An Overview of Third-Party Car Insurance

Third-party car insurance, also referred to as liability insurance, will cover the damages you cause in a car accident.
Written by Hillary Kobayashi
Edited by Amy Bobinger
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Third-party
car insurance
will cover the damages you cause in an accident where you are at fault. The way your car insurance company pays out after an accident and the type of coverage you need will vary depending on whether you live in a no-fault state or an at-fault state.

Third-party car insurance explained

Car insurance policies are a type of third-party insurance. Third-party insurance covers policyholders and protects them from lawsuits. 
In a third-party insurance policy, the first party (the insured person) buys a policy from the second party (the insurance company) to protect themself from a third party (someone who might sue the first party, such as a person who has been in a car accident with the first party).   
This type of car insurance coverage is also called
liability insurance
. A liability insurance policy typically has two types: bodily injury liability and
property damage liability
. Bodily injury liability covers the third party’s person, including medical expenses and lost wages. Property damage liability covers the third party’s vehicle and property, including car repairs. 
Most state laws require drivers to carry certain amounts of liability insurance, but the
required coverage varies by state

No-fault states and at-fault states 

Third-party insurance will be different depending on whether you live in a
no-fault state
or an at-fault state.

No-fault states

In no-fault states, if you are involved in an auto accident, your car insurance company will cover your expenses, regardless of fault. For this reason, no-fault states require
personal injury protection (PIP) coverage
, which pays for your medical expenses in the event of an accident.  
Minimum car insurance laws in no-fault states will also require you to carry liability insurance. 
The main idea behind the laws in no-fault states is to decrease the number of car accident-related small claims court cases. However, it is still possible to sue another driver in certain circumstances, like if the other driver caused a fatal accident or an accident that resulted in serious disfigurement of another party.
Drivers in Kentucky, New Jersey, and Pennsylvania can choose to retain the right to sue another party for injuries related to a car accident. 
Puerto Rico also follows no-fault laws. 

At-fault states

In at-fault states (also referred to as tort states), your liability insurance will cover the medical and property expenses of the other driver after an accident. 
For instance, if you cause an accident in an at-fault state and the other driver needs to go to the hospital, your bodily injury liability coverage will pay for the other driver’s medical bills up to your coverage limits. 
Also, if the other driver’s car is damaged in the accident, your property damage liability coverage will pay to cover their repair bills up to your coverage limits. 

The claims process for a third-party insurance claim

If you were involved in an accident where the other party was the at-fault driver, you can file a third-party insurance claim. To file a third-party insurance claim, also called a liability claim, follow these steps: 
  1. Gather information from the accident, including the other driver’s name, contact number, insurance information, and vehicle information as well as photos or a police report, if available.
  2. Contact your own insurance company.
  3. Work with the
    claims adjuster
    , who will likely be assigned by the other driver’s insurance company. The adjuster will determine who was at fault and how much the insurance company will pay out to cover vehicle repairs and other accident-related costs. 
Another motorist can also file a third-party insurance claim against you following a car accident. 

The best car insurance companies for third-party car insurance

You can purchase third-party car insurance—or liability insurance—from any car insurance provider. Bodily injury liability and property damage liability are available in both no-fault and at-fault states. 
The experts at
Jerry
analyzed thousands of car insurance policies purchased by real drivers to better understand the cost of liability insurance. Here’s what they found, broken down by insurance provider and liability limits: 
Provider
15/30/15
25/50/25
50/100/50
100/300/100
$175
$199
$262
$299
$161
$193
$222
$245
$63
$149
$181
$183
$89
$100
$140
$203
$116
$160
$216
$227
$117
$167
$181
$194
$157
$158
$192
$198
$140
$164
$179
$197
$108
$169
$190
$210
$164
$182
$208
$213
If you’re looking for a new third-party car insurance policy or are hoping to lower your insurance costs, you should give the
Jerry
app a try. Just download the app, input your driver info, and you’ll be scrolling through
quotes f
rom the top car insurance companies in no time. 
You can adjust your
coverage
, liability insurance limits, and
deductibles
in the app, and when you’re ready, you can even purchase your policy or switch insurance companies.
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FAQ

Are third-party car insurance and third-party liability insurance the same? 

Third-party car insurance is liability insurance. Another type of third-party liability coverage is
homeowners insurance
.

What types of damage are not covered by third-party auto insurance?

Your third-party car insurance pays out to cover the other driver’s vehicle and/or medical expenses, not yours. If you’re looking to financially protect yourself and your vehicle, you’ll want to invest in types of coverage like
comprehensive coverage
,
collision coverage
, and
medical payments (MedPay)

What is a first-party claim?

A first party-claim is when an insurance provider pays the insured person directly. 

Sources 

avatar
Hillary Kobayashi
Hillary Kobayashi is an insurance writer and editor specializing in insurance and finance topics. Hillary’s mission is to use her knowledge and love of education to help car owners better understand how they can save time and money on car ownership. The articles Hillary has published for Jerry span topics from state-specific bill of sale requirements to SR-22 insurance information.
Prior to joining Jerry, Hillary spent over ten years in education at Pacific University and the University of Oregon.
avatar
Amy Bobinger
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Licensed Insurance Agent — Expert Insurance Editor
Expert insurance writer and editor Amy Bobinger specializes in car repair, car maintenance, and car insurance. Amy is passionate about creating content that helps consumers navigate challenges related to car ownership and achieve financial success in areas relating to cars.
Amy has over 10 years of writing and editing experience. After several years as a freelance writer, Amy spent four years as an editing fellow at WikiHow, where she co-authored over 600 articles on topics including car maintenance and home ownership. Since joining Jerry’s editorial team in 2022, Amy has edited over 2,500 articles on car insurance, state driving laws, and car repair and maintenance.

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