Third Party Liability Insurance Definition
Depending on the situation, there may be three parties involved in an insurance claim, explains InvestorGuide.com. The first party is you, the policyholder. The second party is your insurance carrier. The third party is another entity, such as the other driver in an auto accident. Third party insurance is designed to protect you from claims made against you by another person.
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Function
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The primary function of third party liability insurance is to protect you in the event that you cause an accident. Liability coverage will reimburse others and pay for damages awarded in a lawsuit, depending on your insurance limits.
Types
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Liability coverage is part of many types of insurance. Auto liability insurance pays for injuries and property damage as the result of a car accident. Homeowners liability insurance protects you in the event that someone is injured at your home. Commercial liability insurance covers you in the course of your business operations.
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Considerations
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If your risk of liability is high, you may need additional coverage than what is offered under your primary policy. In these situations, you may purchase an umbrella policy that will go into effect once the limits of your primary policy are exhausted, according to the Insurance Risk Management Institute.
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References
- Photo Credit Crash on the street. German auto model 2007. image by Dariusz Kopestynski from Fotolia.com
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Comments
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who pays the claiment when a brand name seller sells you a prouct that catches on fire , causes 200,000.00 in damage, they have an insurance co cotact you , send adjusters, and then a letter telling you thaat they are trying to contact the actuall manufacurer in china that they contracted to produce the item to their specs?
