Many people don't like dealing with auto insurance, but it’s necessary so they do it anyway. Still, you'll want to pay close attention to some parts of the insurance policy you spend money for, particularly when it comes to third-party insurance claims.
In auto insurance policies, the first party is yourself, the second party is the insurer, while the third party is any person you might harm or cause car damage to during an accident. In such cases, your insurer will pay for third party claims as stipulated in your insurance policy.
So, what is a third-party insurance claim? Keep reading to find out. This guide will help you understand the ins and outs of this lesser-understood element of auto insurance so you can decide if you should include it in your policy.
What Is Meant by Auto Insurance?
Before we dive deeper into third-party insurance claims, let’s do a quick recap about auto insurance in general.
Auto insurance is a form of protection you take by signing a contract with an insurance company. That contract or ‘policy’ includes details of how the insurance company will compensate you if your vehicle suffers damage, like in a car accident.
Some insurance companies compensate for financial losses due to theft or damage due to the weather.
That policy is highly customisable, so you can choose what you want or don’t want to be covered. Naturally, the more things you want the policy to cover, the more it’ll cost you through the premiums you pay.
Now, here’s the interesting part.
Auto insurance policies include details for first-person and third-person insurance claims.
When your car suffers damage, and you file a claim for yourself, that’s called a ‘first-person claim’. In other words, that ‘first-person’ that you’re claiming for is yourself.
However, your insurance policy could also provide coverage for third-party claims.
What Is a Third-Party Claim?
As you explore the topic of auto insurance, you’ll also come across the term ‘third-party’ quite often. So, what is third-party car insurance?
Third-party auto insurance is a policy that protects you from financial losses if your car causes damage to another person or their property.
Let’s suppose you get into a car accident, and it’s your fault. In that case, you’ll have to pay for the damage that you caused to the other person’s car. If you don’t have third-party insurance coverage, you’ll have to pay out of pocket, using your own cash.
However, if you have third-party car insurance, your insurance company will pay for those damages instead. You’ll go through the same process of filing a claim, except in this case, you’ll be filing a third-party claim (i.e., to compensate the other person) instead of a first-party claim.
Who Is the Third Party in an Insurance Claim?
Let’s be crystal clear about the roles in insurance policies:
- The first party: The first party is you, the person whose name is on the insurance policy. So, any insurance policy you take that provides first-party coverage will benefit you.
- The second party: The second party in this arrangement is the insurance company. They’re the party you form an agreement with to receive auto insurance coverage.
- The third-party: The third party in an auto insurance policy refers to anyone that you cause damage to with your vehicle. That includes causing injury to them personally and causing damage to their personal property.
Remember: Auto insurance policies are customisable. You can get a policy that only covers yourself as the first-person or only covers third-party damage. But, of course, you can also get a policy that includes both.
The protection that your policy provides and who it benefits is determined by your agreement with the insurance company, i.e., the insurance policy.
What Is an Example of a Third-Party Claim?
As you might imagine, a third-party insurance claim procedure is a bit more complicated than a straightforward first-person claim between you and your insurance provider.
The precise steps will differ slightly depending on your insurance provider, but this is what the process will look like in general.
Steps in Filing a Third-Party Claim
- File a police report: As with any auto accident, the first step is for everyone involved to file a police report. Not only is this done to document the details of the accident, but it’s also to determine if you are indeed at fault.
- Contact your insurer: At the same time, you should also contact your insurance company immediately for guidance. Insurance companies typically have an emergency hotline that you can contact for advice on what to do right after an accident.
- Cooperate with the third party: The third party and you will have to cooperate to ensure that the claim is filed correctly. So, they’ll take their vehicle to the mechanic to assess the damage and the necessary repairs. Then, they’ll provide you with the details and any supporting documents for you to file with your insurance company.
- File a third-party claim: With all the documents in hand, you can file a third-party claim with your insurance provider. The insurance company might have follow-up questions or inquiries about the accident and your role in it.
- Compensate the third party: Lastly, the third party will be compensated for your responsibility in the accident and how much your policy will cover. If the damage costs more than the third-party coverage you have, you’ll then have to pay for the difference with your own money.
Again, it’s worth mentioning that the process can differ between insurance providers, but you should always do steps 1 and 2—filing a police report and calling your insurance company for guidance.
From there, steps 3-5 might differ slightly depending on your specific situation.
Is It Worth Having Third Party Insurance?
Auto insurance policies come in many shapes and sizes, especially since you can customise the coverage you want. There are first-person, third-person, and comprehensive insurance policies, all differing in price and the benefits or protection they cover.
Many people choose to get comprehensive insurance coverage that includes first- and third-person benefits. However, that will cost more than getting third-person coverage alone.
Generally, it would be better to get a comprehensive insurance policy. But let’s suppose your car is old and you wouldn’t bother repairing it even if it got totalled. In that case, your only worry would be any potential damage you might cause to someone else’s car on the road.
In that kind of situation, you’ll save money by purchasing only third-party insurance coverage.
Whatever the situation might be, it’s always best to get the advice of an insurance broker or provider and have them customise a plan that fits your priorities.
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By Ray Hasbollah