Everything About Liability Only Car Insurance in India

A liability-only car insurance policy is also called third-party car insurance. It is the most affordable and legally compulsory form of motor insurance. Read on to know everything about liability-only car insurance in India.Read more

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 third-party liabilities. It does not cover damage to the insured's vehicle or the owner-driver.

It is legally required under Section 146 of the Motor Vehicles Act, 1988. Driving without a liability-only policy can result in hefty fines and legal actions and is a punishable offence. The premium for this car insurance is set by the IRDAI and remains unchanged across all insurers.

Key Features of Liability-Only Car Insurance

Here are the key features of a liability-only policy:

• Compulsory by Law: All vehicles, such as two-wheelers, automobiles, commercial vehicles, etc., must have this type of car insurance 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 affordable and are set by the IRDAI as compared to own-damage and comprehensive policies.
• Compensation Decided by MACT: The compensation, particularly for injury or death, is normally decided by the Motor Accidents Claims Tribunal (MACT).

What Does Liability-Only Insurance Cover?

Liability-only insurance only covers third-party liabilities such as injury, death, or damages to their property. It offers the following coverage:

1. Third-Party 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

   If your car damages someone else's property, such as a car, building, or boundary wall, etc., the repair or replacement charges shall be paid under the policy of up to ₹7.5 Lakh.

3. Owner- Driver Personal Accident Cover

   These liability-only policies have an additional compulsory 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 a Liability-Only Policy?

Liability-only insurance does not provide coverage 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 a standalone own damage policy with relevant add-ons.

Who Should Buy Liability Only Insurance?

Apart from being a legal mandate for all cars, here are vehicle owners who can buy just the 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-Conscious Vehicle Owners: Those who want legal compliance with minimal expenditure.
• Commercial Vehicle Owners: Commercial vehicle owners often just opt for the mandatory third-party commercial vehicle insurance.
• 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 fixed annually by the IRDAI based on a vehicle's make, model, engine capacity, etc., of the vehicle. Here is the third-party insurance premium rate in India:

*These rates are decided by IRDAI and are subject to change without prior notice.

Liability-Only Insurance Vs Comprehensive Car Insurance

Here is the table showing the differences between a liability-only car insurance and a comprehensive car policy:

Long-Term Third-Party Insurance Plans

IRDAI makes it mandatory to have 3-year third-party insurance for brand-new four-wheelers. Here are the long-term third-party insurance rates:

How to Buy Liability Only Car Insurance?

You can buy a third-party car insurance policy both online & offline, and either directly from the insurer or from insurance aggregators like Policybazaar, using the steps below:

• 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.

How to File a Liability Only Insurance Claim?

Here is how to file a third party car insurance 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.

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 offers standard coverage against third-party liabilities, it still meets the legal requirement and offers the necessary financial assistance in the case of third-party injury or property damage. It is best suitable for old vehicles, budget-conscious owners, and infrequent drivers. However, if you want wider protection, you can switch to a comprehensive car insurance plan and safeguard against damages caused to the insured vehicle.