Find a clear definition of third party liability insurance, explained with practical examples.
It’s important for business owners to think about third party liability insurance, as it covers you for claims made by a member of the public against your business.
It’s another way of describing public liability insurance, which is a core cover for businesses that come into contact with clients, suppliers, and other third parties. Since insurance terms like ‘third party’ and ‘liability’ can be confusing, we’re going to provide a definition of third party liability insurance and delve a bit deeper into what it covers – and whether it’s right for you.
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Definition of third party liability insurance
Third party insurance meaning: when you take out an insurance policy, you’re forming a legal relationship with your insurance provider. In this relationship, you’re the ‘first party’ and the insurer is the ‘second party’. The ‘third party’ is someone who doesn’t have any involvement with creating this contract, but could be affected by it. This is usually a member of the public who can make a claim against you – which is where third party liability insurance kicks in.
If you face a third party liability compensation claim, your liability insurance could pay out to cover your legal expenses as well as the compensation payment, up to the limit of your policy.
So, who exactly could the third party be?
In the case of business insurance, the third party could be a customer, a client, a supplier, or just someone who comes into contact with your business on your premises or in the street. If they’re injured or their property is damaged by your business, they could claim compensation from you.
Typical third party liability claims
Imagine you’re a builder working on scaffolding and you drop a brick that damages a car parked below, or you’re a restaurant owner whose supplier slips on a wet floor while delivering ingredients. In either case your business could be faced with a compensation claim.
This compensation payment can take into account medical costs, lost earnings, and the replacement or repair of damaged property. As you can imagine, this means that compensation payments can be huge, so it’s important you’ve got the right level of third party liability insurance.
You can usually choose from £1 million up to around £10 million of cover, based on the risks that your business faces and the possible extent of compensation claims. You should also check your client contracts, as some clients will demand a particular level of third party liability cover (or public liability).
Simply Business offers third party liability insurance from some of the UK’s leading providers. You can compare liability quotes, add any extra cover you need to your policy, and buy online in minutes. Hit the start your quote button below to begin.
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