3rd party only policies can actually be the most expensive policies on the market! This is extremely counter-intuitive to anyone outside the insurance market, because it appears that the risk to the insurer is greatly reduced if the insurer would only need to compensate the 3rd party after an accident. Also, the insurer would not need to pay out for any theft or vandalism claims on these policies. So why the higher premiums?
Again, we need to go back to ‘moral hazard’. From the insurer’s point of view, the insured is far less likely to exercise the same level of care when driving/parking/securing a car which appears to have very little value to the owner. This is almost invariably reflected in the higher premiums for these policies. Some underwriters will not even offer a quote on 3rd party only policies.
