What Is Third Party Liability Insurance?

A vehicle owner sustaining damage by another driver is the third party.

Liability insurance is designed to cover loss related to personal injury and/or property damage caused by a policyholder operating a motor vehicle. Liability insurance contains two forms of coverage--property damage liability and personal injury liability.

Parties

In a liability insurance covered incident, there are three parties involved, the insured (first party), the insurance company (second party), and the injured or property owner (third party).

Definition

Third party liability insurance coverage is the portion of an insurance policy that covers loss to others, caused by the policyholder, whether it is personal injury or property damage. Third party liability insurance coverage is required in most states as part of a basic insurance policy for drivers.

Exclusion

Third party liability insurance coverage does not protect the policyholder from loss to his own vehicle or personal injury sustained by anyone in his vehicle. Coverage for first party loss can be added to the policy.

References

• Car Insurance: Coverage Definitions
• All Insurance Info: Property Damage Liability Insurance
• Business Dictionary.com: Third party insurance