How Does Third-Party Car Insurance Work?

Sometimes, your car may cause damages to someone or their vehicle or property accidentally. In such scenarios, it is vital to provide financial compensation to the aggrieved party. A third-party insurance offers financial coverage to the third person for any injury, death, or property damages caused by the insured car. Having third-party car insurance is mandatory in India as per the Motor Vehicle Act, 1988.

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Who Are the Parties in a Third-Party Car Insurance?

Your third-party car insurance policy documents will mention three parties:

1. First Party: Refers to the insured (car owner) who has bought the car insurance policy.
2. Second Party: Is the insurer (insurance provider).
3. Third Party: The person or their vehicle or property that sustained damages due to the first party.

Importance of a Third-Party Insurance

The advantages of a third-party car insurance policy can be summed up as follows:

• Legal Requirement: Having a third-party insurance cover is mandatory under the Indian Motor Vehicle Act, 1988. All cars plying on Indian roads need to have a valid car insurance policy with a third-party liability cover.
• Traffic Fines: Car owners who do not have a valid car insurance policy with a third-party liability cover can be fined Rs. 2,000 for breaking the traffic rules. Repeat offenders may be fined Rs. 4,000.
• Financial Support: If your car has caused vehicle or property damage, then you need not pay out of your pocket. Your insurance company will pay for the damages if you submit a third-party claim.

How Third-Party Car Insurance Works

If the insured car caused property damage or is involved in an accident that caused bodily injuries to a third person, then third party insurance will offer financial assistance to cover the cost of repairs and medical expenses.

Claim Process for Third-Party Property Damage

1. Filing: The insured party must file a claim with their insurance provider. The third party must file an FIR at the local traffic police station.
2. Documentation: The third party must obtain the insured car owner's insurance details and mention them in the FIR.
3. Compensation: After the claim is processed, the insurance company releases the compensation amount to be paid to the third party. Typically, the maximum compensation offered by car insurance companies for third-party property damage is Rs. 7,50,000.

Claim Process for Third-Party Injury/ Disability/ Death

1. Filing: The third party or their dependents can file a claim through the Motor Accident Claims Tribunal.
2. Documentation: The FIR and insurance papers need to be submitted for processing the claim.
3. Compensation: The Tribunal decides on compensation for third-party injury/death/disability based on the documentation provided.

The insured and the third party can also opt for an out-of-court settlement after they reach an amicable understanding, as permitted by law.

Third-Party Car Insurance Coverage Inclusions and Exclusions

Inclusions of a third-party liability policy:

• Death or bodily injury of a third-party individual.
• Property damage to the third party.

Exclusions of a third-party liability policy:

• Death or bodily injury to the occupants in the insured car.
• Damage sustained by the insured car.
• Loss of accessories or components in the insured car.
• Accidents that occur when an unlicensed driver or an unsupervised driver with a learner's licence is driving are not covered.
• Accidents caused by an intoxicated driver are not covered under the third-party car insurance policy.

Pros and Cons of a Third-Party Car Insurance Policy

Typically, a car insurance policy is of two types: third-party and comprehensive car insurance. To help you decide between these two types of policies, have a look at their pros and cons:

Pros

• A third-party car insurance policy is cheaper than a comprehensive car insurance policy.
• It offers financial protection from sudden liabilities due to damages or injuries caused to third parties.
• A third-party car insurance policy is mandatory for all car owners under the Motor Vehicle Act.

Cons

• A third-party car insurance plan does not offer financial coverage for your own car if it gets stolen or damaged.
• You cannot customise the plan to suit your budget or desired coverage.

Conclusion

A third-party liability cover offers excellent financial coverage in the event of an accident or property damage. With this insurance cover, the insured car owner need not face unexpected financial expenses in the event of an accident. As third-party insurance is mandatory under Indian traffic rules, all car owners must sign up for this cover to avoid breaking the law.