Third-party car insurance is a type of insurance that protects the insured driver against damage to someone else or their property.
What is Third-party insurance?
If you are responsible for a car accident, third-party car insurance pays for the other driver’s injuries. Claims can be made against you if you injure another person or damage their property. Third-party car insurance is commonly referred to as liability insurance, and includes both:
Bodily Injury Liability (BIL): Covers costs if you injure another person in a car accident. Expenses covered under the bodily injury portion of third-party insurance include medical bills, legal fees, lost wages, and funeral expenses.
Property Damage Liability (PDL): Pays for the cost of repairing or replacing another person’s property – such as their car, or buildings, fences, and other structures – for damage you are responsible for. This includes damages to another person’s home, business, or vehicle, as well as legal fees related to property damage cases.
Your third-party car insurance doesn’t cover damage to your own car – you’ll need comprehensive collision coverage for such damage.
If another driver hits and injures you or destroys your vehicle, their third-party liability insurance will cover your medical and repair bills.
Benefits of Third-Party Insurance
Drivers must by law carry at least a minimum amount of bodily injury liability and property damage liability coverage.
Some states don’t require either or have other limits. Each state sets its own minimum requirements for each type of coverage.
Even in “no-fault” states, liability coverage is what’s required. No-fault laws were established to reduce or eliminate common injury lawsuits associated with low-dollar price tags and an overwhelming number of pain and suffering claims.
Still, no-fault laws do not protect the insured from million-dollar injury lawsuits arising from seriously injured third parties.
Both types of third-party insurance are essential, especially for individuals, such as homeowners, who have substantial assets to protect.
The more money and assets an insured has, the higher the coverage limit for each type of liability should be.
What are the types of third-party car (automobile) insurance?
Bodily injury liability covers expenses incurred as a result of an injury to a person. These injury costs can include costs such as lost wages, pain, and aches, and hospital care bills due to the accident.
Property damage liability includes expenses incurred as a result of loss or damage to property, such as new landscaping materials or fencing.
If someone destroys your mailbox, this may be covered, as well as compensation for loss of use of your home.
How Third-Party car Insurance Works
Understanding third-party liability insurance becomes easier when you understand what a third party represents.
When you refer to yourself, you are asked to speak in the first person. Similarly, for car insurance, the first party is the person or organization that purchased the car insurance coverage. The company you are buying insurance from is the other party.
If you are responsible for an accident, you may injure another person or damage their property, and in this case, it is a third party.
For example, let’s say you’re involved in a fender bender and accidentally found out. No one was injured, but the bumper of the other driver’s car was damaged.
Fortunately, you have third-party auto insurance coverage, so third-party vehicle damage will be paid under the property damage liability coverage provided by your insurance policy.
What does third-party car insurance cover?
Property Damage Liability Coverage: This type of coverage pays for damage that you do to someone else’s property. The first instance of a fender bender and resulting bumper damage provides an example of a scenario where such coverage begins, but property can refer to any structure that accidentally hits a driver’s car, from a lamppost to a building.
Bodily Damage Liability Coverage: This coverage pays for accident-related injuries you cause to someone in another vehicle. For example, this type of coverage may be triggered if your fender bender causes another driver to suffer whiplash.
If you live in a state with a no-fault insurance system, third-party personal injury protection coverage pays for damages up to certain limits. , and then the driver’s bodily injury liability coverage pays for costs over that limit at fault.
If you live in a state with a traditional tort insurance system, the at-fault driver’s medical insurance may be paid for by themselves or their passengers. Injury and bodily harm will be paid for.
Alternatives to Third-Party car Insurance
Any damage to you, your passengers, or your property will not be covered by third-party coverage. to cover oneself, You will need first-party coverage such as:
- Collision coverage
- Comprehensive coverage
- Personal injury protection coverage
- Uninsured motorist coverage
A third-party insurance policy is purchased by the insured (first party) from an insurance company (second party) to protect against the claims of another (third party). The importance of third-party insurance is that it provides coverage to the insured for injury or damage caused by them.
While the third-party cover is cheaper and only covers third-party damage, the comprehensive cover provides comprehensive coverage and is therefore slightly more expensive.
3 types of auto coverage explained
• Liability Coverage: Protects you if you damage others and/or their belongings.
• Collision coverage: Covers your car if you collide with another car, person, or non-moving object (like Cousin Toad’s decorative rock at the end of their driveway). ,
The first party is the insured. On the other hand, insurance companies. A third party is another person. Therefore, third-party insurance is claimed by someone who is not the policyholder or the insurance company.
Before you hit the road. Third-party Car Insurance Liability Coverage will protect you from other drivers’ bodily injury and property damage claims.
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