What You Need to Know About Third Party Insurance

January 25, 2017

Third Party Liability Coverage Review
John Lennon sang in his song Beautiful Boy, “Life is what happens while you are busy making other plans.” And he was right. You make plans for how you think your day should go. Yet, sometimes, you experience the unexpected. Like having a fender-bender in the parking lot at work. Or when you come home to discover a kid threw a rock through your window. Thankfully, third party liability insurance is designed to cover us financially in these scenarios.

What is third party liability insurance?

Third party insurance protects customers against financial ruin from potential claims for injuries or damages they may cause to another person.

In other words, when you purchase this coverage, it’s designed to protect you financially if someone files a claim against you.

A few third party liability coverage policies include commercial liability insurance, homeowners insurance and auto insurance.

With litigation being a common response to injury and property damage, you never know when you might be the recipient of a filed claim.

Why do you need third party liability insurance?

car covered by third party liabilityAccidents can happen, even if you’re naturally extremely careful. Unless you come from exceptional wealth — or you’ve won the Powerball jackpot — if you cause property damage or bodily injury to another person, you’re going to have a tough time paying for it without insurance.

After footing the bill for the actual cost of damages and lawyers fees, you might end up on the hook for punitive damages as well. The expenses you rack up when you’re the losing party in a court battle can be high enough to put you in debt for the rest of your life. So, if you’re not willing to part with your favorite autographed Prince CD to fund your defense, you’ll want third party insurance.

Which policies cover third party claims?

Not all insurance policies cover third party liability claims unless you actively select them when you buy your policy. Some policies even exclude third party claims.

One insurance plan that requires you to purchase additional third party liability coverage is employment practices liability insurance, which covers claims filed against the business by employees, not customers. By adding this coverage, the business will be protected against claims made by customers.

What’s covered in your policy?

Before purchasing any insurance policy, be sure to read the fine print so you know what is covered before you’re met with third party liability claims.

Many insurance policies contain specific exclusions, even for some situations commonly covered by other companies. Never assume you know what your policy covers just because you’ve had the same type of plan before.

Low limits and high deductibles can put you in debt

You also want to check your coverage limits and deductibles before buying any policy. Sometimes, having a policy with low limits and high deductibles can be like having no coverage.

For example, let’s say you have comprehensive coverage with your car insurance policy and a deductible of $5,000. The only way that policy is going to benefit you is if someone does more than $5,000 in damage to your vehicle.

Now, let’s pretend you’re sued by someone who claims to have been bitten by your dog. If your coverage limit is $3,000, you’ll be on the hook for any additional medical expenses, including surgeries.

Don’t wait until you get sued to find out what your policy covers.

Here’s an overview of what some common policies cover:

Commercial liability coverage

mandatory third party insuranceCommercial liability coverage is a policy for business owners that protects against bodily injury and property damage claims made by non-employees (like customers or clients).

Nobody can anticipate when an employee might forget to put out the “wet floor” sign, resulting in a customer slipping and breaking their leg. This type of coverage is specifically designed to protect small business owners against unexpected risks.

Commercial liability can cover the cost of claim investigation and defend against lawsuits. It can cover witness fees, court costs, attorney fees, judgments ordered by the court and settlements.

Homeowners insurance

Homeowners insurance usually comes packaged with the option for third party liability coverage that protects against incidents that happen on your property.

Although you’re likely a responsible homeowner, accidents might happen beyond your control. Claims against homeowners usually consist of animal bites, slips and falls.

Car insurance: mandatory third party insurance

Although most insurance policies are purchased at the discretion of the consumer, car insurance is mandatory if you want to drive a vehicle. Car crashes happen every day — and vehicles repairs can be expensive — so mandated car insurance makes sense.

If you total your car, you may be entitled to receive the value of your vehicle prior to the accident, depending on your car insurance policy. And some insurance companies now offer to replace your car. Without car insurance, you’d be on your own.

The policy price may differ between insurance companies, so you’ll want to compare car insurance prices prior to purchasing.

Comparing car insurance quotes

When comparing car insurance quotes, take note of the difference in cost for each type of liability coverage. If two providers seem to offer an equal cost, that may change when you increase your coverage amounts.

Notice different deductibles

You may find that different car insurance companies offer different deductible amounts for comprehensive coverage. Some offer the standard $50, $100, $150, $200, while other companies might offer $350 as their lowest deductible.

Get comprehensive coverage

Comprehensive is what covers damage to your vehicle when it’s not in an accident, like vandalism, theft or natural disasters.

Compare today and save

We make it easy for you to find affordable third party liability insurance. Some car insurance companies even offer discounts for good drivers, students and multiple vehicles.

Start comparing car insurance quotes today to see how much you can save on your policy.

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You could save up to 32% by using Compare.com!

Based on a survey of 100 California Residents. Average savings determined via a comparison of their selected policy against their self-reported annual premium.