What Is Third-Party Auto Insurance?

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If you drive a vehicle, your state probably requires you purchase third-party auto insurance. Read on to learn more. 

You’re on the hook if you’re at fault for hitting a driver with your vehicle. That’s where third-party insurance, or liability insurance, comes in. Third-party auto insurance pays for costs when you’re at fault for damaging another person or property.

If you’re a car owner in the United States, you’re legally required to purchase third-party auto insurance. Notable exceptions include residents of New Hampshire, Arizona, and Virginia.

What does third-party auto insurance cover?

Third-party insurance covers people and property damage done to third parties.

It covers people whom you injure in the event of an accident. Medical bills, lost wages, and suffering caused by the accident are all covered.It covers property you damage in the event of an accident. That includes vehicles, fences, and other structures damaged due to the accident.It covers legal fees. If a victim sues you for injuring them, third-party auto insurance pays for legal expenses needed to resolve the case.

How much does third-party auto insurance cost?

In 2019, the average annual cost for U.S. third-party auto insurance was $650.35, according to the National Association of Insurance Commissioners. The cost of insurance varies by policy and state. It also depends on where a person lives, their age, and other factors.

Before anything else, check how much damage your state requires you to cover with your third-party policy in the event of an accident. Each state has its minimums, ranging from $5,000 to $25,000 in damages.

You can buy more or less third-party coverage. How much you pay for coverage depends on how much car insurance you need.

What is not covered by third-party auto insurance?

Third-party insurance is the bare minimum required to hit the road legally. It covers damage you cause to people and property, but there are many things it doesn’t cover:

It doesn’t cover damage to your body. Third-party insurance only covers third parties.It doesn’t cover damage to your vehicle or property. Third-party insurance only covers third-party property.It doesn’t cover anything above your policy maximum. If your third-party insurance has a $10,000 limit, and you’re on the hook for $15,000 in damages, you are responsible for covering the $5,000 difference.

If you’re unable to pay tens of thousands of dollars in the event of an accident, consider purchasing more than the bare minimum insurance required by your state.

Other types of car insurance

You may want to take out policies that cover damage to your body, damage to your vehicle, or non-crash-related expenses, like auto theft. These policies can plug up the potentially money-draining holes left uncovered by third-party auto insurance.

Personal injury policies cover damage done to you in the event of an accident.Collision policies cover damage to your vehicle in the event of an accident.Comprehensive policies cover losses that aren’t crash-related, like theft and vandalism.

How much you pay for insurance depends on many personal and financial factors. The best car insurance companies will offer you the most bang for your buck.

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Ready to shop for car insurance? Whether you’re focused on price, claims handling, or customer service, we’ve researched insurers nationwide to provide our best-in-class picks for car insurance coverage. Read our free expert review today to get started.

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