That’s Third Party Liability.
How It Works
The 1st party is you.
In a dispute, the 2nd party is the insurance company. And the 3rd party is someone who takes some form of legal action against you. Usually in the wake of an accident, injury or loss of property.
Here, the 3rd party is someone who gets into an accident with the policyholder. Once blame is brought against the policyholder by the 3rd party, what’s needed to cover the costs of legal fees, medical reparations or property damage is an insurance plan designed for 3rd Party Liability.
That includes injury to the body, physical assets and medical expenses, or even damage done to public property.
An insurance plan with this kind of coverage will have maximum allowable limits that it’s capable of covering. As with most insurance agreements, the amount that is covered is dependent on how much the policyholder pays into the plan.
If there is a lot of property or money to shield from 3rd party liability, it’s likely worth it to the policyholder to increase the amount his insurance is able to cover.
In most of the United States, this kind of policy acts to protect the assets of an individual, and allows insurance to cover the monetary expense of an accident as opposed to personal property, savings and even future wages.
By the numbers, commercial liability makes up a large sector of insurance company income – amounting to 160 billion in 2013. That’s 10% of worldwide premiums – not counting life insurance.
Indeed, there are a lot of things that people can do to each other by accident. That’s mainly what 3rd party liability insurance is designed to cover – as opposed to malicious intent.
Medicaid 3rd Party Liability
This is the law that prior to getting medical treatment covered by medicaid, the ability of all 3rd parties to pay should first be vetted. Determining which of the 3rd parties this obligation applies to is up to each state.
Some of the 3rd party groups that have a responsibility to pay, if applicable, include:
• Court-mandated health coverage
• Settlements from a liability insurer
• Workers’ compensation
• Long-term care insurance
• Other state or Federal coverage programs
• Group health plans
• Self-insured plans
The existence of these entities are the first in the line of payment, prior to medicaid.
Knowledge about 3rd party liability insurance is important for anyone in a position to lose something valuable, or for anyone who is dealing with medicaid and trying to understand their benefits. For more information speak to your insurance company, or local medicaid office.