What Does Third Party Insurance Cover?

You probably already know that one of the big decisions you need to take when arranging car insurance is around whether to go for Fully Comprehensive cover or Third Party cover.  After all, this is one of the factors which will most affect the amount of premium you need to pay out.

Buy what does third party insurance cover and what is the difference between third party and other types of insurance cover? The following are the main points you need to be aware of when choosing your level of cover. In this post we will aim to answer the question, What Does Third Party Insurance Cover?

The Legal Minimum

In the UK and many other countries Third Party is the legal minimum cover which car owners can take. Basically, if you have Third Party cover then any accident you cause can be claimed against your policy. This is important because it means that we can all drive on the UK’s roads safe in the knowledge that we will be compensated for any damage caused to our vehicles which someone else is responsible for. It is even more important when we think about the issue of personal injury, as these claims can be for very large sums of money. An ordinary motorist could be financially ruined by an accident in which they hurt or kill someone if they don’t have Third Party insurance. No matter whether you damage a car, a person or property you can claim under this section. This is why it is such a serious offence to drive without insurance in the UK, as you are running the risk of causing damage which you can’t pay for.

Fire and Theft Optional

Some people think that Third Party cover automatically covers fire and theft but this isn’t the case. In fact, when you get an insurance quote you can choose between the options of Third Party Only and Third Party, Fire and Theft. The first option only covers the absolute bare minimum which we covered in the previous paragraph, while the second one gives your own car a bit more protection. The Third Party, Fire and Theft cover will cost more than Third Party Only, of course, but it does mean that you get a payout if the vehicle is damaged in a fire or is stolen.

When Should You Choose Third Party Cover?

The most common reason for choosing one of the forms of Third Party insurance cover over Fully Comprehensive is financial. The difference between these types of cover can be massive, especially for a young driver or for a car which is in one of the higher insurance groups. However, if we leave aside the financial aspect for a moment, when would it be best to opt for Third Party insurance? Simply put, it is when the car isn’t worth enough to make insuring it on a Fully Comprehensive basis worthwhile. For example, let’s say that the higher level of cover would cost you an extra £500 per year. We then need to consider the excess on the policy. This is the amount of any claim which you need to pay before the insurance company pay out. Let’s imagine that you have an excess of £100. Now, if your vehicle is worth £1000 and it gets completely written off you will get paid £900 to replace it. However, if you have been paying for Fully Comprehensive cover instead of Third Party for two years then it has cost you an extra £1000 in order to be able to make this claim. Each case is different so it is worth sitting down and working out whether it is worth paying more for a higher level of cover for your car.

Well I hope we’ve effectively answered the question, What does third party insurance cover? If you have anything to add please leave a comment below.

I also just need to say a quick thank you to the Carnival of Financial Planning for including TCCTI recently.

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