What you should know about 3rd-party cover

Insurers offer affordable types of vehicle cover that at least pay out for the damage to a car you accidentally crash into. In the third article in this series on short-term insurance, in association with Santam, we look at third-party vehicle insurance.

Comprehensive vehicle cover is obviously the best cover to have for your car, because, subject to various conditions and your prescribed excesses, it covers you for all losses in an accident, for theft, as well as for perils such as hail damage and fire. But it is also the most expensive type of cover.

Insurers offer lower levels of cover for your car that are more affordable – typically, these are limited to cover for third party, fire and theft, and third-party-only cover. These types of policies may be attractive if:

You have an older, low-value vehicle, and it is paid off; and/or

You don’t drive the car very often or very far.

For example, you may be retired with a 10-year-old car worth R30 000, and use it only to drive to your nearest shopping centre a couple of times a week.

If you do opt for limited cover, however, you need to know exactly what is covered and what is not. Importantly, third-party cover will protect you financially against the potentially crippling costs of causing damage to someone else’s vehicle, especially if it is an expensive model.

Who is the third party?

The third party in an insurance claim is the person who has suffered a loss because of your actions and who lodges a claim against you. The first party is you, the person insured, and the second party is your insurance company, which is responsible for settling the claim.

Rowland Ramalingam, head of specialist claim services at Santam, says: “The third party is anyone, apart from you, to whom you have caused damage. It extends beyond natural persons to juristic persons, such as businesses.”

In vehicle insurance, the third party is most likely to be the driver of the other car in an accident that you caused, but it may be a retailer, for example, if you drove your car through a shop window. Some policies may exclude certain people in their definition of third party, such as members of your household, Ramalingam says.

What does it not cover?

Third-party insurance does not cover your loss in an accident, says Ramalingam. In other words, any damage to your car or other property of yours is not covered, and you would have to pay for it out of your own pocket. If the accident is not your fault, however, you can claim against the other party (see “Who pays what in an accident”, below).

Often, fault does not lie entirely with one party or the other. For example, even though fault may lie mostly with you – you reversed out of a driveway without looking, for example – the driver who crashed into you may also be partly to blame, for not taking evasive action.

In this instance, the insurer will apply the principles of “apportionment of damages” and pay out accordingly. The apportionment of the damages indicates the amount of damages payable in relation to the amount of fault resting on each of the two parties, Ramalingam says,

What is the difference between what insurers cover and what the Road Accident Fund covers?

Ramalingam says the Road Accident Fund (RAF) covers personal injury to the third party, but not damage to material possessions such as his or her car. Your third-party policy covers you for the other party’s material damage, but it extends to personal liability cover for an event outside South Africa. It will also cover you for an “emotional shock” claim against you by a party who is not directly involved in the accident, something not covered by the RAF (see “When to claim from the Road Accident Fund”, below).

What are the price differences for the different levels of cover?

The lower levels of cover – third party, fire and theft policies and third-party-only policies, cost less than comprehensive cover. The pricing differs among insurers, so it’s a good idea to get a number of quotes, on both comprehensive and limited cover. A good broker will be a great help in this regard.

How much am I insured for?

Ramalingam says your liability limit depends on the level of cover selected, which would nor mally be sufficient to fully cover the damage to the other vehicle, minus your excess, for which you are responsible.

D o t h i r d - p a r t y - o n l y ve h i c l e insurance policies require less underwriting?

Your own car is not insured, so its value is not taken into account. But most underwriting for a policy concerns the driver, and how much risk you, as the regular driver of the car, pose to the insurer. Ramalingam says the value of your vehicle is not important, but your age, driving style and claims history certainly are, and these will be taken into account in the calculation of your premium.