17 September 2024
What is third-party car insurance? A guide
5 minutes
If you own or drive a car, being insured is a legal requirement. But there are different options out there, so how do you know which kind of insurance to choose? What is third-party car insurance, and how is it different from the others?
In this in-depth guide, we’ll take you through how third-party car insurance works and how it compares to more comprehensive policies. We’ll also cover why it’s important to have, whether it’s actually cheaper, and its main pros and cons.
What does third-party car insurance cover you for?
Third-party cover — sometimes called third party only — is the most basic of the three main types of car insurance. As the name suggests, it protects you against any claims made by a third party. This is often another driver, but it could be anyone who isn’t you (the first party) or your insurance company (the second party).
If you have a car accident, you’ll be insured for any damage you do to someone else’s car or property, like their house or fence. You’ll also be covered for any injury you cause to someone else, like another driver or your own passenger.
But because it’s third party only, that’s all you’re insured for. You won’t be able to make a claim for any damage to your own car or any injury to yourself. You’ll need to cover these costs on your own.
Read more: What does third-party insurance cover?
What is the difference between comprehensive and third-party insurance?
As mentioned above, there are three main types of car insurance. We’ve introduced third party only, but how’s it different from the other types?
- Third-party, fire, and theft insurance: This type of insurance gives you the cover of third party only, but it also protects your vehicle in the event of a fire (whether arson or accidental), theft, or break-in. You and your car still aren’t covered in the event of an accident though.
- Comprehensive insurance: Sometimes referred to as fully comprehensive, this is the highest level of car insurance you can get. Not only does it cover third parties, fire, and theft, but it’ll also protect you and your vehicle in the event of an accident — even if it was your fault.
Why is third-party car insurance important?
If you own or drive a car, it’s vital you have some form of third-party car insurance, whether that’s third party only or as part of a more comprehensive plan. There are two main reasons for this:
- Legal requirement: First and foremost, it’s legally required in the UK. Third party is the minimum level of insurance cover you need to drive. If you don’t have it, you could get points on your licence, receive a hefty fine, lose your car, or even be disqualified from driving altogether.
- Financial protection: The damage caused by a car accident can be very expensive. You might have to cover extensive repairs to other vehicles and properties, the cost of replacing another car entirely, or sizeable medical bills if other people are hurt. Third-party insurance means the only costs you have to worry about are your own.
How does third-party car insurance work?
So, how does third-party insurance work in practice? Well, it largely depends on whether or not you’re at fault.
If you’re at fault
If you cause an accident, your insurance provider will cover any claims made by third parties. They’ll pay compensation to these parties directly, so you don’t need to worry about arranging this. But if you’ve suffered any damage yourself, you’ll need to cover these costs on your own. And you’ll probably also lose your no-claims bonus if you have one, unless it’s protected under your policy.
If you’re not at fault
If you’re involved in an accident that wasn’t your fault, the other person’s insurance will cover any damage to you and your vehicle. Again, their insurance company will pay you compensation directly. Your insurance policy won’t be affected, and you won’t lose your no-claims bonus either.
But if you don’t know who’s at fault — for example because you’re involved in a hit and run — or if the other driver doesn’t have insurance, you won’t be able to make a claim. And of course, if your car gets damaged by a fire or is stolen, third-party only insurance won’t cover this, so you’ll have to foot the bill yourself.
Read more: What to do if you’re involved in a car accident?
Optional extras and add-ons
As with all types of car insurance, providers will usually offer various extras you can add to your policy if you’d like to. These will cost more, but they can boost your protection in areas that are important to you, for example breakdown cover or protection for your no-claims discount.
Should you choose third-party car insurance?
Car insurance policies will differ from provider to provider, and quotes will vary significantly depending on a whole multitude of factors, like your age, where you live, the car you have, its mileage, your driving history, and so on. But generally speaking, there are a few pros and cons to consider when deciding whether to take out third-party only cover.
Is third-party car insurance cheaper?
Because it’s the most basic level of cover, it makes perfect sense to assume third-party would also be the cheapest. But actually, these days, that isn’t always the case.
Third-party insurance has traditionally been popular with drivers looking for a cheaper option — especially new and less experienced drivers who are higher risk and therefore have higher premiums. But as a result, third-party cover has become responsible for the biggest proportion of insurance claims. So, insurers now see third-party as a more risky option, which bumps up the price.
Of course, it’ll depend on your personal circumstances and your chosen insurance provider, but sometimes you’ll find that third party is actually the most expensive option! For example, GoCompare found that in 2024 third-party insurance was around 30% more expensive than both third-party, fire, and theft cover and comprehensive insurance on average.
When is third-party car insurance a good option?
Although it isn’t always cheaper, there are definitely situations where third-party insurance can be a great option.
- Older, cheaper cars: If your car has a fairly low value anyway, you might find it’s not worth what it costs to repair after an accident, and in fact you’re better off replacing it. In this instance, third-party might cover all the costs you want it to.
- Infrequent drivers: Third party might also be suitable for people who don’t drive very often. If you’re rarely on the road, you might not want to fork out for comprehensive cover. So assuming third party only is a cheaper option for you, you might decide it does the job.
What are the disadvantages of third-party car insurance?
Apart from the fact it’s sometimes more expensive, there are some other cons of third-party insurance to keep in mind.
- Limited cover: Because it offers less protection than other insurance types, choosing third-party cover now could result in greater costs down the line if something happens. So for peace of mind, you might be better taking out third-party, fire, and theft cover or comprehensive cover. And given the price differences, you can sometimes get more protection for less money — win-win!
- Younger and inexperienced drivers: Third-party insurance can be particularly tempting for newer drivers due to the higher premiums they face. But these drivers often need the most protection from their insurance as they build up their experience. If you’re a younger driver, you might want to consider black box (or telematics) insurance instead. This type of cover rewards you with lower premiums if you drive safely.
Quickfire summary
To recap, third-party cover is a type of car insurance that protects you against claims from third parties, but nothing else. That means you’ll be liable for any costs to yourself and your vehicle. It’s the minimum level of car insurance required by UK law, so you must have some form of third-party cover.
While it can be a good option, especially for lower value cars and those who don’t drive very often, nowadays it sometimes works out more expensive than other insurance types. And due to its limited cover, it leaves you partially unprotected. So for full peace of mind, you might want to choose third-party, fire, and theft cover or comprehensive cover instead.
One of the best ways to decide is to get some insurance quotes so you can compare prices and policies. Get in touch with Howden’s team of experts today to find the best deal for you.
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