Third party liability auto insurance coverage is bought by a driver to cover damage claims made by the occupants of the other vehicle in an accident. This type of protection is mandatory in most parts of the United States, and each one determines the minimum level of coverage that drivers must have in place to stay legal.
Liability insurance coverage has a bodily injury damage component. This part of the policy has a set limit for the claims made by a single accident victim for medical bills, rehabilitation expenses and lost wages. It also pays out a certain amount for funeral expenses.
The other component making up liability coverage is property damage liability coverage. This coverage pays for repairs to the other driver’s vehicle, as well as any public property which has been damaged or destroyed in the accident. It does not cover the other driver or passengers’ personal property; the other driver would need to make a claim under his or her homeowners’ or tenants’ insurance policy for reimbursement for these items.
Third party liability coverage also pays for legal fees involved in defending a legal action launched by the occupants of the other vehicle. The insurance company will look after retaining legal counsel, if necessary, and attempt to negotiate a settlement on the policyholder’s behalf. The company will pay out on claims up to the policy limit the customer has chosen to put in place.