Can you save money by taking out third party insurance on your vehicle? Learn what third party insurance is, what it covers and how it impacts your business’ cash flow in this article. 

We’ll cover the key aspects of third party car insurance so you can understand how it protects you versus other options your business has and how to handle it on your accounts. Discover:

  • What is ‘third party’ car insurance, and what does it cover?
  • Is it a legal requirement?
  • What other options are there?
  • Is third party insurance for sole traders or limited companies?
  • What does it cost, and can I expense it?
  • Avoid time and stress from your business with Countingup

What is ‘third party’ car insurance, and what does it cover?

Third party car insurance is an insurance product available to UK drivers and their vehicles. ‘Third party’ refers to what the policy covers: other people or things. This means if you have an accident that injures or damages another person (including your own passengers),  vehicle, animal or piece of property, you’re covered. However, third party insurance doesn’t cover you or your vehicle. 

This means that if an accident was your fault, your policy won’t cover repair costs to your vehicle or help with any medical or legal fees you may need. Third party insurance also doesn’t usually cover accidents to your car that don’t involve other drivers (like a windscreen repair, breakdown coverage or theft).

Is it a legal requirement?

Yes, third party car insurance is the legal minimum level of coverage your car insurance policy should cover. 

Although, this doesn’t necessarily mean that it’s the most desirable. Not only are there other options that still provide you with the legal minimum level of coverage, but the coverage provided can be more protective and even cheaper on average.

What other options are there?

Third party, fire, and theft

Third party, fire, and theft is the next tier above third party car insurance. This type of car insurance policy goes further than third party, like its name suggests, to cover accidents like fire and theft that happen to your car.

However, this policy still won’t cover key costs like repairs or legal/medical fees if you’re involved in an accident that was your fault. Cost of coverage aside, even if you manage to find a cheaper policy, not opting for comprehensive coverage can be risky. Like the saying goes, having coverage that you might need one day is better than needing coverage you don’t have.


Comprehensive is the broadest insurance package offered, covering nearly all instances of accidents and eventualities for UK drivers. Along with covering all of the previously mentioned accident situations, comprehensive policies also afford protection to you and your vehicle, often with repair and medical/legal fees included. 

Comprehensive policies aren’t as restricted in the coverage they provide and so some providers are more ‘comprehensive’ than others. For example, some policies have options for courtesy cars, insurance coverage across the EU, and breakdown coverage included. 

Multi-car and integrated policy deals

Multi-car policies and integrated deals on insurance policies are a slightly more recent offering by insurance companies. The idea is that you can purchase all sorts of different insurance products through one provider so everything is easier (and sometimes cheaper) as one big deal. 

In particular, as a business, you may also be buying public liability insurance, professional indemnity insurance, employers insurance, and others. And so, seeing where you can collect your policies under one provider for a better price may be worth it.

Is third party insurance for sole traders or limited companies?

Third party coverage on business vehicles can be purchased by both sole traders and limited companies. Unfortunately, the financial reality of this coverage for each business may be very different.

Specifically, if you’re a sole trader or your revenue is lower, opting for a less comprehensive and more risky policy might come to impact your business more heavily when you need to use it. In contrast, if you’re a limited company or your profits are higher, you may be able to take the hit of repairing or acquiring a new vehicle after it’s had an accident more easily. 

Nevertheless, this is highly dependent on your own business’ circumstances. If you qualify for a cheaper policy with less coverage, you’ll know best whether or not taking it is right for you.

What does it cost, and can I expense it?

Surprisingly, third party car insurance can be more expensive than more comprehensive insurance packages. This is partly caused because they’re less popular policies (so fewer people cover the cost of claims) but also because some insurance providers assume that people who take out third-party policies are more likely to claim, which is why they often charge them more.

Fortunately, businesses can expense insurance costs on their accounts and claim tax relief on this basis. While you should still aim to find cheaper coverage (as this still impacts your net profits), this shouldn’t come at the cost of the quality of your coverage. Make sure you do your research and compare a number of different providers to find a suitable policy for your business and budget.

Avoid time and stress from your business with Countingup

While you’re running your business and working on client projects, don’t let routine admin get in your way. If you’re to deliver industry-leading and innovative solutions, you’ll need to dedicate time to your business and save on chores where you can.

That’s why thousands of UK business owners use the Countingup app to save time on their financial admin and focus on growing their business instead. 

Countingup is the business current account and accounting software in one app. The app automates time-consuming bookkeeping admin and provides live updates about your business performance.

With automatic expense categorisation, receipt capture tools and invoicing features, you can confidently keep on top of your business finances and admin when while on the go. And with running tax estimations, you can avoid unexpected costs from HMRC.

Take the time and stress out of bookkeeping. Find out more here and sign up for free today.