The first step to understanding the concept behind a third-party insurance policy is to first be familiar with these basic terminologies in insurance such as:
First-party: The person who purchases an insurance policy.
Second-party: The insurance company(insurer).
Third-party: A person who raises a claim for damages or loss caused by the first party.
UNDERSTANDING THIRD PARTY CAR INSURANCE
Table of Contents
Now that you are aware of this, we can now address it in the following post;
- What a third-party car insurance policy is,
- The insurance policy types that exist and the highlight difference of a third-party car insurance policy,
- Importance of having third-party vehicle insurance,
- Inclusions and exclusions of a third-party car insurance
- How to avoid paying an expensive range of third-party car insurance,
- And choosing the right car insurance cover/policy.
What is Third-Party Car Insurance?
Third-party car insurance is an auto insurance policy that covers any damage and/or loss caused to another car by you while driving. Legally, it is the minimum and compulsory requirement of car insurance in most countries around the world.
That is, you cannot drive legally on the road without having this insurance.
It is a type of liability coverage that is usually the cheapest and lowest level of car insurance. There are two types of liability coverage insurance:
- Bodily-injury Liability Coverage – This covers all bills that result from injuries caused to an individual by your vehicle. It can also include coverage for passengers (if present) in your car that got involved in the accident.
- Property Damage Liability Coverage – This covers all bills resulting from the damage you cause to someone’s property while driving.
The third-party insurance policy covers both liability coverages here.
Major Categories of Car Insurance Policies
Traditionally, there are three (3) levels of car insurance policies that exist-
- Third-party only insurance (TPO) Policy: As already described, this policy concerns only the losses incurred on third-party vehicles, properties or persons. It is the lowest level of car insurance.
- Third-party, fire and theft insurance (TPFT) Policy: This policy covers that of TPO and also your losses only in the case of a theft or fire accident to your own vehicle.
- Comprehensive Insurance Policy: This is the highest level of the car insurance policy. It includes coverage for both third party car insurance policies (TPO & TPFT) and also covers other forms of loss/damage to your own vehicle whenever you make a claim. It also often includes coverage for any personal injuries you sustain as a driver while driving your car.
Essentially, the third-party car insurance differs from others in that it covers ONLY any loss or damage done to another car or individual, NEVER YOURS.
Importance of Having a Third-Party Insurance Cover
Having third-party car insurance is beneficial and majorly economical for a lot of car owners. As nothing is 100% certain or secured when it pertains to driving, it is the most basic level of protection offered to cover for any financial liabilities caused to a third party.
Hence, the major importance of a third-party car insurance policy serves for
Financial protection – in the case where you are not financially capable to pay for the damage you have caused
Cheap & affordable coverage – being the lowest insurance policy, it does not charge for additional risks like in other insurance coverages.
And ultimately, compliance with the law – helps you obey the statutory law that requires you to have this form of insurance at the least before driving.
Inclusions and Exclusions of a Third-party Car Insurance Policy
It is important you note the inclusions and exclusions associated with opting for a third-party car insurance policy before paying for this plan.
The Inclusions,
- Damages to third-party vehicles
- Physical injuries/death to third-party
- Damage to property of third parties.
The Exclusions,
- Your third-party insurance policy company will not cover you if;
- The accident was caused due to negligence or drunk-driving
- The accident was a deliberate act
- Underaged Driver
- The driver does not have a driving license
- The damage is caused due to an act of war
- Your vehicle was used for commercial purposes
- Damage was caused by the engine due to oil leakage
How to Avoid Paying an Expensive Range of Third-party Car Insurance
The price rates vary among various insurance companies.
To get a comparably cheaper/affordable rate for your third-party policy plan, ensure you;
Research through various insurance companies online and compare their quotes before settling for one
Make sure to have a clean driving record as most insurance companies consider this and tend to influence their premium pricing based on your record.
Check out How to Get the Best Cheap Car Insurance on the proven ways to find the cheapest car insurance rate while also getting maximum value.
On Choosing the Right Car Insurance Cover/Policy
Since third-party car insurance is the lowest level of auto insurance policy, it is apparently the cheapest and many people tend to opt for this policy.
However, you need to prioritize your requirements and consider the circumstances you are surrounded by before finally comparing insurance policies to identify the one most suitable for your needs.
You can also check Investopedia for more information on the various car insurance policies available and how to choose the best policy suitable for your needs.
