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Third Party Insurance

Third party insurance is a compulsory motor insurance policy designed to provide coverage for financial and legal responsibilities related to third-party incidents resulting from an insured vehicle. This type of car insurance offers compensation for third-party fatalities, injuries, and property damages caused by an accident.

       

    Characteristics of Third-Party Car Insurance

    • The primary feature of third-party car insurance is its provision of compensation for damages caused to a third party by the insured vehicle.
    • Third party insurance is available at a very nominal premium.
    • It is the most fundamental and mandatory insurance coverage that a policyholder can purchase.
    • It covers the legal and financial responsibilities that the policyholder may need to bear in the event of accidental involvement.
    • The insurance company compensates for accidental injuries, loss of life, and damages to third party property.
    • This insurance also provides compulsory personal accident coverage for the owner/driver of the car.

    What is the Need for Third Party Insurance?

    A car owner requires third-party insurance as it protects them from legal responsibilities, accidental liabilities, or property damage to a third party arising from an unfortunate event. Furthermore, the policyholder is relieved from the burden of covering medical expenses incurred by the third party due to accidental injuries or death.

    There is no coverage limit in the event of death; however, for property damage in car insurance, coverage is capped at Rs 7.5 lakh. The compensation for third party liabilities is contingent upon the age, income, profession, and status of the third person. Opting for third-party liability insurance is strongly recommended for vehicles aged more than 5 years.

    Advantages of Third-Party Insurance

    While driving on the roads, the risk of an accident always exists. In such instances, third party insurance provides the policyholder with appropriate protection in the following manner:

    Protects you from Legal Responsibilities

    As the name suggests, third party insurance takes care of all legal responsibilities towards third parties if the policyholder is responsible for accidental damages or injuries. It not only covers the costs for damages to another person's car or property but also offers compensation to the third party in the event of injury or death.

    Meets the Legal Requirement

    According to the Motor Vehicles Act of India, 1988, it is a legal requirement for all vehicle owners in India to possess at least third party insurance coverage to use their vehicles on public roads.

    Provides Financial Assistance

    It provides the policyholder the necessary financial assistance and assistance in settling third-party liabilities without depleting their savings entirely.

    Ensures Peace of Mind

    A liability-only policy allows a vehicle owner to drive with peace of mind as the insured would offer assistance in case of a road mishap.

    Cost-Effective Policy

    The coverage provided by third-party liability insurance seems remarkably cost-effective and rewarding with its cost and premium rate.

    Third Party Insurance Inclusions

    Personal Accident Cover

    Under third-party car insurance, car insurance companies also provide personal accident coverage for the owner-driver of the insured car. This coverage ensures that the owner-driver receives compensation in the event of disability or death resulting from a car accident.

    If the policyholder passes away, the compensation is disbursed to the nominee designated by the car owner. The mandatory personal accident cover for the owner-driver is available for up to Rs 15 lakh.

    Third Party Liabilities

    Third-party liabilities result from damages or injuries caused by the insured car to a third party during an accident. As the accident is caused by the insured car, it is the responsibility of the owner of the insured car to pay for the damages. Third-party liability insurance covers legal liabilities that arise from causing:

  • Car Damages: If a car owner accidentally collides with a third party's car while driving, the insurance policy will step in and cover the expenses for the damages caused to that third party's car on behalf of the policyholder.
  • Accidental Bodily Injuries: If the victim experiences a disability due to the accident, the Motor Accidents Claims Tribunal determines the compensation amount that must be paid. However, in the event of the victim suffering from a lost limb or partial blindness, the insurer only covers 50% of the compensation amount.
  • Accidental Death: In the event that the car owner accidentally runs over someone with his/her car, causing fatal injuries or disability to a third-party person resulting in untimely death, the motor insurance provider will compensate the victim's family on behalf of the policyholder.
  • Property Damages: If someone unfortunately rams his/her car into a third-party person's property, such as the boundary wall or a shop, the third-party insurance policy will cover the loss or damages caused to that person. The motor insurer will cover the damage liability up to the limit of Rs 7.5 lakh.

    • Third Party Insurance Exclusions

    Similar to the basic motor insurance plan, the standard third-party insurance does not apply to certain situations. A third-party car insurance policy does not provide the following coverage:

    Drunk Driving

    The insurance does not cover any third-party liabilities if the car is being driven under the influence of alcohol or drugs.

    Invalid License

    If the driver of the insured car has an invalid driving license, the insurance does not cover any third-party injuries or damages.

    Own Damages

    The insurance does not cover any damages sustained by the insured car, whether they are accidental damages, fire damages, damages due to natural and manmade calamities, or theft.

    Unauthorized Usage

    Using the insured car for illegal activities, racing, commercial purposes, etc., does not result in coverage for any third-party injuries or damages under third-party liability insurance.

    Outside Geographical Limit

    If the insured car causes third party damages to something outside the specified area in the insurance policy, it won't be covered.

    Undesignated Driver

    If any individual, who is not the car owner or the assigned driver, was driving the vehicle, any damages or injuries to others are not covered.

    Contractual Liability

    Claims arising out of contractual liability are not covered by it.

    Nuclear Perils

    It does not cover any liability caused directly or indirectly by a nuclear weapon or radioactive contamination.

    War

    This insurance policy does not provide coverage for any damage, loss, and/or liability caused to the third party due to invasion, war, or any other war-like operations.

    Make sure to check the policy documents for a comprehensive list of exclusions; the details in the list above are the most common exceptions.

    Different between Comprehensive and Third Party Liability Car Insurance

    Third Party Liability Insurance Comprehensive Car Insurance
    It covers bodily injury and accidental death caused to the third party. It protects against accidental damage to your vehicle and covers any harm or damage you might cause to others.
    The insurance premium is lower. It provides a wide range of coverage but comes with a considerably high premium.
    If the value of the vehicle is low, taking third party car insurance is worth considering. This cover is beneficial for luxury or expensive cars as it provides protection against all damages.
    It covers property damage caused to the third party. It protects against damage to other people's property and damage to your car from things like accidents, fires, theft, and natural disasters.
    It only offers liability coverage. It pays you for more than just car crashes because it covers both damage you might cause to others and damage to your own car.
    Under motor laws, having this coverage is compulsory. This coverage is optional, and car owners can choose whether or not to opt for it.
    Additional covers are not available. You can purchase a variety of additional covers, like return to invoice cover, nil depreciation cover, and more.

    How to Make a Claim for Third-Party Insurance?

    Application

    The person who got hurt or the family member of someone who passed away can ask the car owner for compensation in case of an accident.

    File a First Information Report (FIR)

    After finishing the application, report the incident to the police by filing an FIR and providing all the necessary information. Keep a copy of the FIR and the original records of the victim's expenses.

    Go to the Motor Accidents Claims Tribunal

    After you have reported the incident by filling out the First Information Report (FIR), the next thing to do is to tell the Motor Accidents Claims Tribunal about your case.

    Get the Cover Amount

    There is no fixed limit for compensation. The insurance company pays the amount decided by the court. But for damage to property, the coverage is limited to a maximum of Rs 7.5 lakh as per IRDA.

    Note: The police report should contain the following details:

    • Driver’s License Number
    • Witnesses’ name and contact details (if any)