There are different kinds of insurance policies for various insurance needs. A simple explanation for what third party insurance is that it is an insurance policy for protection against the claims of another. It is usually applicable in auto insurance.
How Third-Party Insurance Works
Third-party insurance works as a form of liability insurance. The insured gets protection against the claims of another. If your car is involved in a car accident, third party insurance policies won’t take care of the cost of any damage done to your car. However, the cost of damage caused to other vehicles is covered by third-party insurers.
To better understand how third-party insurance works, there’s a need to understand it’s terminologies. Here are the most commonly used terms associated with third-party insurance.
First Party: The policyholder or person who purchases the insurance policy
Second-party: The insurer or insurance company which covers the policy.
Third-party: The claimant or the person who raise a claim for damages caused incurred by the first party
When a policyholder is involved in an accident, the policyholder is liable to pay for the damages, injuries or loss caused to the third party. There are two types of third party insurance.
Bodily injury liability: Takes care of the cost of injuries to a person as a result of the accident. The cost could be medical bills, lost wages or other loss caused by the accident.
Property Damage Liability: This covers the cost resulting from damages to or loss of property.
Features of Third Party Insurance
- Offers basic protection to all policyholders.
- Offers protection and compensation to third parties in cases of injury, loss of life or property damage.
- Third-party insurance usually has affordable premium
- Protection isn’t offered to the insured policyholder’s vehicle.
Why do you need Third Party Insurance?
Third-party insurance is required by law. In most countries, drivers are required to have both a bodily injury liability and property damage liability coverage. The following explains the importance of third party insurance.
- A mandatory requirement by law: Every road user is required to have insurance, so having third party insurance makes an individual law compliant.
- Peace of mind: Policyholders are rest assured that if unfortunate events happen, they are covered.
While driving, there is a risk of being involved in an accident. This may lead to serious bodily injuries or in other cases, damages to property to a third party. These liabilities are better well prepared for with third party insurance. There’s also peace of mind knowing that you’re law compliant and