Third-Party Car Insurance Coverage: Definition, Benefits, Details

February 15, 2022

Imagine a tranquil morning. You’re driving on your favorite highway, thrilled about the upcoming vacation with your family. But suddenly, out of nowhere, a car appears just in front of you and, unable to hit the brakes in time, you’re ramming it, causing an accident and hours – if not days – of proceedings and paperwork.

But not only this! If you were uninsured, you are now facing exorbitant bills and a tarnished reputation at best, points on your driver’s license, or time in jail at worst. What were you thinking? Why have you neglected your family in favor of saving a few dozen bucks? Greed and wrong priorities have led to dire consequences.

Safety comes first. Third-party car insurance can grant it without making a dent in your budget.

Peace Of Mind Over Pettiness

Being insured means being protected, but it also means acquiring the peace of mind that allows you to live the life that you have imagined – happy, trouble-free, and fulfilling. When the price tag is as low as $50 a month, you shouldn’t be bothered too much about overpaying for your safety and comfort, should you?

Well, as statistics show, the question doesn’t sound rhetorical to almost 32 million American drivers who remain uninsured. The table of unscrupulous motorists is topped by car owners from Mississippi, Michigan, Tennessee, New Mexico, Washington, and Florida, each of the states having at least 20% of its drivers uninsured. Even in the most law-abiding state – New Jersey – about 3% of car owners don’t have mandatory car insurance.

Speaking of which, third-party car insurance is an absolute must, and not only because it is required by law in all states and at all times. More importantly, third-party car insurance coverage protects you from financially burdensome claims from third parties that otherwise could – no more, no less – turn your life into (financial) hell.

How Does Third-Party Car Insurance Work?

Also known as ‘act-only’ insurance, it does just what its name suggests, protecting the vehicle owner against claims from third parties. Claims may come as a result of a bodily (physical) injury – including death – and property damage.

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Is It Mandatory In The U.S.?

Yes, it is obligatory in most states except Florida, New Hampshire, Massachusetts, New Jersey, Texas, and Virginia. The mentioned states have unique car insurance laws, many of which require third-party coverage, but in a different form. For example, deposits or bonds in Massachusetts and Texas.

Most states, however, require the following three types of coverage:

  • Bodily injury per individual.
  • Bodily injury per accident.
  • Property damage.

In practice, it looks like this: 20/50/25, where:

  • 20 refers to $20,000 in bodily injury coverage per individual.
  • 50 refers to $50,000 in bodily injury coverage per accident
  • 25 refers to $25,000 in property damage coverage.

All numbers are the minimums required by law. Different states require different limits for different sub-types of car insurance coverage.

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What Does A Third-Party Car Insurance Policy Cover?

A typical third-party car insurance policy is, in fact, liability insurance. It covers:

  • Bodily injuries: All types of bodily injuries are covered, regardless of how intense these injuries are and how they were caused unless they were caused either directly by the policyholder or as a result of the policyholder’s actions.
  • Disability (partial or permanent): One of the most unwanted consequences of car accidents is a partial or permanent disability of a third party. Medical bills can pile up very quickly, so financial support provided by third-party car insurance is paramount.
  • Death: The worst-case scenario is when you caused an accident that led to a third party’s death. No amount of money can compensate for the death of a human being, but at least you will get covered financially.
  • Property damage: The most frequent case is when an unfortunate accident results in damage to the property of a third party. The ‘property damage’ part of your insurance will take care of the financial burdens caused by this accident.

Also, note that it’s possible to alter your policy, adjust the coverage limits for the mentioned cases, and even add more cases to the coverage. At the same time, some policies may only cover two or three of the mentioned cases.

What Does Third-Party Car Insurance NOT Cover?

The most important thing to remember is that third-party car insurance doesn’t cover the insurer’s property or bodily injury, which is clear from the name and type of said policy. It also doesn’t cover:

  • Underage drivers
  • Drunk drivers
  • Drivers with no driving license
  • Deliberately caused accidents
  • Stolen vehicles and vehicles used for commercial purposes

Other than these cases, third-party car insurance is applicable in almost any situation and can save your day as long as you know how to file a claim quickly and properly.

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Third-Party Vs. Comprehensive Car Insurance

The difference between these two types of insurance is substantial. Third-Party insurance only covers the damages and losses you cause to a third party. For example, if you hit someone else’s car on the road – not the insured. On the other hand, comprehensive car insurance covers the damages and losses of the insured.

How To File A Third-Party Insurance Claim

The faster you react at the site of the accident, the better. Here’s what you should do:

  1. Inform your insurance company about the accident;
  2. File the FIR and get a copy of it;
  3. File your claim to your insurer: Send all possible details of the accident, including the degree of injuries, property damage, weather conditions, visibility, and other details. If possible, attach photographs from the scene.

Once your insurance company receives your claim, it will send its representative – a surveyor or insurance adjuster – to the site. The surveyor will file a report based on which insuring party will settle the claim and pay for damages.

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Benefits And Disadvantages Of Third-Party Car Insurance


  • Liability protection.
  • Legal assistance from the insurer.
  • Affordable premiums, starting from $20 a month.


  • Does not cover the damage caused to the insured.

Conclusion: Do You Really Need Third-Party Car Insurance?

Without a shadow of a doubt, a smartly-chosen car insurance policy is a must for every car owner. Not only is it required by law in most states in the U.S., but it is also excellent in terms of logic and common sense. Saving a few dozen dollars a month while compromising the comfort of your life is not worth it. With that, it’s time to wrap it up. Go get insured!

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Third-Party Car Insurance Coverage: Definition, Benefits, Details 5

Oleksandr Rohovnin is a Content Marketer at and an expert contributor to CoverExplore. His passion is digital marketing, innovative technologies, tech industries, and – above all – distilling vast amounts of complex information into engrossing narratives anyone can relate to. At CoverExplore, Oleksandr stokes passion for auto insurance and the automotive industry in general in every story he curates.