In general, third-party insurance is any type of insurance coverage that is purchased for protection against the claims of another person. It is a form of liability insurance
However, a Third-Party Car Insurance is a type of insurance policy that is purchased by the insured (First Party) from an insurer (2nd Party) against any claims (damages or losses) incurred by another person (third party). It is sometimes referred to as the “act only cover” because it is made mandatory by the Motor Vehicles Act. Given this, all general insurance companies have an obligation to provide third-party motor insurance services.
In Nigeria, the minimum insurance that the owners of motor vehicles are required to have under the Motor Vehicles Act of 1950 is the Third-Party Motor insurance.
WHAT DOES 3RD PARTY MOTOR INSURANCE COVER
There are two types of third-party car insurance that insurance companies in Nigeria offer;
The first one protects the insured against bodily injury. These are liabilities resulting from injuries to a person mostly ranging from the following under listed:
- Medical expenses
- Lost wages
- Any pain and/or suffering that must have occurred due to the accident
The second type protects the insured against costs resulting from damages and loss of property. These are liabilities resulting from damages or loss of property ranging from the following
- Loss or damage of any structure – buildings, shops, etc
- Damage to the third party’s vehicle
- Reduces financial or legal damages
THIRD-PARTY PREMIUM CALCULATION
The premium payable on third-party car insurance policies vary. It is largely dependent on the risk you are transferring to your insurer. Usually, a cap limit is set for third party policy contracts. For example, an insurance company could cover third-party property damage up to N1m- with a third-party cover on bodily injury or death to a maximum of N50m
The maximum amount of cover the insurer is willing to grant is what is used to determine the premium which is often calculated by insurance underwriters. However, insurance companies have different attitude to risks as well as how they asses risk. The risk assessment of a particular company also play an important role in premium computation.
Finally, some insurance companies might request for a thorough inspection of the vehicle being insured, age of the driver, and for what purpose was the car bought – i.e if it is private or commercial.
However, some insurance companies would offer both types of third-party insurance coverage but it is important to note that the first party is responsible for their own damages or losses. Comprehensive motor insurance is generally more expensive, which is why most people opt for third-party insurance. However, before you opt for a third-party motor insurance cover you should look out for the following
- Policy terms and conditions
- Premium comparison between two or more insurance service provider
- The claim settlement history of the insurer
- You should be able to verify your insurance policy under the Nigerian Insurance Industry Database
It is also important to note that all aspects as relating to third-party accidents are covered as well as what different policy parameters mean. This will help you understand the limits of your coverage and ensure a smooth claims process.