What’s the deal with third-party insurance?

Third-party cover is an affordable and attractive car insurance option for many drivers. Here's a look at how it works.

One minute you're driving along, hitting all the right notes with Taylor Swift, and the next you're hitting the car in front of you. That's when you realise that investing in third-party insurance instead of in those singing lessons was the right choice after all.

A split second is all it takes, and causing an accident can be devastating. Yet when you have third-party insurance, you can rest assured that the costs of repairing the other vehicle will be covered.

What is third-party insurance?

When you're at fault in a car accident, you're responsible for covering the legal and financial costs of all the resultant damage. Enter third-party insurance. Essentially a liability insurance, third-party insurance covers the costs of the damage you cause to other people's vehicles or property.

In insurance terms, the 'third party' refers to the person who has incurred a loss or damage because of your actions. They then lodge a claim against you, the first party (the insured person who caused the accident). The insurance company which ultimately settles the claim is the second party.

Third-party cover covers you for the damage you (accidentally) do to another vehicle. It's best for people who have an older car that's already paid off, or who don't drive their car very often or very far. The reason we say that is, infrequent use of the vehicle minimises the risk of you being involved in an accident or having to pay towards the costs of repair or replacement parts. Remember: third-party cover pays for the other vehicle; not yours.

So you'll still have to pay for repairs to your own car out of your own pocket... but at least if you bump into a brand-new Beemer or accidentally fender-bend a Lamborghini, you won't have to pay those debilitating repair costs.

Third-party vs comprehensive cover

If you can't afford comprehensive cover, choosing the top tier of car insurance options may not be viable. That's why third-party cover – which covers the bare basics (i.e. the damage to another person's vehicle) – is so appealing to those who cannot afford a comprehensive car insurance policy.

Comprehensive cover pays out for any damage caused to both your vehicle and another car or property, subject to excess as well as terms and conditions. Comprehensive cover includes hail damage, fire and theft. Certain third-party insurance policies also include fire and theft, obviously adding to your monthly premiums.

In the case of basic third-party insurance, the costs of the damage to the other vehicle or property, minus the excess your insurance company charges you, will be covered. The amount paid out will, however, depend on what limit you place on the cover you select. To minimise shortfalls, do your research to ensure you have the best coverage possible within your price range.

If you only have third-party cover and you cause an accident, the costs of the damage to your vehicle will not be covered at all. All repairs, replacement parts or even the cost of a new vehicle – should your car be written off – will be for your account.

Oh, and if someone else is at fault in an accident, they are liable for covering your damages.

How does the Road Accident Fund work?

Should the third party be injured or killed in a car accident you cause, the government's Road Accident Fund (RAF) will cover your liability with regard to this. In other words, when it comes to innocent car crash victims and their families, the RAF will cover medical or funeral costs as well as loss of income due to serious injury or death – subject to certain caps and limitations. It's the material damage to their car that will be covered by your third-party insurance.

The only time that third-party insurance may cover you for personal liability is when the accident happens outside South Africa – when your policy covers you for journeys across the border. It may also come into play should someone not directly involved in the accident (for example, a family member of the third party) make an 'emotional shock' claim against you.

It's best to check your policy to ensure this coverage is included in your policy.

Inspired to check out your car insurance options? Compare Car Insurance quotes side by side and make sure you get the best coverage for your budget.

This article is for informational purposes only and should not be construed as financial, legal or medical advice.