When you buy a car the first thing you need to sort out is insurance. Actually, you can take the risk and not insure your vehicle for damages. However, you have to buy at least state minimum auto insurance in order to provide third party car insurance coverage for others who may suffer injuries and damages caused by your automobile.
What Is Third Party Vehicle Insurance?
You are the first party when you purchase liability coverage, your insurer is the second party in this transaction as the provider of the coverage and the policy provides coverage for anyone, the third party, who may be injured or suffer financial losses as a result of an incident with the insured vehicle.
Third party auto insurance can be defined as liability car insurance that is underwritten to provide coverage to other motorists and property owners for the damage that may be caused by the insured drivers. This insurance pays for the cost of repairing or replacing other vehicles and the injuries of their occupants when you are at fault.
Most countries and every state in the US require some sort of minimum coverage that pays for the damages sustained by unsuspecting third parties when anyone wants to own and drive a vehicle on the public roads.
Third Party Car Insurance Coverage
Do you need insurance to drive? Yes, vehicle owners and drivers are responsible for their actions and vehicles, and must be in a position to pay if they cause injuries and damages to anyone while driving or while the insured vehicle is driven. It doesn’t matter that someone else is driving your car or you are driving someone else’s car. Third parties can ask the owner of the vehicle, the driver or both to pay for the losses they suffered from an accident that was caused by a said automobile. The best solution would be to insure the vehicle for such liabilities so that third parties can claim their losses from the insurance company.
Third party liability cover provides cover when a policyholder or insured driver is responsible for a vehicle accident:
- That damaged other people’s property, or/and
- Injured or killed someone
Bodily injury and property damage liability covers together make up liability vehicle insurance coverage and compensate these two different types of third party losses.
- Bodily Injury Liability Coverage pays for costs in regards to people, like the medical bills, lost wages, any other consequential costs, including pain and suffering. It also pays for funeral expenses if the accident resulted in fatalities.
- Property Damage Liability Coverage pays for the costs relating to property, like repairs (or replacement) of vehicles and objects that belong to other people. This doesn’t include your own vehicle and personal property in other automobiles.
Anyone who wishes to drive must buy at least a basic policy that comes with both types of liability coverage. Here is more detailed explanation of what is liability coverage for auto insurance? Each state sets minimums for each type of coverage.
Every auto policy includes at least basic third party liability car insurance as it is mandated by every state. Remember that these policies only protect the insured from third party claims and don’t provide any other benefit for the policyholder. It certainly doesn’t pay for your own or your family’s injuries and don’t pay for damages to insured vehicle.
How Much Third Party Liability Auto Insurance Is Enough?
Liability coverage is essential even in “no-fault” states. No-fault laws were established to clear courtrooms from the burden of dealing with small injury and pain and suffering lawsuits. But, no-fault laws do not protect the insured from million-dollar injury lawsuits when third parties are seriously injured.
It is very important to keep in mind that your insurer can only pay up to the limit of your policy. You are on your own and can lose everything you have when the policy limits are exhausted. That is why a teenager with nothing on his/her name may be justified to buy minimum state required coverage but you must buy large enough coverage when you have assets to protect. Most experts suggest that people should buy a liability auto insurance policy that has the following coverage.
$100,000 per person for bodily injury
$300,000 per accident for bodily injury
$50,000 per accident for property damage
Both bodily injury and property damage liability covers are important, especially for people with substantial assets. The more money and assets you have the higher the limit should be for each cover. You should also make a habit of reviewing the level of coverage in accordance with your needs every year.
Third Party Auto Insurance Claims
The only real difference in cases of third party car insurance claims is that you make the claim on the insurer of the third party who is at fault in the accident that caused your injuries or/and property damages. It is the other way around when you are at fault and third parties claim on your liability insurer. Otherwise, the process is pretty similar to making first party auto insurance claims in which you claim on your own insurer.
What is First Party Car Insurance?
You arrange first party car insurance when you want to insure damages to your own vehicle and injuries to yourself and your family members. In other words, the first party or the insured can claim his/her losses from his/her insurer (the second party) no matter who is at fault.
First party auto insurance pays for injuries or property damages to the policyholder, as opposed to providing third party liability protection for other people’s injuries and losses.
You can buy Uninsured/Underinsured Motorists Coverage to be protected from third party uninsured drivers or hit and run cases. If not, you can usually make a claim on your Collision Coverage for the damages caused by third parties. Then, it would be up to your insurer to chase the responsible third parties or not for the reimbursement of payments they made.
The most common first party automobile insurance type is full coverage car insurance that comes with Collision and Comprehensive Coverage as well as Liability. It is called full coverage policy because it has the essential liability component and also provides protection in case the insured automobile is damaged in an accident, flood, fire, storm and other perils or stolen.