Motor third-party liability

What it means

Motor third-party liability insurance is compulsory for damage caused by operating a vehicle. Every registered vehicle must have it, even one standing idle.

It covers harm to others: injury, property damage, lost profit and legal costs. It does not cover your own vehicle; that is what own-damage cover is for.

The cover protects whoever is driving the vehicle at the time, not just the policyholder or owner. Injuries to passengers in your own car are covered, but the health of the at-fault driver is not. That is what a driver accident rider is for, arranged separately with the policy and assessed on its own when an insured event occurs.

How it works in practice

The policy is taken out when the vehicle is registered and evidenced by a green card. In a fleet the cover follows the vehicle rather than the driver, and claims history feeds the bonus.

In the books the premium is a cost of the period, spread over time when paid annually. It is not the motor vehicle tax, which is a separate obligation.

Under a lease the leasing company owns the vehicle, but the lessee usually pays the insurance, either directly or within the instalment. In the books we therefore distinguish whether the premium is part of the instalment or a separate cost, and when the lease ends we check whether the policy passed to the new owner or lapsed.

What to watch out for

When a vehicle is sold, terminate the policy and hand in the documents. Otherwise premiums keep running and, after a new owner’s accident, the insurer deals with the policyholder named in the contract.

An insurer that has paid the victim can, in cases the law sets out, claim the money back, for example when the driver was drunk or had no licence. With a company car such a recourse claim lands on the company or the employee, and the amount can exceed all the premiums paid over years.