Third Party Insurance

Third party insurance or third party liability insurance protects vehicle owners against any third-party liabilities arising from accidents involving the insured car. A third party car insurance offers monetary compensation in case of third party death, bodily injuries or property damage from the insured vehicle.

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What is Third Party Insurance?

Third party insurance is a mandatory policy under Indian motor laws that offers essential protection to you and others on the road. It offers financial and legal protection to car owners, covering a third person's death/injury and property damages from an accident by their insured car.

While the third party liability insurance does not include coverage for damages to the insured vehicle, you can avoid hefty fines and potential imprisonment by having this policy, making it a significant aspect of responsible vehicle ownership and road safety.

How Does Third Party Liability Insurance Work?

To understand how third-party liability insurance works, let's look at some key terms through a car accident involving the following parties:

First Party: The policyholder or the insured individual

Second Party: The insurance provider

Third-party: The individual who claims from the second party for the damages caused by the first party.

In case the insured with a third party car insurance policy is found liable for the injuries or damages to the third party, a claim will be filed against the policyholder. Now, the insurance company will cover the costs for the injured individual, including medical expenses, lost wages, and potential long-term care. This agreement protects both the insured and the third party from significant financial burden.

The person with the third party liability insurance must immediately inform the insurer about the accident. The insurance company will then register the claim against the insured by the third party.

Key Features of Third Party Car Insurance

A third party car insurance policy offers several important features to the policyholder, including:

Why Do You Need Third Party Insurance?

Third party insurance saves car owners from legal and financial liabilities that may arise from an unfortunate accident. The compensation offered under third party liability insurance depends on the third party's age, income, profession, and status. In case of death, the compensation is unlimited, while for property damages, it is limited to Rs. 7.5 Lakh.

Third Party Car Insurance Premium Rates

The IRDAI (Insurance Regulatory and Development Authority) decides the third party insurance prices according to the car's cubic capacity (CC):

Third Party Premium Rates for Electric Vehicles

Key Benefits of Third Party Insurance

A third party insurance policy offers the following advantages to the policyholder:

1. Financial Protection

   3rd party car insurance provides policyholders with financial assistance for third-party liabilities. It pays off for third-party liabilities, which eliminates out-of-pocket expenses for car owners.

2. Covers Legal Liabilities

   Third party liability insurance covers legal liabilities of policyholders in case of third person's accidental injury/death or property damages. Moreover, it also provides compensation to the third person in case of injury or death.

3. Fulfils Statutory Mandate

   The Indian Motor Vehicles Act mandates vehicle owners to at least own third party insurance to ply on roads.

4. Cost-Effective Policy

   The coverage offered under third party liability insurance is rewarding as to its premium rate.

What is Covered Under Third Party Insurance?

Third party car insurance covers the liabilities arising from third-party accidental damage, injury or death. Mentioned below are the inclusions of 3rd party car insurance in detail:

1. Third-Party Liabilities

   3rd party liabilities result from any accidental damages or injuries caused by the insured car to a third party. These are the inclusions:

   • Property Damages- If you ram your car into someone's property, your third party liability insurance will pay for the damages. Your insurer will cover the damage liability up to Rs. 7.5 Lakh.
   • Car Damages- If you accidentally damage another person's vehicle from your car, your insurance will cover the damages.
   • Accidental Bodily Injuries- In case of a third person's disability from an accident, the MACT (Motor Accidents Claims Tribunal) decides the compensation. However, the insurer will only pay 50% for limb loss or partial blindness of the third person.
   • Accidental Death- If you accidentally hit someone and cause death/disability, your insurer will compensate the victim's family.

2. Personal Accident Cover

   Car insurance companies also offer PA cover for the owner-driver of the insured car under third party insurance. This cover compensates the owner-driver in case of a disability/death from an accident involving the insured vehicle. In case of death, the policyholder's nominee receives the compensation amount.

What is not Covered Under Third Party Insurance?

The following coverage is not provided under a third party car insurance policy:

• Own Damages: Damages sustained by the insured car from accidents, fire, natural & manmade calamities, or theft.
• Drunk Driving: Any third-party liabilities if driving under the influence of alcohol or drugs.
• Invalid Driving Licence: Any third-party injuries or damages if driving without a valid driving licence.
• Outside Geographical Scope: Any liability occurring outside the area as specified in the car insurance policy.
• Unauthorized Usage: Any third-party injuries or damages while using the insured car for illegal activities, racing, commercial purposes, etc.
• Contractual Liability: It does not cover any claims arising out of contractual liability.
• Undesignated Driver: Damages or injuries to the third party by an individual other than the owner/designated driver.
• Substantial Loss: Third party insurance for cars doesn't cover accidental damages to the third party from any substantial loss.
• Nuclear Perils: It doesn't include any liability caused by a nuclear weapon or radioactive contamination directly or indirectly.
• War: Third party liability insurance doesn't cover damages or liability to third parties caused by invasion or war.

*Disclaimer: These are the most common exceptions. You should check your policy documents for a comprehensive list of exclusions.

Disadvantages of Third-Party Liability Insurance

Here are some of the disadvantages of buying third-party liability insurance:

1. No Option to Avail Add-ons

   Add-ons are additional covers that enhance your car insurance coverage. However, with third-party liability insurance, you can not opt for these options. You can only opt for them under a comprehensive car insurance policy.

2. No Coverage for Damages due to Natural Disasters

   Natural disasters, such as floods, earthquakes, tsunamis, etc., are unpredictable. If any of these calamities cause damage or losses to your car, your third-party insurance will not provide coverage.

3. No Cover for Own Damages (OD)

   Third-party liability insurance does not cover damages to your own vehicle. To protect against the costs of your own vehicle's damages, you will need to purchase a comprehensive car insurance policy.

Comprehensive V/s Third Party Liability Car Insurance

Here’s the table that highlights the differences between comprehensive and third party insurance:

How to Buy/Renew Third Party Car Insurance Online?

Here is the simple process to buy/renew third party insurance online from Policybazaar Insurance Brokers Private Limited:

• From the homepage of Policybazaar.com, select 'Car Insurance.'
• Enter your car number on the given form or select 'Brand New Car.'
• Select details of your four-wheeler such as make, model, variant, fuel type, RTO, etc.
• Now, from various car insurance quotes shown, select the one under ‘Third-Party Plans' that suits your requirements.
• Make the premium payment via cards, net banking, or UPI.
• After the payment, you will instantly receive your third party car insurance policy at your email address.

How to Claim Third Party Insurance?

Here is how you can raise a third party insurance claim:

Step 1- Application

The victim or the legal heir of the departed can make an application against the owner of the vehicle for third-party liability compensation.

Step 2- Lodge an FIR

Now, file an FIR with the police, furnishing the required details and documents. These include a copy of the FIR and the original records of the expenses incurred by the victim.

Step 3- Approach the Motor Accidents Claims Tribunal

After lodging the FIR, the next step is to register the case with the Motor Accidents Claims Tribunal (MACT).

Step 4- Get the Cover Amount

The compensation limit is not pre decided. The insurer compensates the full amount decided by the court of law. However, IRDAI has capped compensation for property damages to up to Rs. 7.5 Lakh.

NOTE: The police complaint must have the following information:

• Driver’s Licence Number
• Name and contact details of witnesses(if any)