What is third party insurance?

Third party car insurance is liability coverage that protects against claims from a third party. You must carry your state's minimum required amount of third party car insurance.

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Zaneta Wood, Ed.S. has over 15 years of experience in research and technical writing bringing a keen understanding of data analysis and information synthesis to reach a wide variety of audiences. She studied adult education and instructional technology at Appalachian State University as well as technical and professional communication at East Carolina University. Zaneta has prepared technical p...

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Joel Ohman is the CEO of a private equity backed digital media company. He is a CERTIFIED FINANCIAL PLANNER™, author, angel investor, and serial entrepreneur who loves creating new things, whether books or businesses. He has also previously served as the founder and resident CFP® of a national insurance agency, Real Time Health Quotes. He has an MBA from the University of South Florida. Jo...

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Reviewed by Joel Ohman
Founder & CFP®

UPDATED: May 27, 2020

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Here's what you need to know...

  • Third party auto insurance is something you can purchase through any auto insurance carrier
  • Your state has requirements on the minimum amount of coverage you should carry
  • If you need to shop around for insurance, using an online quote tool will save you time and effort

In certain situations, third party auto insurance may be the only kind of insurance that you need.

Third party car insurance is insurance that you purchase from an insurance company. It also refers to liability coverage.

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Third party car insurance is required in most states in the U.S.

If you drive your vehicle without auto insurance, you can face license suspension, fines, and even jail time. What happens to you will depend on the state you live in, as the laws vary by state.

Assuming that you aren’t going to have an accident is a fast way for you to get into some serious trouble.

Most states have on-demand requirements for showing proof of auto insurance.

Many states are moving toward a completely electronic system, which allows the state to know virtually instantly that you have allowed your auto insurance to lapse or that you don’t have car insurance at all.

A variety of car insurance companies is available in every state, although not every insurance company can sell in every state.

Understanding your car insurance options will help you make good choices about your coverage. In addition, taking advantage of discounts and shopping around will make your choice more affordable.

Third Party Auto Insurance Options

For car insurance, third party insurance companies must be licensed in your state to sell auto insurance. This is why you will sometimes find that insurance companies sell insurance in many other states but not in your own.

Most states have dozens of quality car insurance companies licensed to sell insurance.

For the most affordable choice for auto insurance, you are going to want the at least bare minimum that you can afford.

Most third party car insurance companies will not recommend that you only purchase your state’s minimum requirements, but if you can’t afford more, you must have at least what your state requires.

Is third party insurance enough?

In most states, the minimum insurance requirement is liability insurance.

Liability insurance provides coverage for the people and automobiles in any accidents that you cause.

Liability insurance is meant to protect others from you, which means that this insurance doesn’t protect your personal property or your medical costs.

Some states, such as Florida, also require drivers to carry PIP insurance. PIP stands for Personal Injury Protection. This provides you with medical coverage if you are injured in an accident.

If you have health insurance, don’t purchase PIP insurance unless you are required to in your state.

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Third Party Liability Levels

Third party car insurance often refers to liability coverage.

You can choose many different levels of liability car insurance. Third party companies usually recommend purchasing as much as you can afford as a serious accident can cost nearly $100K.

Recommended limits are 100/300/100. If there is a multi car accident, the costs can exceed even that.

Collision coverage is another option for your car insurance.

Collision Coverage

Third party companies suggest that if you can’t afford to replace your vehicle with cash after an accident, that you carry collision coverage. If, however, you drive a car with little to no value, collision coverage isn’t recommended.

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Collision insurance covers the cost of damages to your vehicle or the cost of replacing your vehicle (current market value, not what you owe on the vehicle) if it is totaled.

This applies to any accident that you cause, including hitting objects. That is why if your vehicle has no real market value, this insurance won’t benefit you.

Comprehensive Coverage

Comprehensive car insurance covers virtually anything else that could happen to your vehicle outside of an accident. Theft, fire, flood, hail, lightening, and virtually whatever you can think of is covered by this type of car insurance.

However, your insurance company may have exclusions listed on your policy that will not be covered.

As you can imagine, comprehensive coverage is going to be the most expensive option that you choose for your car insurance. Third party insurance companies don’t recommend comprehensive coverage on vehicles with little to no value.

Much like collision insurance, comprehensive coverage isn’t necessary for a vehicle that has no market value.

You will find various other options available to you depending on the insurance company you choose. Roadside assistance, rental car coverage, locksmith coverage and so on are all options that many insurance companies offer.

Third Party Discount Options

You will find that there are many discount plans for car insurance. Third party insurance companies vary, however, with the type of discounts that they offer.

Generally, the larger the insurance company, the more discounts they offer to their customers.

Most insurance companies offer great discounts to safe drivers, and there are a variety of other discounts that you could qualify for.

If your driving situation changes, most specifically if you are driving less due to a job change or because you moved, you can get a discount for that.

If you need more than car insurance, third party companies will offer you a discount if you purchase multiple policies from them. This could include renters insurance, homeowners insurance, life insurance and/or health insurance.

Shopping Around for Car Insurance

Quite possibly the easiest way to save money on your car insurance is shopping around.

Nearly every insurance company offers a quote tool on their website, but the truth is that this isn’t the best way to shop around for car insurance. Third party companies will quote you their rates and you will have to visit other insurance sites to get more quotes.

If you want a faster way, then it is time for you to try our free quote tool.

Using our quote tool will allow you to get car insurance rates fast. Our form is easier and faster to fill out than those you will find on third party insurance sites as well.

Your information will be kept private and you aren’t obligated to make a purchase.

Enter your zip code below to access car insurance quotes from multiple companies today!

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