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Third-party insurance coverage is designed to protect individuals or entities that are not directly involved in an agreement or contract but may be affected by the actions of a party that holds the insurance policy. The focus of such coverage is on compensating the injured party to ensure they are 'made whole' after an incident that resulted in damages or injury.

When a third-party claims against the insured party, the insurance is intended to cover the costs associated with that claim, such as medical expenses, property damages, or legal fees. It embodies a principle of indemnity, ensuring that the injured party receives compensation for their losses due to another party's actions or negligence.

In contrast, options such as providing exclusive coverage to the insured party or limiting coverage to only liability damages do not accurately reflect the nature of third-party coverage. The intent is broader, focusing on the rights and recovery of those who have suffered harm, rather than just the insuring party. Therefore, the core function of third-party insurance aligns well with the goal of making an injured party whole.