Risk is a part of life. Accidents happen.

That’s why insurance matters.

From bumper-to-bumper car accidents to slips and falls, these are incidents that, while you can’t anticipate them, can result in serious consequences for your small business. Especially if you don’t have third-party liability insurance.

Unsure what third-party liability insurance is? Keep reading to find out.

What is third-party insurance?

Generally speaking, third-party insurance refers to any type of liability insurance policy that is bought by a business or an individual (first-party) from an insurer (second party) in order to have protection from claims made by someone else (third party).

Once purchased, the insurance plan shields you in the event that someone makes a claim, saying you’re responsible for damage to someone else’s property or for a physical injury.

It’s often bundled with other policies including homeowners and renters policies, business owners, and in some states, it’s legally required to be included in your automobile insurance.

Homeowners & renters insurance


A homeowners insurance policy will not only cover damages to your home or property, it will also (usually) include third-party insurance coverage. It’s meant to keep you safe from damages that you the policyholder, a member of your family, or your pet caused to someone else. From a baseball through a neighbor’s window to your dog tracking mud into their house, there are endless everyday reasons why homeowners’ insurance just makes sense. Homeowners third-party coverage provides the following benefits:

  • Medical bills – If someone is injured on or by your property (say they slip on the sidewalk), you could be held liable for the medical bills
  • Lost wages – Should an injury be sustained in your home, which keeps the third party from working, you’d have to pay for the lost earnings without insurance
  • Legal defense – Lawyers charge a pretty penny for a day in court, but the liability portion of the policy would pay for your legal fees
  • Pain and suffering – If the court grants pain and suffering damages to a third party injured on your property, these would be taken care of

Renters insurance

The primary purpose of renters insurance is to safeguard your personal property in the case that your rental home or apartment is damaged or destroyed. That said, it also provides third-party liability coverage. This covers bodily injury and property damage claims that happen to third parties in your home. So, you might have a house cleaner over to tidy your place. The cleaner could get hurt during the course of their work, whether by slipping on a wet floor or tripping down the stairs. Because it happened in your home, they might sue you for the bodily injury and to help them cover their medical bills.

Auto insurance & third-party insurance

Even if you live in a “no-fault” state, having third-party liability coverage could be a lifesaver. Almost every state requires that a driver’s auto insurance policy contain two different types of third-party coverage:

  • Bodily injury
  • Property damage

Bodily injury

This coverage is mandatory in every state. Were you to cause an accident—and be considered the one at fault—it would cover injuries to the third party. Coverage typically extends to physical injuries, pain and suffering, and even death. Driving is inherently risky. Should you run a red light or not see someone in your blind spot when merging, that could result in an accident with bodily injury. Were that to happen, your car insurance would help shield you from liability, particularly the costs associated with the accident and injury. Most every insurance policy will include two coverage limits:

  1. Coverage that is applied per person
  2. Total coverage for each accident

Required minimum coverage requirements vary on a state-by-state basis. For example, in California, minimum coverage levels are $15,000/$30,000, meaning that policy limits the coverage to $15,000 per person in an accident, and $30,000 total in an accident.

These are just the minimum requirements. And, as you might have considered, they’re hardly enough to cover a serious injury. So, it’s usually recommended you have a higher policy limit, since just a single trip to the hospital can cost tens of thousands of dollars.

Property damage

This third-party liability insurance helps you cover damages you caused with your vehicle to someone else’s property. Although it’s typically used to pay for damages to another driver’s car, it can also apply to their property (like their mailbox or garage). Say you’re driving in your neighborhood and a dog runs across the road. You swerve to avoid it. Should your preventative actions cause you to drive through the neighbor’s fence, you could be held liable for property damage. In this scenario, your insurance could help cover these costs. Similar to bodily injury, the required coverages vary by state and are often lower than what most experts would recommend. So, if you want to be safe, your property damage limit should be at least $50,000.

Business insurance & third-party insurance

Business owners policy (BOP)

A business owners policy (BOP) tends to combine several different coverages into one comprehensive policy. This gives a small business maximum protection from the various risks associated with their practice. One of the most vital parts of any BOP is third-party liability, which shields the business from damage it causes to third parties. For instance, you’re a contractor painting the interior of a home and you typically have your equipment spread out as you work. If the client were to fall over those tools and sustain a personal injury, or if your equipment caused damage to the person’s property, your third-party insurance could help protect you from liability.

Bonus coverage: Business insurance

Although third-party insurance is an important add-on to many other types of insurance policies, it doesn’t cover everything. For example, it wouldn’t cover negligence or protection from providing bad professional advice (that resulted in the financial loss of a client). For that, you’d need professional liability insurance, also known as errors and omissions insurance (E&O).

Fortunately, Thimble provides both E&O insurance as well as general liability insurance policies that are affordable, easy to get, and on-demand.

When it comes to business insurance, one size doesn’t fit all. You need an insurance plan that is tailored to your needs today, and adjustable tomorrow. Thimble policies can go by the hour, day, week, or month, and start as low as just $5 per hour.

With Thimble go from being exposed to covered in under 60 seconds. It’s really that easy. It’s Thimble.

Our editorial content is intended for informational purposes only and is not written by a licensed insurance agent. Terms and conditions for rate and coverage may vary by class of business and state.