In most countries of the world, all cars on the road are required to have at least one third party liability cover as per law. It is important as it pays out if you are held responsible for a loss suffered by someone else – known as ‘Third Party’.
A third party can be anyone other than yourself, such as a passenger in your vehicle, driver or passenger of another vehicle or a maybe a pedestrian. Losses covered by the liability may include loss of earnings, treatment for injuries, and cost of damages to third party property, compensation for death or permanent disability.
The third party liability cover is essential because if you do not have it, you will have to meet the costs for which you are liable from your own pocket. Needless to say these costs can go up to very high burning a hole in your pocket.
What is not covered?
First of all, it does not cover any damages to you or the rental car. It is also important to remember that you could invalidate the cover if you don’t abide by the terms and conditions of the rental agreement. The cover may also be deemed invalid in case you fail to abide by the laws.
For example, your liability cover may be deemed invalid in case you were found driving under the influence of drugs or alcohol. You may also land up in with your cover being cancelled if the rental car was being driven by someone who is not mentioned in the rent agreement.
In some cases the policy clearly specifies that you are allowed to not drive on certain routes, so if you are found driving off road, your claim might be denied.
In some cases, based on your insurer and the place you reside, the insurance company may still pay out the compensation to the third party in question, but pursue you personally for the costs incurred.
It should also be noted that if you only have a third party cover, you will not be compensated for cost of any damages incurred to your car. That is the reason it is suggested to take a comprehensive insurance plan.
How does it work with an excess?
If you caused an accident that resulted in financial losses to a third party, you do not make a claim for your third party liability cover. The claim will be made by either them or their insurance company. Hence, you do not have to worry about the excess, which is the amount to be paid by the policyholder towards the cost of claims made. Since the claim has been made by someone other than you, you are not liable to pay any excess.
How much cover do you need?
Since it is a legal requirement in most countries, the owner of rented car makes sure that the vehicle has minimum amount of cover required by law. He may also choose to increase the amount of cover if he desires in certain cases, but that is a rare case.