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What are the Consequences of Not Having Third Party Car Insurance?

Third party insurance is the most rudimentary insurance policy, which is mandatory for all vehicle owners in India. As per the Motor Vehicles Act of India, you can’t drive your car on Indian roads without it. Though this plan comes with a bundle of benefits, very few are aware of how to utilise these benefits in real sense.

You, as an owner-driver, might not have had to register a claim for Third Party Car Insurance, due to your safe driving or possibly good luck, but you may need to use it as a pedestrian; owning to an accident where the other party is at fault.

In case you meet with an accident which leads to damage to your property or an injury, Motor Vehicle Law allows you to file a claim for reimbursement from the owner of the car involved.

While IRDA has simplified the whole process of claiming third party car insurance, as a car owner it should be your responsibility to know the process. It helps you prepare for the possibilities that you may face, and avoid any last minute complications.

The Term ‘Third Party Car Insurance’

At the outset, a little introduction to Third Party car insurance – also known as ‘Act Only’ plan, Third Party car insurance is associated with motor insurance. It is the most basic cover that one must have to protect his/her vehicle, during unforeseen eventualities.

As the name suggests, when someone apart from the insured and insurer (the two parties in the contract) is benefited, the insurance cover is called third party car insurance.

In a broader sense, this insurance policy covers any damage to a third party’s property or liabilities against injury or death due to an accident, where the insured vehicle is involved. In such situations, third-party is someone other than the insurance company and the insured. If your vehicle is involved in an accident and causes damage to a third-party, then the insurance company takes charge of the expenses arising out of the damages.

Third Party Insurance: The List of Coverage

Usually, a motor insurance policy provides two covers, Own-damage and Third Party cover. As you already know, as per the Motor Vehicle Act, 1988, plying a car without valid third party insurance is an offense for which one could be punished as well. Here’s why one should know what are the coverage and benefits of this policy:

Cover for Accidental injury, permanent or partial disability and death:

During an accidental misfortune that causes injury, permanent or partial disability or death, the liability limit has not been pre-decided. The insurer compensates the total amount as decided by the court in its final verdict. So, the compensable amount is fixed by the court at the time of resolving the case.

Property Damage:

Apart from bodily injuries to the third-party or disabilities, whether it is permanent or partial, if the accident causes any damage to the third-party’s vehicle, the law permits them to register a claim against the car owner for compensation. IRDA limits third party property damage cover up to 7.5 lakh. However, there are options for the policyholder to restrict the cover up to 6 lakhs, whereby a reduction will be applicable to the annual premium one pays to avail third party insurance coverage.

What are the Consequences of Driving without Insurance?

During an unforeseen event, a car insurance plan assures that you are financially covered, by compensating the expenses incurred in damage repair or if your prized possession is stolen. This risk cover is offered by automobile companies at the time of purchasing a vehicle which runs on fuel and requires a valid license. Vehicle insurance is as important as a driving license, without which you may end up paying a huge penalty.

The penalties may differ country to country, however, some of the similar punishment are listed below:

  • One has to surrender his/her driving license for driving his/her car without a motor insurance.
  • This also leads to suspension of your vehicle’s registration.
  • As a fine for driving without a valid insurance, you would end up paying Rs. 10,000/or serving 3 months’ imprisonment/or could be the both, depending on the situation.

Just for your knowledge-

While Third Party Liability Insurance cover is beneficial for the third-party only and offers third-party liability coverage, Comprehensive Car Insurance offers own-damage cover in case of an accident or damage caused to your car due to natural or man-made calamities.

However, a motor insurance​​ with comprehensive cover generally does not include the following risks:

  • Normal car depreciation
  • Normal wear and tear
  • Any damage/loss caused under the influence of alcohol or drug
  • Any damage/loss happened when the insured is driving his car without a valid license.

Third Party Liability Insurance: How Your Claim Proceeds

When a claim is made for injury/disability/death

As per the rule of Motor Vehicles Act, 1988, a victim of an accident can file a claim in Motor Accident Claims Tribunal intimating the location of the incident. In this case, the victim must collect the insurance information of the involved vehicle and register a First Information Report (FIR) of the incident explaining who was at fault. With a basic FIR and the insurance policy details, the person should visit Motor Accident Claims Tribunal of the same place where the accident occurred or where the claimant resides.

However, it is always wise to make an out-of-the-court settlement, as it could be a lengthy procedure. But if it is a case of death, any legal beneficiary of the departed can register a claim under third party liability insurance to obtain the compensation. Next, the involved car owner will be summoned by the court and their case will be argued by lawyers of both parties and the court will announce a final verdict after hearing both parties. The insurer of the vehicle owner then compensates the decided amount to the third-party on the behalf of the policyholder.

In case of property damage:

When it comes to damage to third-party’s property, the victim can file a case in the Motor Accident Claims Tribunal, following the same procedure mentioned above. For most of the cases, an out-of-court settlement is reached and compensation for the asked expenses is provided. But if the person thinks the compensation given is less, then he can file a claim against the vehicle owner.

Third party insurance claims- no-fault liability claims v/s fault liability claims:

No fault liability claim stands for accidents with no negligence, the compensation is pre-decided as per Motor Vehicles Act, 1988. While on the other hand, if the negligence or fault of the driver is proved that it led to the accident, then the Tribunal court decides the amount to be compensated by the party at fault. The amount will be evaluated keeping the factors in mind such as loss of income for the affected person or the family, residual human asset value etc.

Pointers to Remember

So, whenever you require to make a claim against third party car insurance, remember the below pointers apart from the legal procedures.

  • The claimant should enclose all the documents in order, including a police FIR.
  • Timely intimation of the incident is a must to process your claim faster.
  • Ensure frequent follow-ups about the process.

In a Nutshell!

We wish that nobody should face the need to file a claim. But god forbid, if you need it, just remember these things to make your claim process faster and hassle-free. Uncertainties come knocking without notice and thereby it is always the best to be prepared to tackle them. Don’t ignore insuring your vehicle. With third party car insurance, drive safe!