Third party liability insurance

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Page written by Chris Godfrey. Last reviewed on September 24, 2024. Next review due October 1, 2025.

Accidents happen. There’s no getting round it. Nor the fact that they can bring crippling claims against your business if you cause personal injury or property damage to someone else. To eliminate this kind of risk, businesses buy third-party liability insurance – all-weather umbrella cover that can protect organisations from the financial storm if the worst should ever happen.

Read on to learn more about third-party insurance and how it can take the sting out of any claim.

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What is third-party insurance?

There are two types of third-party insurance:

Third-party liability insurance: Also known as public liability insurance, this is a type of business insurance that protects your organisation if someone is injured, or their property is damaged because of the services that you or your business provides. This type of cover, also known as PL or liability insurance, is designed to protect your company against third party claims for injuries or property damage from a customer or client, passer-by, or a visitor to your business premises – including building sites – whether you’re at fault or not.
Vehicle third-party insurance: Also known as third-party only, or TPO – this is the most basic form of vehicle insurance required under US law. Applicable to private and commercial vehicles – motorcycles, cars, vans and trucks – it will cover you for damage your vehicle causes to another vehicle, person or property, but your own vehicle won’t be covered if it needs to be repaired or replaced. Additionally, TPO won’t cover your vehicle from theft, vandalism, or if it is damaged or destroyed in a fire unless you choose to buy a different kind of policy known as third-party, fire and theft, or TPFT.

What is the importance of third-party insurance?

Third-party insurance protects the insured from potentially catastrophic compensation claims for any personal injury or property damage they have caused to another person, business, or organisation. Without third-party insurance, you could end up paying extremely high damages to someone you have injured, or for the repairs or replacement of their property, whether or not the harm was intentional.

Who are the parties in third-party insurance?

There are three parties in third-party insurance:

First-party: The insured (you).
Second-party: Your insurance company.
Third-party: The person or business who has suffered injury or property damage and is making a claim.

What is the difference between first-party and third-party claims?

It depends on who is making the claim. If you’re the insured (the first-party), and you suffer loss – for example, someone smashes your shop window but they are never identified – and you make a claim on your business insurance, you are making a first-party claim. Alternatively, if you or your business causes injury or property damage to someone else (the third-party) and they make a compensation claim against your liability insurance, they are making a third-party claim. So:

First-party claim: You claim against your own insurance.
Third-party claim: Someone else makes a claim against your insurance.

What does third-party insurance cover?

Third-party liability insurance can cover the cost of legal expenses and compensation costs if someone sues your business for injury or damage.

For example, you run a window-cleaning business and someone trips over one of your ladders and suffers injury, or your delivery van accidentally scrapes a customer’s car that’s parked on your forecourt. In these kind of situations, the person who has suffered injury or damage (the ‘third-party’) could claim compensation from you. The claim can include things like medical bills, lost income, legal fees, and replacement or repair costs. (If your public liability insurance covers it, your own legal expenses will usually be paid by your insurer).

How much does third-party insurance cost?

The average cost for a third-party insurance is $130 per month, but the premium you pay will depend on your business type, where you operate, your business risk profile, the excess you agree to pay and any optional extras you choose to buy.

How Swoop can help

All business involves risk, but that doesn’t mean you have to suffer the consequences if things go wrong. Don’t let a simple accident or error become a catastrophe for your business. Contact Swoop today to compare top-quality third-party liability insurance from different providers and to discuss all your business insurance needs.

Written by

Chris Godfrey

Chris is a freelance copywriter and content creator. He has been active in the marketing, advertising, and publishing industries for more than twenty-five years. Writing for Wells Fargo Bank, Visa, Experian, Ebay, Flywire, insurers and pension funds, his words have appeared online and in print to inform, entertain and explain the complex world of US consumer and business finance.

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