Everything About Liability Only Car Insurance in India

Of all the motor insurance options in India, a liability only car insurance or third party insurance has an exclusive and essential space. It is the least costly and compulsory form of vehicle insurance. Under the Motor Vehicles Act, 1988, all vehicle owners need to have at least a third-party liability insurance policy in order to drive their vehicles legally on public roads. This article goes in-depth into the liability only insurance policy in India — discussing its definition, features, coverage, and exclusions.

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What is Liability Only Car Insurance?

Liability-Only Insurance, which is commonly known as third-party insurance, is a form of car insurance that protects only against liabilities incurred because of damages or injury to, or caused to, a third party due to the insured car. It does not cover damage to the insured's vehicle or himself.

It is legally required under Section 146 of the Motor Vehicles Act. Driving even with just a liability-only policy can invite hefty fines and legal actions.

Key Features of Liability-Only Car Insurance

• Compulsory by Law: All vehicles such as two-wheelers, automobiles, commercial vehicles, etc. are mandated under the law.
• Coverage against Third-Party Liabilities: Provides cover against death, injury, or damage to the property of the third party.
• Reasonably Priced Premiums: As the extent of coverage is limited, the premiums are relatively inexpensive compared to full-coverage policies.
• Compensation Based Upon Tribunal's Ruling: Payments, particularly for injury or death, are normally made according to the Motor Accidents Claims Tribunal (MACT).

What Does Liability-Only Insurance Cover?

Liability only insurance is meant to secure the insured against financial loss arising due to third party liabilities such as injury, death, or damages to their property. It offers the following coverage:

1. Third Party's Bodily Injury or Death

   If your car is involved in an accident that injures or kills someone else, the insurance covers:

   • Medical expenses of the third party
   • Compensation in the event of permanent disability or death
   • Legal fees, where applicable

   Compensation against death or injury is not capped; it depends upon the decision of the MACT.

2. Damage to Third-Party Property

   In case your car damages someone else's property (like a car, building, or boundary wall), repair or replacement charges shall be paid under the policy to the extent of an upper limit of often Rs. 7.5 Lakh for private cars.

3. Owner- Driver Personal Accident Cover

   These liability-only policies have an additional personal accident cover of Rs. 15 lakhs for the owner-driver. This offers compensation in the event of death or permanent disability while driving the insured vehicle.

What is Not Covered Under Liability-only Policy?

Liability-only insurance does not provide insurance for the following:

• Damage to your vehicle
• Theft or loss of the insured car
• Accidents to the driver, excluding where PA cover is included
• Mechanical or electrical failure
• Driving without a valid licence
• Driving while under the influence of alcohol or drugs
• Consequential damages
• War, mutiny, or nuclear risks

To safeguard yourself from these, you have to go for a Comprehensive Insurance or add relevant add-ons.

Who Should Buy Liability Only Insurance?

• Owner-drivers with Very Old Cars: For relatively inexpensive cars, paying high premiums for comprehensive cover may not make economic sense.
• Budget-Savvy Owners: Those who want legal compliance with minimal expenditure.
• Commercial Vehicle Owners: As an affordable solution to make sure fleet vehicles are legal.
• Vehicle Owners with an Impending Sale: Liability insurance is adequate in situations where the car is to be sold or scrapped.

Liability Only Insurance Premium Rates in India

Liability only insurance premiums are not market-determined; they are fixed annually by the IRDAI based on a vehicle's:

• Make & Model
• Engine size
• Vehicle Age

For private cars (as according to IRDAI 2024-25 rates), the third party insurance rates are as follow:

These rates are to be revised annually by IRDAI.

Liability-Only Insurance Vs Comprehensive Car Insurance

Here is the table showing differences between third party car insurance and a comprehensive car policy:

Read More: Difference Between Comprehensive and Third Party Car Insurance

Long-Term Third Party Insurance Plans

IRDAI makes it mandatory to have 3-year third-party insurance for brand-new four-wheelers. This minimizes the inconvenience of annual renewals and guarantees compliance over extended time. Own-damage cover, where necessary, though, is still bought individually on an annual basis.

How to Buy Liability Only Car Insurance Policy?

You can buy a third-party car insurance policy both online & offline and either directly from the insurer or from insurance aggregators like Policybazaar. However, it is a good idea to buy it online as it is simple, lets you compare multiple plans, and takes only a few minutes. Here is the process:

• Visit Policybazaar.com and choose 'Car Insurance'.
• Enter your car's registration number or click 'Brand New Car' and provide vehicle and personal information.
• Now, from the list of different quotes offered by multiple insurers, select the one that suits your requirements.
• Proceed towards making the premium payment via debit/credit cards, UPI, or netbanking.
• Upon successful payment, your third party insurance documents will be sent to your email ID.

Make sure your policy covers the owner-driver's PA, since this is compulsory unless you already have an independent PA cover.

Liability Only Insurance Claim Process

Here's how to file a third-party liability claim:

• Notify the Insurer: Inform your insurer immediately after the incident.
• File the Police FIR: This is compulsory for legal actions and insurance purposes.
• Third Party Files a Claim: The aggrieved third party must file a claim with the Motor Accident Claims Tribunal.
• Tribunal Ruling: MACT considers the circumstances and determines the compensation.
• Compensation is Paid by Insurer: Your insurer pays the claim to the third party as per the decision.

You, as the policyholder, are not entitled to compensation under third-party claims.

Also Read: How to Claim Third Party Car Insurance

Documents Needed for Liability Only Insurance Claim

While filing a third party car insurance claim, you need to keep the following documents handy:

• Copy of the liability only policy
• Police FIR
• Vehicle Registration Certificate (RC)
• Driving Licence
• Third-party claim details (notice of legal claim, claim petition, etc.)

Should You Upgrade to Comprehensive Car Policy?

Liability-only insurance serves well for compliance and minimal protection, but ideally, upgrading to an all-comprehensive policy is advisable when:

• Your car is brand new or high-end
• Where you reside is vulnerable to accidents, robbery, or acts of nature
• You desire peace of mind with extended protection
• You use your vehicle quite often

In a Nutshell

Liability-only insurance, although offers very little coverage, meets the legal requirement and offers the crucial financial assistance in the case of third-party injury or property damages. It is best suited for old vehicles, budget-conscious owners, and infrequent drivers. But recognizing its limitations is essential. If you want a wider protection, particularly for yourself, you might want to switch to a comprehensive car insurance plan.