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 bodily injury.
It’s often bundled with other policies including homeowners and renters policies, business owners, and in most states, auto liability insurance is required by law for every registered automobile owner.
What third-party insurance covers
Third-party insurance kicks in when a third party — be it your customer, a vendor, or a stranger — suffers property damage or bodily injury and claims your business is responsible. Specifically, third-party insurance typically covers:
- The costs of repairing the property damage
- Medical bills and expenses related to the bodily injury
- The legal costs of defending yourself against the claim
The particulars of what’s covered will depend on the type of third-party insurance you’ve purchased, such as auto insurance or commercial general liability.
What third-party insurance does not cover
For one, third-party insurance does not cover bodily injury or property damage that you, as the first party, suffer. Third-party insurance also doesn’t cover every type of claim that a third party may bring against you or your business. For example,
- Negligence: If a third party claims that your business made a mistake, provided bad advice, or were otherwise negligent, you would need to be covered under a professional liability policy, also referred to as errors & omissions (E&O) insurance.
- Malpractice: Some professions, most notably doctors, lawyers, and accounts, are exposed to specific kinds of risk. These businesses need malpractice insurance to be protected against third-party claims of malpractice and negligence.
- Cybercrime: Cybercrime is an emerging threat to many businesses. If your business gets hacked and it causes damages to third parties like your customers or vendors as a result, they can sue you. You need cyber liability insurance for protection against these claims.
Common types of third party 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 a broken arm when a visitar trips over a loose board on your front steps, 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
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.
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
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 auto liability insurance would help shield you, particularly the costs associated with the accident and injury. Most every insurance policy will include two coverage limits:
- Per person
- Per 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 provide $15,000 per person in an accident, and $30,000 total if an accident results in injury or death to more than one person.
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.
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, consider using $50,000 as a minimum property damage coverage limit.
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.
How to file a third-party insurance claim
Whether you’re filing a third-party claim or responding to one, you’re probably wondering how the claim filing process works, and the steps you can take to ensure a speedy resolution. Here’s how it works:
1. Safety first
Your immediate first steps after the accident, especially if bodily injury or a crime has occurred, are to make sure everyone is okay and has received medical attention if necessary.
2. Collecting information
Once that’s done, gather all the information you can at the incident.
- Get the names, addresses, phone numbers, and emails of everyone involved.
- Record when and where the accident occurred.
- Take photos of the accident and damage, and write a description of what happened while it’s fresh in your mind.
- If property damage occurred, take photos. Make repairs as needed to preserve the property and prevent further damage.
- If a police report was made, request a copy and the name and badge number of the reporting officer(s).
- Collect any supporting documentation relevant to your claim.
- Locate your policy number and the name of the policy holder, if it’s not you (you’ll need it when submitting your claim).
3. Reporting a third-party claim
Next, report your claim as soon as possible. Even if your business is the first party, you still want to report your claim to your insurer quickly. The sooner you report your claim, the better equipped they’ll be to defend you properly. Plus, some states may have a set deadline, such as 20 days, for how long you can wait to respond to a lawsuit. Miss the deadline, and there may be a default judgment.
When filing your claim, you’ll want to include all the information you’ve gathered above.
Reporting a third-party claim with Thimble
To report a claim with Thimble, email firstname.lastname@example.org, call the Markel Claims hotline at 800-362-7535, or fax 855-662-7535. You can report a claim 24 hours a day, seven days a week. All Commercial General Liability policies arranged by Thimble are underwritten by Markel Insurance Company.
4. Claim resolution
Your claim will be assigned to a claim representative or insurance adjuster. They will contact you and the other party to collect details and information about the accident and the damage. The initial contact with the claims expert often takes place over a recorded phone interview, so it’s a good idea to have as much of the information listed above at hand. The insurance adjuster may also visit in person to assess property damage.
The timeline for settling a claim can vary based on the incident, the number of people involved, and the complexity of the claim. While you wait for your claim to be processed, do not admit responsibility and do not discuss the accident with anyone other than your insurer or an authorized representative.
5. Settling a claim
After reviewing all of the information provided and conducting interviews with both parties, your insurer will either deny or approve the claim. If approved, the claimed amount will be paid up to the policy limit purchased. If the claim is larger than the policy limit, the responsible party pays the excess out of pocket. The third party may be compensated for costs they already paid, or the insurer may prefer to pay medical bills or repair costs directly to the vendor.
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.
Protect your business from third-party claims with Thimble. Tell us a few details about your business, like the type of work you do and your zip code, and you can get your free quote in just 60 seconds. Seriously.