What does third-party insurance cover?

Third-party insurance is specifically designed to provide coverage for claims made by individuals who are not directly involved in the insurance contract, essentially covering the legal responsibility of the insured towards others. When a policyholder (the insured) is held liable for causing damage or injury to another person (the third party), third-party insurance comes into play. This type of insurance helps cover the costs associated with those claims, protecting the insured from financial loss due to their legal liabilities.

In contrast, claims made by the insured against their own insurer pertain to first-party insurance and not third-party coverage. Claims related only to first-party losses pertain to incidents where the insured is claiming for their own losses—again, outside the scope of third-party insurance, which does not cover personal losses. Regarding the option suggesting that all claims made within the insurance policy would be covered, that is inaccurate since third-party insurance specifically limits its coverage to claims initiated by third parties, reinforcing that the insured's own claims or risks aren't included in this type of policy.