What is the definition of third party car insurance?

Third-party car insurance protects other people and property from damage that you cause. 48 states require third party coverage from all drivers.

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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: Jun 24, 2020

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Here's what you need to know...

  • Third party car insurance is the most basic of auto insurance coverage
  • Third party car insurance is mandated in some form in every state
  • Third party car insurance does not provide protection for driver at fault

Third party car insurance can be defined as liability insurance that is designed to provide protection to other motorists and property owners for the damage you cause.

This insurance pays for the injuries of the occupants of the other vehicle, the cost of repairing it as well as damages caused when you are determined to be the at-fault driver.

Third party car insurance doesn’t provide any protection for the driver of a vehicle. It is not the same thing as collision or comprehensive coverage, which protect against damage to your vehicle.

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Types of Car Insurance Coverage

Collision coverage pays for the cost of repairing your vehicle when the damage is caused by making contact with another car or an object, such as a guard rail or a sign post.

Comprehensive coverage pays out when the vehicle is damaged by other causes, such as fire, theft, hail, or flooding.

Neither of these are third party insurance and do nothing for damage you cause to others.

In most parts of the United States, vehicle owners are required to have liability or third party car insurance in place. State law sets out the minimum level of coverage that must be put in place.

Liability insurance takes the form of bodily injury and property damage liability coverage:

  • Bodily injury liability coverage – pays for the medical bills, lost wages, and expenses incurred as a result of the accident and funeral expenses if the accident resulted in fatalities
  • Property damage coverage – pays for the cost of repairing property other than the other driver’s vehicle and in most cases doesn’t include personal property in the other vehicle

Always check the policy provisions to understand exactly what is covered and what the policy exclusions are.

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Choosing the Right Level of Coverage

While a driver is meeting his or her obligations by buying only the minimum level of third party car insurance coverage, it may not be the right level of protection for them.

When an accident occurs in a tort state, the insurance company will pay for the damages incurred by the occupants of the other vehicle up to the policy limit through the liability policy.

As a policyholder, you are responsible for paying the deductible before the insurance company will pay out any benefits under the policy.

If the amount of coverage under the policy doesn’t fully satisfy the damages incurred by the other people involved in the accident, the policyholder is required to pay them personally.

Since the idea of buying car insurance is to protect your assets, buy as much insurance coverage as you can afford.

No matter what level of third party car insurance coverage you have in place, review your coverage annually to make sure you have the right level of protection for your needs.

If you are ready to start looking at different options, why don’t you click on the free insurance tool on this page?


  1. https://www.investopedia.com/terms/t/third-party-insurance.asp
  2. https://www.iii.org/article/what-is-covered-by-collision-and-comprehensive-auto-insurance
  3. https://www.naic.org/state_web_map.htm
  4. https://www.libertymutual.com/auto/car-insurance-coverage/property-damage-coverage
  5. https://www.rmiia.org/auto/steering_through_your_auto_policy/Tort_Auto_Insurance_Basics.asp

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