In Australia, you purchase Comprehensive insurance, what you call third party property, this covers Your car, the other car, the hospital bills, the neighbor's cat and the Shopping mall that you drove through.
As for where you can drive to, you are usually limited to the number of kilometers per day or you pay extra and get unlimited kilometers.
You can drive interstate if you want however if you are driving of road you will need to get a suitable car.
You will also pay extra if you do not return car to original point of hire.
At present i am driving a Toyota Rav4 rented through Avis, company provided, unlimited kilometers but limited to driving on bitumen(Tarmac).
There are other options available as their are companies that organize one way trips for people, for example you will pick up a camper van and you will be required to drive it from one point to another, they will usually give a fuel allowance and you do not pay for the van, you just have to move it from point A to point B within the timeframe give.
You just have to get lucky and get a transport option that suits your plans.
Trips from Places like Darwin to Perth are quite common.