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Third-party liability insurance is insurance that pays when the policyholder injures another person or causes damage to another person’s property. In car insurance, third-party liability insurance is required in almost every state, and it only applies when the policyholder causes an accident. Third-party liability insurance does not pay for the policyholder’s own injuries or property damage.
The Parties in Third-Party Liability Insurance
In third-party liability insurance, the first party is the policyholder and the second party is the insurance company. The third party is anyone else who becomes involved. Since liability means legal responsibility, third-party liability refers to the policyholder’s legal responsibility to someone else.
For example, say that Driver A accidentally rear-ends Driver B at a stop-light, causing minor damage to both cars’ bumpers. Driver B can file a claim with Driver A’s third-party liability coverage to pay for the damage. However, Driver A cannot file a claim with their own third-party insurance, since they are the first-party in this scenario. Instead, Driver A would need to have collision insurance for the damage to their own car to be covered.
Types of Third-Party Liability Car Insurance
Third-party liability car insurance incorporates two subsections: bodily injury and property damage liability. In addition, car insurance policies usually include three separate payout limits to cover different aspects of third-party liability. For instance, a policy written as 25/50/25 refers to limits of $25,000 for bodily injury claims per person, $50,000 for bodily injury claims per accident, and $25,000 for property damage claims.
Third-party liability car insurance is a term most frequently used outside the United States. In the U.S., insurance companies will usually just call it liability insurance instead.
People also ask
What is liability only insurance?
Liability-only insurance is car insurance that covers a third party's property damage or injuries in the event of an accident. The term “liability-only car insurance” is used to distinguish policies with basic coverage from those with collision insurance and comprehensive coverage.
Liability insurance is the only type of auto insurance that is mandatory in almost every state. It’s split into two main categories of coverage: bodily injury liability and property damage liability.
What Liability-only Insurance Covers
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How much does liability car insurance cost?
Liability car insurance costs an average of $671 per year nationally. The exact cost of a liability auto insurance policy varies based on several factors, including the state, insurance company, driver’s record, and amount of coverage purchased.
Liability Car Insurance Cost by Company
- GEICO: $462 per year
- USAA: $487 per year
- Progressive: $549 per year
- Travelers: $639 per year
- State Farm: $718 per year
- Allstate: $781 per year
- Nationwide: $890 per year
- Farmers: $1,044 per year
- Liberty Mutual: $1,090 per year
These sample quotes...
read full answer by WalletHub, Financial CompanyHow much property damage liability do I need?
You need at least the minimum amount of property damage liability coverage required in your state, for starters. But because many states have low minimum insurance requirements, it’s advisable to get as much coverage as you can afford, and to purchase limits that are equal to your net worth at the very least. Property damage liability pays for damage to other people’s property after you are at-fault in an accident, so you will be financially...
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