What does third-party insurance cover?

Being self-employed allows you flexibility. You can choose when to work and where you choose, or even how much work you want to do – it puts you in control of your earnings and the types of work you want to do. But going it alone in business is not without its risks and often accidents can happen that are outwith your control. This is why it’s important to protect yourself and your business with effective insurance policies.

This article will tell you all you need to know about third-party insurance, by looking at the following areas:

• What is third-party insurance?
• What types of third-party insurance apply to businesses?
• What does third-party insurance cover?

Third-party insurance is a policy purchased by the person or business who wants to be insured (the first party) from an insurance provider (the second party) for protection against any claims of another person or business – the third party.

Third-party insurance is most commonly known when referring to car insurance. You might also hear third-party insurance referred to as a form of ‘liability’ insurance. It means that the ‘liability’ is an unknown risk or hazard, and the insurance protects the first party (the insured person or business) in case they have to pay for any damages or financial losses, regardless of the cause or who is responsible for the accident.

All policies will have their small print about what is and isn’t valid on a claim, so always read the small print to understand what your coverage looks like in the case of a claim. So how does third-party insurance apply to your business?

As mentioned, car insurance is a type of third-party insurance. If you drive a vehicle for your business or have a fleet of vehicles that you use in the company, then this insurance will be a top priority for you. Third-party insurance is the minimum protection you need to drive under UK law. It covers you if you damage someone else’s vehicle or injure them while driving, and will cover your passengers too. Third-party insurance in this instance is to compensate the third party, never you if you are injured or your own vehicle if it was damaged in an accident of your doing.

Another type of third-party insurance that will be most pertinent for a business is public liability insurance. Public liability insurance is a policy that ensures your business against any claims made if a third party is hurt or harmed whilst dealing with your business. This third party could be a member of the public, a supplier, a contractor or in some circumstances, an employee. This could be while they were on your premises, at an event with your company or from using your products or services.

Businesses are not legally required to have public liability insurance. However, if your work involves you dealing with the public often then it would be a smart business decision to invest in a policy. For example, if a customer tripped over equipment when visiting your place of work, they would have a valid claim. It’s important to be protected as compensation can cost thousands and this could be catastrophic to a new or small business. 

Depending on the policies you have for a business, they will cover separate things. 

Third-party only (TPO) cover for a business car insurance is the most basic kind of cover available, and it provides the minimum level of cover required by UK law. This basic coverage would pay for:

• Paying for compensation or rehabilitation for an injury caused to a passenger or a person in another car.
• Damage to another person’s car, but not yours.
• Damage to another person’s property, including buildings or walls that could be driven into and damaged.

For a business vehicle, you may also consider third-party, fire and theft insurance. This usually comes as a package and includes third-party cover plus protection for your own car if it’s damaged in a fire or stolen. To receive coverage for yourself (if you were injured) and your business vehicle, you’d be looking at a ‘comprehensive’ policy from a car insurance provider.

Every policy will be different, so ensure that you always read the small print when choosing the right policy. 

Sometimes mishaps are unavoidable, and the types of incidents that are covered by a public liability policy usually fall into these brackets:

• Damage to a customer’s property (either their home or their personal items) caused by you or the business’s work you are carrying out.
• An injury caused to a customer by you, or any employees you may have, as a result of your business activities.

A public liability policy will usually include cover for your legal fees as well as any compensation for the claimant (which can be in the tens of thousands, for even a small accident).

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