Who is third party in insurance

Included benefits

• We'll cover anyone you give permission to drive your car. Driver and usage exclusions apply1
• Provides up to $20 million cover for damage you cause to other people's cars or property, arising out of a single accident and its related events.
• We'll pay for reasonable legal costs and expenses from court proceedings due to a liability claim 

¹ Driver exclusions apply if the driver is unlicensed, is not following the conditions of their license, refuses a drug or alcohol test, is under the influence of drugs or exceeds the legally allowed alcohol limit. Refer to the Comprehensive Car Insurance or Third Party Property Damage Car Insurance PDS for full driver, usage and other policy exclusions as set out in the "What's not covered" section. An additional excess applies to drivers under 25.

When it comes to insurance policies, there are a lot of parties – these aren’t the backyard BBQ variety. ‘Third party’ refers to the person or persons, who may be indirectly involved but are not primary to, or directly involved in, the arrangement or insurance contract. Having third party property insurance covers your legal liability for third party property damage (including cars, pedestrians and cyclists) for an accident that you caused. Some third party insurance providers, as an additional extra, will also cover your property for theft and fire.

Why would I need both Compulsory Third Party (CTP) and Third Party Property Insurance?

Unlike Third Party Property insurance, CTP is a legal requirement for all motor vehicles in Australia. In NSW and the ACT this may be referred to as a ‘green slip’. CTP covers any personal injuries or death you cause to another person as a result of an accident. Having both CTP and third party property insurance covers you for any claims for personal injury to another person and property damage caused by you.

Do you need more than third party property insurance?

If you have a second hand car you may think that the premiums for comprehensive insurance are not worth it. Think about it this way: if you are dependent on your car, could you afford to fix it if your vehicle sustained extensive damage or afford a new car if it was written off? No one plans to be involved in an accident, but in the event that you are at fault, being comprehensively insured can help to deliver peace of mind to cover damage to your own car, as well as the other driver.
 

How do I reduce my premiums?

If you know that you can’t live without third party property insurance, but are worried about the cost there are things that you can do to reduce your premiums:

• Be a safe driver: If you have no previous claims or history of reckless or dangerous driving you will be considered less of a risk to insure helping to reduce your premiums.
• Buy your car insurance online: By purchasing your car insurance online you may be able to receive a discount on your premiums.
• Choose your excess: The excess is the initial amount of the claim you pay to the insurer. Choosing to pay a higher excess in the event of an accident will help to lower your premiums.

Even if you don’t have comprehensive car insurance, third party property insurance may be worth considering.

Definition: Motor third-party insurance or third-party liability cover, which is sometimes also referred to as the 'act only' cover, is a statutory requirement under the Motor Vehicles Act. It is referred to as a 'third-party' cover since the beneficiary of the policy is someone other than the two parties involved in the contract (the car owner and the insurance company). The policy does not provide any benefit to the insured. However, it covers the insured's legal liability for death/disability of third-party loss or damage to the third-party property.

Description: Since the third-party insurance cover is mandatory, all non-life insurance companies have an obligation to provide this cover. In the Indian context, automobile dealers arrange for a comprehensive insurance cover along with vehicle registration. This comprehensive cover is an add-on to the mandatory third party cover and protects the car owner from financial losses, caused by damage or theft of the vehicle.

Also See: Motor Insurance, No-Claim Bonus, Surrender Value, IRDA

When we take a broad look at insurance, there are numerous types of policies and coverages available but generally we can categorise them into one of two forms – first party and third party insurance.

As is commonly the case with insurance, knowing exactly what the difference is between the two and how they affect you is half the battle!

We will take a look at both first party and third party insurance to identify how the two differ and what that means for you as a policy holder.

What is first party insurance?

With an insurance policy, there are two parties to the insurance ‘contract’ – the insured and the insurance company.

‘First party’ insurance provides coverage against loss or damage sustained by the insured. The insured being the person or business who has purchased the insurance policy or the policy is written to protect.

In this instance, the insured is referred to as the ‘first party’ and the insurance company is referred to as the ‘second party’. However for reasons we are unsure of, the insurance company is rarely referred to as the ‘second party’ in the insurance world.

Upon the occurrence of a first party claim, payment is directly made from the insurance company to the insured.

Examples of a first party insurances include:

• Motor vehicle insurance
• Home insurance
• Contents insurance

For example, if there is a fire at your home and your property is damaged or destroyed, you may wish to claim under your home insurance policy for property damage. This is an example of a first party claim as you as the insured have directly suffered a loss and the insurance company is required to pay you directly for the sum of the damages if covered under the policy.

What is third party insurance?

‘Third party’ insurance is designed to insure against liability of a person for loss, damage or personal injury caused to a third person (i.e. someone other than the insured).

Think of the third party as being a stranger to the policy as they are neither the insured or the insurer.

Common types of third party policies include:

Third party claims are almost always a liability claim.

For example, you are a business owner and a client has fallen as a result of a wet and slippery surface on your premises leading to injury – you have been found negligent for the incident.

Under your Public Liability insurance policy, you may have ‘third party coverage’ which protects you as the insured from exposure to liability. In this instance, your insurance company will pay the claim amount directly to the claimant (the third party) rather than to the insured to cover the losses.

Is there anything in between?

To answer this simply, yes. Some types of insurance policies contain aspects of both first party and third party provisions.

A common example of such an insurance policy is Cyber Liability Insurance.

Under a Cyber Liability policy, insurers may offer both first and third party insurance for cyber losses.

First party coverage insures for losses to the policyholder’s own data or loss of income, or for any harm that may have been caused as a result of a data breach or cyber attack to the policyholder’s business.

Third party coverage insures for the liability of the policyholder to third parties who have been impacted by the data breach or cyber attack. This may include clients and government bodies.

As you can see, there is quite a difference between first party and third party insurance and it is important to know the difference between the two fully understand how your insurance policies work for you.

Would you like to know more about first party and third party insurance? Contact us.