiums don't only vary between policy types but also providers. Look for the best value for your budget, which won't necessarily be the cheapest. You don't want to sacrifice benefits you need just so you can save a few Rands.

• Excess: Your excess—or deductible—is what you need to pay out of pocket when making a claim. Lower premiums usually mean a higher excess, so look for an excess you can comfortably afford.

• Reputation: This is something too easily overlooked. Look at reviews and ask colleagues for recommendations. You want an insurer that has a reputation for great customer service, reliability, and efficient claims processing.

•  Other products: In addition to included benefits such as roadside assistance and towing, also consider optional add-on products. These might include tyre and rim protection, along with scratch and dent cover.

 Get a Third-Party or Comprehensive Car Insurance Quote from Budget

Making the right choice for Car Insurance can save you a lot of stress and money in the long run. Whether you decide on Comprehensive Car Insurance for full protection or Third-party Insurance for cost-effective coverage, Budget Insurance is here to help.

Get a quote to find a plan that suits your needs and budget today.

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Sources:

 [1]  FA News - https://www.fanews.co.za/article/short-term-insurance/15/motor/1023/avoid-financial-ruin-by-shopping-for-insurance-before-choosing-your-dream-car/39138

 [2] News24 - https://www.news24.com/news24/partnercontent/an-insiders-guide-to-saving-big-on-your-car-insurance-20240614

Disclaimer: The information in this article is provided for informational purposes only and should not be construed as financial, legal, or medical advice.