what is third party insurance 
third party insurance is a policy purchased by the insured first party from the insurance company second party for protection against the claims of another third party a common example of third party insurance is car insurance which is designed to protect you against the claims of other drivers in case of an accident investopedia jake shiunderstanding third party insurancethird party insurance is essentially a form of liability insurance the first party is responsible for their damages or losses regardless of the cause of those damages one of the most common types is third party insurance is automobile insurance third party offers coverage against claims of damages and losses incurred by a driver who is not the insured the principal and is therefore not covered under the insurance policy the driver who caused the damages is the third party for auto insurance there are two types of third party liability coverage in some cases third party insurance may be required by law drivers for example must carry at least a minimal amount of bodily injury liability and property damage liability coverage these coverage requirements vary from state to state a few states do not require both or have other limitations each state sets its minimum requirement for each type of coverage 2even in no fault states liability coverage is all but essential no fault laws do not protect you from million dollar injury lawsuits stemming from seriously injured third parties 3no fault laws were established to reduce or eliminate ordinary injury lawsuits affixed with low dollar price tags and an overwhelming number of claims for pain and suffering both types of third party insurance are important for individuals such as homeowners with substantial assets to protect the more money and assets an insured has the higher the limit should be for each type of liability coverage special considerationsin most countries third party or liability insurance is compulsory for any party sued by a third party public liability insurance involves industries or businesses that take part in processes or other activities that may affect third parties such as subcontractors architects and engineers here the third party can be visitors guests or users of a facility most companies include public liability insurance in their insurance portfolio to protect against damage to property or personal injury product liability insurance is typically mandated by legislation which varies by country and often varies by industry this insurance covers all major product classes and types including chemicals agricultural products and recreational equipment it protects companies against lawsuits over products or components that cause damage or injury 