Third-party liability insurance protects you from other drivers’ claims.
Also called liability insurance, third-party car insurance is required in most states and protects you if you’re at fault in an accident and need to pay for damages to another driver.
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What does third-party car insurance cover?
You’re the first party, and your insurer is the second party. Everyone else on the road is the third party. To cover any claims other drivers make against you, you’ll need third-party car insurance.
The various types of third-party coverage include renters insurance, homeowners insurance and business owners policies. For auto insurance, there are two types of third-party coverage: bodily injury liability and property damage liability. These are basic forms of liability coverage.
- Bodily injury liability pays for costs if you’ve injured another person in a car accident.
- Property damage liability pays for costs if you’ve damaged another person’s property in a car accident.
Does liability insurance come with a deductible?
Third-party auto insurance usually doesn’t come with a deductible. For example, if you hit another car and your insurance covers the cost of the other driver’s repairs, you won’t have to pay anything out of pocket.
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How do third party car insurance limits work?
When you’re buying third-party auto insurance, you’ll need to choose the amount of coverage you want. Your policy will either be split limit or combined single limit.
Split limit policy
While shopping for liability coverage, you may see an insurance policy expressed as “25/50/15.” When you see numbers like these, you’re looking at a split limit policy.
These numbers are just shorthand for how much your insurance will cover you for.
- The first number is the individual payment limit per accident for bodily injury. The “25” in our example refers to $25,000. It’s how much your insurance will cover for each person’s bodily injury costs (other than yours). For example, if you’ve injured someone in an accident and their medical bills are $20,000, you’re covered.
- The second number is the overall payment limit per accident for bodily injury. The “50” refers to $50,000. It’s how much your insurance will cover for the total bodily injury costs in an accident (other than yours). For example, if you’ve injured five people and their medical bills are $20,000 each, you’re on the hook for $100,000. In this case, your policy will cover $50,000, and you’ll need to pay the other $50,000 yourself.
- The third number is the overall payment limit per accident for property damage. The “15” refers to $15,000. It’s how much your insurance will cover for the total cost of property damage in an accident. (This doesn’t include your own vehicle — instead, you’ll need collision coverage for that.) For example, if you rammed into a barn and it costs $6,000 to repair it, your insurance will cover the expenses.
The three numbers will change to create different policies. Your state will most likely have policy minimums, but otherwise you’re free to choose the right mix for your own needs.
Combined single limit policy
A combined single limit policy offers one coverage limit.
Let’s say you took out $200,000 of combined single limit coverage. In the event of an accident, you can split this coverage between different types of damages. For example, you’d be covered in these instances:
- One person’s medical bills totals $150,000, and there’s $30,000 in property damage.
- The medical bills of four people total $200,000.
- You caused property damage that costs $180,000. You also need to pay for someone’s medical bill of $15,000.
All of those costs are $200,000 or less, so your insurance will cover them.
How much liability coverage do I need?
In every state except New Hampshire and Virginia, you’re required to buy third-party coverage. Furthermore, your state requires certain minimums in bodily injury liability and property damage liability. Third-party coverage ensures you’ll have the means to pay if your vehicle causes damage to others or their property.
View liability coverage requirements by state
What are the requirements for New Hampshire and Virginia?
If you live in New Hampshire, you’re not required to have auto insurance. However, you need to prove you can pay if you cause bodily injury or property damage. The easiest way to do this, of course, is by purchasing insurance.
It’s not mandatory to have auto insurance in Virginia, either. But like in New Hampshire, you must prove that you can pay for costs stemming from bodily injury or property damage. You can do that by either buying insurance or paying a fee to Virginia’s DMV.
How much does liability-only car insurance cost?
Typical costs for liability-only or state minimum policies are in the range of $500 to $1,000. The cost of third party auto insurance will vary considerably depending on your age, where you live and your driving history, among other factors.
Liability-only car insurance quotes
| Company | Average annual rate | Learn more |
|---|---|---|
| Geico | $394 | Read review |
| USAA | $416 | Read review |
| Progressive | $536 | Read review |
| Grange | $557 | Read review |
| Mercury | $564 | Read review |
| Esurance | $609 | Read review |
| Kemper | $615 | Read review |
| 21st Century | $651 | Read review |
| Allied | $666 | Read review |
| Nationwide | $666 | Read review |
| Allstate | $693 | Read review |
| Liberty Mutual | $709 | Read review |
| State Farm | $726 | Read review |
| The Hartford | $727 | Read review |
| Average | $598 | Compare all reviews |
Bottom line
Before you hit the road, you’ll need car insurance. Third party liability coverage will protect you against other drivers’ claims for bodily injury and property damage.
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