In most countries, the law says that every car on the road has to have Third-Party liability coverage. So car hire companies provide it with every rental. Find out how Third-Party Liability coverage works.
A ‘third party’ is anyone apart from yourself. It includes other road users, pedestrians, and even passengers in your car.
‘Liability’ just means ‘legal responsibility’ (in this case, for the cost of damage or injuries).
So anyone renting a car needs Third-Party Liability coverage in case they injure someone, or damage someone’s property, while they’re driving.
What Third-Party Liability coverage does
If a driver causes an accident (so it’s their fault), they’ll be liable for:
- the cost of any damage to any property that belongs to a third party (whether it’s a car, a fence, a laptop, or anything else)
- the cost of any third party’s injury and damages (which could include medical bills, loss of earnings, and more)
- third-party legal costs and ‘disbursements’ (e.g. court fees or expert fees).
That could be extremely expensive, but the driver’s Third-Party Liability coverage will pay these costs, and their rental company will deal with the paperwork.
So you can see why Third-Party Liability cover is a legal requirement.
Without it, the driver would have to meet the costs out of their own pocket – and a lot of people simply couldn’t afford that.
What Third-Party Liability coverage does NOT do
Third-Party Liability coverage does not cover any damage to the driver’s own rental car. Nor does it cover theft of the car.
And it might not cover anything if the driver has broken the terms and conditions of the rental agreement, or the relevant local laws. For example, the driver could invalidate the cover by driving off road, driving under the influence of alcohol, or letting someone else drive if their name isn’t on the rental agreement.
If that happens, and there’s an accident, the insurance company will still pay out for any third-party costs the driver is responsible for, but it could then take legal action against the driver to try and get that money back.
How much Third-Party Liability coverage is needed?
In most countries, cars need to have Third-Party liability coverage. It’s the law. So car hire companies make sure that their cars have the cover they need.
Even so, in North and South America, the amount of coverage that’s legally required can be quite low. So the coverage that comes with the car might not be enough for every situation. The renter can either:
A) Drive with the minimum coverage. If they cause more damage to a third party, they’ll have to pay it out of their own pocket.
B) Buy ‘Supplemental Liability Insurance’. This typically provides between $1,000,000 and $2,000,000 of coverage.
To find out more about hire car insurance, see Insuring your rental.