A third-party insurance policy gives the insured the peace of mind that, up to the policy’s predetermined limitations, the costs related to injuries, property damage, and other losses sustained by the affected third party will be covered in the event of an accident. The harmed party notifies the insurance company (second party) of the claim, which evaluates the claim’s legitimacy and the insured’s responsibility. After verification, the insurance provider pays the third party for losses, relieving financial pressure off the insured (first party) and promoting accountability for ethical behavior. Although it is required in many jurisdictions, this insurance mechanism makes the guarantee that people can deal with unforeseeable calamities while still keeping their commitments to others.