Third Party Insurance
Sometimes it’s hard for people to understand exactly what is meant by third party insurance coverage. Let’s look to the online Business Dictionary for its definition: “Liability cover purchased by an insured (the first party) from an insurer (the second party) for protection against the claims of another (the third) party. The first party is responsible for its own damages or losses whether caused by itself or the third party.”
This term is used primarily with regard to auto insurance. This type of insurance is definitely not for everyone but it does have some useful applications.
Most states nowadays require car owners to carry, at a minimum, liability insurance to protect persons and property damaged by the owner’s negligence. Many drivers, especially those with nicer and more expensive cars will want to purchase additional coverage. They might purchase protection against damage to their own car in a collision, as well as coverage against comprehensive damages such as theft, vandalism, and acts of nature like hail or flood damage.
And yet, a size-able community of drivers operates cars that have very low value. It’s this group of people that will most likely be attracted to the reduced premiums offered by this insurance. In essence, third party insurance affords bare-bones coverage protecting drivers only against the liability they face with lawsuits and claims from third parties (other drivers and passengers).
It’s important to note that third party coverage leaves its insured’s with absolutely no insurance coverage for damages to themselves or their vehicles. So, even when such a policy meets state-mandated liability insurance requirements, it leaves these drivers to handle any and all bills for medical care, as well as repair and replacement costs for their vehicles.
This insurance may seem like the perfect solution but you must be certain that it meets your state’s minimum requirements. Some states go beyond just liability insurance requirements and require drivers to also carry some coverage for passengers in their own car. Check with a reputable car insurance agent to be sure you’ve met minimum state insurance requirements.
Another caveat: if you carry financing on your vehicle, the bank or other loan holder may have additional insurance requirements to protect their financial interests. In that case, this type of insurance may or may not meet those requirements. Since lenders typically require proof of current insurance, they will undoubtedly let you know if your insurance coverage does not their standards.
Although you may prefer a neighborhood agent or broker for you insurance needs, many online insurance quote sites exist to help you do some comparison shopping. It’s a good way to get a feel for prices generally. It also lets you visit a local agent or broker with some knowledge of costs.
Without a doubt, this insurance answers a size-able market demand. It can be the perfect solution for some people. But remember, it’s not for everyone. Exercise your due diligence and understand the legal and other requirements for your particular insurance needs before you jump into it.