Definition - What does Third Party mean?
A third party is a party who is neither the owner of assets being insured or the insurance company insuring the assets. Many insurance policies provide third party coverage. This insures a certain asset against damage caused by a third party. Third party insurance is frequently used in auto insurance.
Insuranceopedia explains Third Party
The reason why third party insurance is so commonly required for auto insurance is because many people receive damage to their cars caused by other people. This typically occurs when another person causes an accident. Most places in the United States require drivers to have third party insurance to cover property damage and medical costs they cause to other people's cars or bodies. It is often not necessary for them to insure their own cars.