What is third-party auto insurance?
|Things to Know||Source|
|Average rates for third party liability coverage are $40.66/mo or $487.88/yr||National Association of Insurance Commissioners|
|Minimum liability insurance is required in 47 states, but coverage levels vary by state||Insurance Information Institiute|
|New Hampshire, Arizona, and Virginia are the only state that do not require at least minimum liability coverage to legally drive, but you are still required to provide proof of financial responsibility||New Hampshire Department of Safety Division of Motor Vehicles, Arizona Department of Vehicle Insurance, Virginia Department of Motor Vehicles|
What is car insurance from a third party? Third-party auto insurance is the most basic form of car insurance, also known as liability insurance. It is mandated (in some form) in every state of the U.S. If you’re wanting to buy third-party car insurance online or want to learn more about third-party car insurance claims or the claims process, keep reading. Knowing how to buy auto insurance will save you a lot of trouble and money.
Third-party insurance covers you for the damage you cause (property or physical) to other drivers; it will pay for the medical coverage of the passengers and drivers of vehicles you damage, as well as the cost of the repairs to the vehicle you damaged.
Ready to find affordable third-party auto insurance rates? Enter your ZIP code above.
Third-Party Auto Insurance and Your Coverage
So you know third party car insurance is required in most cases, but what does third party car insurance cover? How does third party car insurance work? What is the best third party insurance for your car? Can you buy third party insurance for a car online? Read through the next few sections to find out more.
How to get third-party car insurance online? It’s best to comparison shop, and when you shop for policies online, third-party insurance is often the cheapest (and certainly the simplest) option you will be quoted by your insurance company. Adding on other more all-encompassing forms of insurance will cause your rates to go up, but will cover you in more situations. If you’re wondering how to get third party car insurance online, all you need is your ZIP code, as we noted earlier.
What’s not covered by basic liability insurance?
Naturally, when we’re looking at what third-party insurance does cover, it’s also important to consider what is not covered. The three most important aspects of any accident that are not covered by third-party insurance are:
Physical damage to your own car
Unless the other driver is at fault and has insurance, you will not receive any money from insurance to have your own car repaired.
Third-party insurance will only pay out to a third party, and not to you. If you crash and there is not another driver involved (i.e. if you back into a tree or skid off the road), or if you cause an accident, then you will bear the full brunt of the costs.
Medical Payments and Personal
Like with physical damage, you are not covered personally by third-party insurance. That means that if you incur large medical expenses as a result of a crash, you will need to pay them fully out of pocket (again, unless the accident was caused by someone else and they have third-party insurance).
Free Car Insurance Comparison
Compare Quotes From Top Companies and Save
Secured with SHA-256 Encryption
Does financing a car require more than third-party insurance coverage?
Although it can be tempting to examine third-party car insurance as an option, you should also check what you are legally required to have. If you finance your car (such as with a lease or car loan) you will usually need more than just third-party insurance. How to check third-party car insurance? Your insurance company.
The financing company wants to make sure that the car won’t be totaled without you being able to afford repairs, so they will usually demand collision coverage.
Also, if you are planning on driving for a ride-share company, you may have to have more advanced insurance (although this varies from company to company). Certainly, it is advisable if you’re planning on transporting passengers, due mainly to potential medical costs in the case of an accident for which you are deemed at fault.
What are the benefits of third-party insurance?
There are certainly pros and cons of third-party insurance. It will depend on your own personal circumstances, including how and why you use your car, as well as your financial situation. It’s worth fully examining both sides before you determine what the best option is for you:
Naturally, the first thing to consider is what the legal requirement is for insurance. As mentioned above, financed vehicles and ride-share companies may have some requirements for you to have additional insurance. However, you should also check what each state requires as its minimum levels of coverage.
New Hampshire is the only U.S. state that does not require you to buy car insurance in order to drive, although it does demand that you are financially responsible so that you will be able to compensate those whom you injure and repair any damage.
- In effect, therefore, you will need to buy third-party insurance in NH unless you have extensive savings, and even then, you may be better off hedging by buying insurance.
Similarly, Arizona and Virginia require insurance unless you post a bond payment instead of insurance ($40,000 in Arizona).
Having third-party insurance is far cheaper than having any other form of insurance, such as collision or comprehensive. According to the National Association of Insurance Commissioners, the average savings of someone taking out third-party online insurance versus more comprehensive insurance is 50 percent or an average of $500 per year.
Of course, the low cost from the premium stems from a reduced amount of coverage, meaning that your insurance company will pay fewer claims. However, if you’re looking purely at the cost of a premium, then taking out third-party-only is the best way to reduce your premium cost.
Take a look at this table to see the average cost of liability insurance in each state, along with the minimum requirements in each state, as described by the Insurance Information Institute.
Minimum Liability Auto Insurance Requirements and Average Rates by State
|States||Insurance Required in the State||Minimum Liability Limits||Average Annual Liability Insurance Rates||Average Monthly Liability Insurance Rates|
|North Dakota||BI & PD Liab, PIP, UM, UIM||25/50/25||$282.55||$23.55|
|South Dakota||BI & PD Liab, UM, UIM||25/50/25||$289.04||$24.09|
|Iowa||BI & PD Liab||20/40/15||$293.34||$24.45|
|Wyoming||BI & PD Liab||25/50/20||$323.38||$26.95|
|Maine||BI & PD Liab, UM, UIM, Medpay||50/100/25||$333.92||$27.83|
|Idaho||BI & PD Liab||25/50/15||$337.17||$28.10|
|Vermont||BI & PD Liab, UM, UIM||25/50/10||$340.98||$28.42|
|Kansas||BI & PD Liab, PIP||25/50/25||$342.33||$28.53|
|Nebraska||BI & PD Liab, UM, UIM||25/50/25||$349.07||$29.09|
|North Carolina||BI & PD Liab, UM, UIM||30/60/25||$357.59||$29.80|
|Wisconsin||BI & PD Liab, UM, Medpay||25/50/10||$359.84||$29.99|
|Indiana||BI & PD Liab||25/50/25||$372.44||$31.04|
|Alabama||BI & PD Liab||25/50/25||$372.57||$31.05|
|Ohio||BI & PD Liab||25/50/25||$376.16||$31.35|
|Arkansas||BI & PD Liab, PIP||25/50/25||$381.14||$31.76|
|Montana||BI & PD Liab||25/50/20||$387.77||$32.31|
|New Hampshire||FR only||25/50/25||$393.24||$32.77|
|Tennessee||BI & PD Liab||25/50/15||$397.73||$33.14|
|Missouri||BI & PD Liab, UM||25/50/25||$399.41||$33.28|
|Virginia||BI & PD Liab, UM, UIM||25/50/20||$413.12||$34.43|
|Illinois||BI & PD Liab, UM, UIM||25/50/20||$430.54||$35.88|
|Mississippi||BI & PD Liab||25/50/25||$437.38||$36.45|
|Minnesota||BI & PD Liab, PIP, UM, UIM||30/60/10||$439.58||$36.63|
|Oklahoma||BI & PD Liab||25/50/25||$441.57||$36.80|
|Hawaii||BI & PD Liab, PIP||20/40/10||$458.49||$38.21|
|New Mexico||BI & PD Liab||25/50/10||$462.21||$38.52|
|California||BI & PD Liab||15/30/5||$462.95||$38.58|
|Utah||BI & PD Liab, PIP||25/65/15||$471.26||$39.27|
|Colorado||BI & PD Liab||25/50/15||$477.10||$39.76|
|Arizona||BI & PD Liab||15/30/10||$488.59||$40.72|
|Georgia||BI & PD Liab||25/50/25||$490.64||$40.89|
|Pennsylvania||BI & PD Liab, PIP||15/30/5||$495.02||$41.25|
|South Carolina||BI & PD Liab, UM, UIM||25/50/25||$497.50||$41.46|
|Texas||BI & PD Liab, PIP||30/60/25||$498.44||$41.54|
|West Virginia||BI & PD Liab, UM, UIM||25/50/25||$501.44||$41.79|
|Kentucky||BI & PD Liab, PIP, UM, UIM||25/50/25||$518.91||$43.24|
|Alaska||BI & PD Liab||50/100/25||$547.34||$45.61|
|Oregon||BI & PD Liab, PIP, UM, UIM||25/50/20||$553.43||$46.12|
|Washington||BI & PD Liab||25/50/10||$568.92||$47.41|
|Massachusetts||BI & PD Liab, PIP||20/40/5||$587.75||$48.98|
|Maryland||BI & PD Liab, PIP, UM, UIM||30/60/15||$599.48||$49.96|
|District of Columbia||BI & PD Liab, UM||25/50/10||$628.09||$52.34|
|Connecticut||BI & PD Liab, UM, UIM||25/50/20||$633.95||$52.83|
|Nevada||BI & PD Liab||25/50/20||$647.07||$53.92|
|Rhode Island||BI & PD Liab||25/50/25||$720.06||$60.01|
|Michigan||BI & PD Liab, PIP||20/40/10||$722.04||$60.17|
|Louisiana||BI & PD Liab||15/30/25||$727.15||$60.60|
|Delaware||BI & PD Liab, PIP||25/50/10||$776.50||$64.71|
|New York||BI & PD Liab, PIP, UM, UIM||25/50/10||$784.98||$65.42|
|Florida||PD Liab, PIP||10/20/10||$845.05||$70.42|
|New Jersey||BI & PD Liab, PIP, UM, UIM||15/30/5||$865.55||$72.13|
To help clarify the acronyms and abbreviations in the table, we’ve defined them below.
|PD||Property Damage Liability|
|PIP||Personal Injury Protection|
Good if you have a cheaper car
If you have a cheaper car, then having third-party only insurance may actually make financial sense. As a rule, look up the value of your car using an online service (it’s advised that you do this across at least two sites so that you have a range of options).
If the annual premium for comprehensive and collision insurance comes to more than 10 percent of the total value of the vehicle (if you were to sell it tomorrow) then you should only get third-party insurance. It’s simply not worth the added cost if you are not likely to require a major claim.
If your car is totaled or stolen
If you have full coverage (i.e. comprehensive and collision) and your car is totaled or stolen, and you can’t use it again, third-party car insurance companies will pay out the full value of the car, which can allow you to pay off any loans, or buy a new car.
However, if your car has little financial value, the need for a full refund may not be worth the additional monthly payments. Think about what you would do if you lost your car suddenly – depending on how desperate your situation would be, you should consider whether you need the full insurance package.
You can raise your deductible
If you have a solid driving history, with few or no accidents, then you could raise your deductible by $1,000, remove collision coverage, and put the amount saved in a savings account for use if you have an accident.
The amount your premium will decrease by will, after a few years of doing this, normally be enough to buy a second-hand car that will keep you on the road if your car is totaled. If you’re an above average driver (i.e. have had no claims in the past five years, you should consider this to be a viable option).
What are the downsides of third-party insurance?
If you do decide to cut your insurance coverage, you will (of course) be losing out on a wide range of insurance benefits. You should give serious consideration to whether the downsides are worthwhile.
Although it may seem tempting to save money in the short-term, if you do experience an accident, you will lose money, and often a lot of money, compared to having more extensive insurance.
Won’t cover repairs to your own car
Probably the biggest omission that comes from cutting your car insurance down to third-party-only is the fact that you will no longer be covered for repairs to your own car. This can make an accident a major financial penalty.
In 2013, the average claim for property damage from a car accident was $3,231. This is money that someone with collision or comprehensive insurance would receive, but someone with third-party would not. Even more dramatically, the average claim for bodily injury was $15,443.
Responsible for paying all costs in a no-fault system
The particular legal system within your own state will also play a major role in shaping the potential downsides of having third-party only insurance. There are two types of states when it comes to car insurance:
In a tort system, the driver who is found to be at fault pays for all damages. If you have third-party insurance and you are at fault, your insurance will cover all parts of the other driver’s damages (although, again, you personally will not receive any money).
Passengers are not covered
If you regularly travel with passengers, then you should give serious consideration to getting more insurance than just basic third-party. In the event of a crash, sometimes the most basic third-party coverage will not cover injury to your passengers.
This, more than the cost of property damage, is the biggest expense occurring as a result of a crash – often costing three times as much as the cost of repairs to a car.
Roadside assistance is not covered
If you have an accident or a breakdown and require towing, most comprehensive insurance policies will cover towing.
However, third-party only doesn’t cover this, so you will need to pay this out of pocket. Needless to say, this can be a major expense. If you have an older or cheaper car, you may require towing more often than in a brand new car. An average cost of towing usually involves the following:
- Hook up fee
- Dollar charge per mile
- Local towing fee (or long-distance towing fee)
You’ll need to have savings
One of the biggest determinants of whether you should select a third-party insurance policy is whether you can afford a catastrophic incident financially. This is counter-intuitive, since cutting insurance saves money.
However, what you’re effectively cutting is the payout you would get or even owe if you were to have an accident. If you have savings up to the value of your car, and would not be financially damaged too greatly by having to replace your car, then third-party insurance should be sufficient, particularly if you have a strong driving record.
You should think extremely carefully about your insurance policy before you decide to reduce it down to third-party only. Although it may seem like you are saving money (and you certainly are in the short-term), the potential costs of an average $15,000 medical claim or costly damage to your own vehicle will soon eliminate any concept of money saved.
Counter-intuitively, reducing your coverage may be a better option if you are in a more stable financial position, and can afford to bear the out-of-pocket costs that would be paid by a claim. Third-party insurance is money saved — but at what cost?
When you’re looking at how to check third party car insurance costs, take a moment to use your ZIP code and get third-party auto insurance quotes that you can use to buy third party car insurance online or through an insurance agent, as well as other forms of coverage, should you decide third-party coverage is not sufficient.