Understanding Third Party Liability Insurance

Third party liability insurance is compulsory as it should be. When you own a car, there is a very decent chance that you will cross paths with a third party, no matter how careful you are when driving. It is also very likely that the third party will hold you responsible for any damage to their car and injuries to their passengers. You must be in a position to honor claims and be protected from law suits that may be filed against you. This is where third party liability policy comes in useful.

Here we will define what third party liability insurance is, its importance, its coverage, and whether or not it is enough for your needs.

What is Third Party Liability Insurance?

When you purchase an insurance policy, you create a contract with an insurance provider. In this partnership, you are the ‘first party’ or the insured, and the company is the ‘second party’ or the insurer. The ‘third party’ is generally someone who can make a claim against you. The main purpose of this coverage deals with the welfare of other people in the unfortunate event of an accident.

The third party liability insurance policy is the minimum level of requirement to drive in Singapore.

Why is Third Party Liability important?

In Singapore (and in most countries), third party liability insurance is a requirement to drive. Third party liability insurance is purchased to compensate for the damages caused to the third party by the first party. For example, if you are involved in injuring a pedestrian while driving your car and it is determined that you are at fault, the person (third party) can seek damages from you. Your insurance company can pay out your compensation payment. In addition, the third party liability insurance covers your expenses against law suits and other hefty claims by the injured party.

You are legally liable if you accidentally cause injury or damage and are considered to have been negligent under Singapore law.

What does it cover?

The third party insurance typically covers the death or bodily injury of any person involved in the accident including the occupants in the vehicle. The insurance plan also covers damage to property such as the third party’s car, a street light, or other property destroyed in the accident.

This insurance policy does not cover your own injuries and damages in an accident.

When talking about third party liability, it’s not difficult to determine whether you need it or not. Simply owning a car requires you to have this basic type of coverage. If you have assets or income that needs protection, this minimum coverage might not be enough for you. Although the standalone third party liability coverage is decidedly much cheaper than a comprehensive policy or other policies, it might not be enough to protect you from significant financial loss. Do note that it only takes one disastrous claim to clear out your savings account and force you to sell your assets. Additional coverage is reasonably priced and should complement the amount of assets you want protected.