Everything About Third-Party Liability Insurance

While buying a car, individuals often get confused while choosing a car insurance policy. In India, there are 2 types of car insurance policies available. Third-party liability insurance and comprehensive car insurance. Both have their advantages and disadvantages and suit different types of requirements. Read on if you are planning to buy third-party liability insurance for your vehicle and want to know everything about this type of car policy in under 10 minutes.

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Above-mentioned prices are for a 7-year-old Maruti WAGON R AVANCE LXI (998 CC) registered in Gurgaon and 15 days before expiry of previous policy

What is Third-Party Liability Insurance?

Third-party liability insurance is a type of policy under which the insurance company offers cover for the insured against legal liabilities that arise due to the loss/damage caused by them to a third person’s body or their property. 

On the other hand, a comprehensive car insurance policy offers complete protection against damages sustained by your car due to unforeseen accidents or as a result of other incidents such as natural/manmade risks.

How Does Third-Party Liability Insurance Work?

Let us look at some terminologies to better understand the concept of Third-party liability insurance. Taking an example of an event in a car accident where parties involved are as follows:

First Party: Is the policyholder or the insured person

Second Party: Is the insurance company

Third-party: Is the person who claims for the damages caused by the first party from the second party.

In case the insured is held legally liable with the third party car insurance policy for injuries or damages caused to the third party, then the insured is indemnified with compensation. Any losses arising due to damages or injuries caused by the insured to a third party or third

party’s property, are covered under the 3rd party car insurance policy.

In the event of a car accident, the insured person holding the Third-party liability insurance policy must inform the insurer about the accident. If you turn out to be responsible for the accident (or the third party believes you to be responsible), a claim will certainly be filed against you, which your insurer will be expected to pay. 

Thus, for the speedy resolution of the claim, the insurance company must be informed at the earliest. This is how a third-party motor insurance process works.

Features of Third-Party Liability Insurance

Key Features

Benefits 

Damage to property/vehicle of third-party

Up to Rs 7.5 Lakh

Buying Process

Online/offline

Bodily damage/injury to third-party

Decided as per the Motor Accident Claim Tribunal(MACT)

Benefits of Third-Party Liability Insurance

There are many advantages to third-party insurance, let’s look at the ones that you will be eligible for in case you wish to buy Third-party liability insurance for your vehicle.

1. Freedom to Drive Legally and Stress-Free

It is necessary to insure your car to legally drive on Indian roads, as per the Motor Vehicles Act, 1988. Getting this basic third-party insurance will save you from burning a hole in your pocket from the hefty traffic fines. Additionally, knowing that any unforeseen legal and financial liabilities arising due to an accident will be covered by your insurer helps you drive with peace of mind.

2. Provides Coverage for Personal Damage of the Third-Party Involved in the Accident

In case of events like an accident where you end up injuring someone physically or in severe cases you become the cause of the death/permanent disability of the third person. The third-party insurance holder will get coverage for all the losses up to unlimited liability.

3. Helps Save Time, Efforts and Money

Now you can buy your favorite car policy from the best car insurance companies from the comfort of home, with just a few clicks. This digital process says goodbye to the hassles of standing in queues, filling long forms, running from one counter to another to get the work done, and the huge struggle of travel, saving you loads of time and money. 

4. Provides Coverage for Vehicular Damage of the Third-Party Involved in the Accident

In the event of an accident wherein the insured person causes damage to the third party car, the insurer will provide coverage of up to Rs 7.5 lakh for the third party.

5. Protection Against Unwanted Financial Liabilities

Considering the heavy traffic on Indian roads, accidents are bound to happen, thus buying a Third-party liability insurance policy is a must. This will help you stay financially secure if an unplanned mishap comes your way, being prepared is always better than repenting later.

6. Third-Party Liability Insurance Inclusions

With a Third-party liability insurance policy, you will be covered against financial/legal liabilities in the following situations:

  • Damages to the third-party vehicle because of the insured vehicle
  • Damages to the third-party property to an extent of Rs 7.5 lakhs
  • Bodily injuries sustained by the third-party causing permanent disability/death

Third-Party Liability Insurance Exclusions

When you opt for a third-party-only car insurance policy, you should also be aware of all the exclusions. Let’s take a look at what all is not covered by the third party car insurance:

  • The damages caused to your vehicle
  • The cost of the damages to the vehicle or the belongings there inside the vehicle at the time of the accident
  • The losses that are incurred in case your car or belongings are stolen or destroyed 

Disadvantages of Third-Party Liability Insurance

Let’s look at some of the disadvantages that you might face if you choose to buy Third-party liability insurance instead of a comprehensive car insurance policy:

1. No Option to Avail Add-on Covers

There are many add-ons offered that can enhance the coverage of your plan, but you can only opt for them if you go ahead and buy a comprehensive car insurance policy. Being the most basic plan, Third-party liability insurance does not offer you this flexibility.

2. No Coverage Against Damages Due to Natural Calamities 

Future is not in our hands, natural calamities like floods, earthquakes, tsunami, etc., are some unpredictable and uncontrollable mishaps. If your car gets damaged due to a natural calamity, your Third-party liability insurance won’t be able to help you. Such coverage is only offered by a comprehensive car insurance policy that protects you from the damages sustained by your car both against natural or man-made disasters.

3. No coverage Against Own Damage (OD)

Third-party liability insurance does not provide coverage against the damages caused to your vehicle. To protect your car financially, you will have to buy a comprehensive car insurance policy.

In a Nutshell

Without a basic car insurance policy, your beloved vehicle will practically be useless and illegal to drive as the Motor Vehicles Act, 1988 makes it compulsory to carry car insurance. Having said that, not everyone can afford comprehensive car insurance policies for their vehicles and some don’t even find the need to acquire one. For this reason, third-party liability insurance suits a lot of individuals who want to drive their car peacefully as well as abide by the law.

Written By: PolicyBazaar - Updated: 19 October 2021
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