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Rental Car Third Party Insurance Explained

Third party insurance is one of the most misunderstood parts of rental car insurance — especially when you travel between Europe, Australia, New Zealand, and the United States.

In simple terms, third party insurance covers damage or injury you cause to other people. It generally does not cover damage to your own rental car.

In many countries (including the UK, Europe, Australia, New Zealand, and most of Asia), third party insurance is compulsory and must be held by the vehicle owner (the rental company). In the United States, however, the responsibility often falls more heavily on the driver, which is where many travellers get caught out.

There are also important differences between:

  • Third party property damage (damage to someone else’s vehicle or property)

  • Third party personal injury (injuries to other drivers, passengers, or pedestrians)

Lastly, there is often confusion in Australia and New Zealand because rental companies may recover third party damage costs from your excess if you are involved in a multi-vehicle accident. This can make it feel like “third party is included,” when you may still be exposed to significant out-of-pocket costs.

Europe

In Europe, third party insurance is usually called “civil liability” insurance. It is mandatory and held by the vehicle owner (the rental company). Without it, a vehicle typically cannot be legally registered or driven on public roads.

This insurance generally covers:

  • Damage to other vehicles or property

  • Injury to other drivers, passengers, or pedestrians

Because it is compulsory and included by law:

  • Rental companies generally do not sell it as an add-on

  • It is not offered separately by RentalCover

Australia and New Zealand

In Australia and New Zealand, third party coverage can be confusing because personal injury and property damage are often handled differently.

Personal injury cover is compulsory for vehicle owners:

  • Australia: This is commonly provided via Compulsory Third Party (CTP) insurance.

  • New Zealand: Injuries are generally handled through a government program called ACC (Accident Compensation Corporation), which operates on a no-fault basis.

Property damage (damage to other vehicles or property) is where many renters get surprised. Even if third party exists in the background, rental companies may:

  • Recover third party property damage costs from your excess

  • Hold you financially responsible under the rental agreement in certain situations

What About the United States?

This is where things change dramatically. In the United States, third party liability cover is often:

  • Limited

  • State-dependent

  • Very low compared to real-world claim costs

Because medical bills and legal claims in the US can be extremely expensive, relying on minimum liability limits can expose you to serious financial risk.

What Is Supplemental Liability Insurance (SLI)?

Supplemental Liability Insurance (SLI) provides additional protection if you cause injury or damage to other people, vehicles, or property — often on top of whatever minimal liability coverage might be included with the rental.

SLI typically helps cover:

  • Injuries to other drivers, passengers, or pedestrians

  • Damage to other vehicles or property

  • Legal and medical costs above basic included limits

In the United States, SLI is often a separate add-on. As a general rule:

If SLI is offered for your rental in the US, we recommend you take it.

Important note: SLI is not included in RentalCover’s standard policies, so it should be purchased separately when renting in regions where liability cover is limited.

The Bottom Line

  • Europe: Third party (civil liability) is compulsory and included by law.

  • Australia and New Zealand: Third party personal injury is compulsory, but property damage may still be recovered from your excess in some cases.

  • United States: Liability cover can be limited — this is where travellers face the biggest risk.

  • SLI: A smart add-on for US and Canada rentals to protect against high liability costs.

For more information on rental car insurance options, read: what is rental car insurance and how does it work.

Heading to the United States?

Don’t rely on minimum liability coverage. If you’re renting in the US, consider adding Supplemental Liability Insurance (SLI) for peace of mind and stronger financial protection.

Get your instant quote and protect your rental today.