Is Third-Party Insurance Mandatory for All Cars in India?

With strict traffic regulations and a rising number of road accidents, having motor insurance is not just a legal requirement but a practical necessity. Many car owners often wonder whether third-party car insurance is mandatory and what it really covers. A third-party insurance is the most basic type of car insurance policy, ensuring you stay legally compliant while protecting you from liability-related expenses. Read on to understand why third-party car insurance is essential for every car owner in India.

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What is Third-Party Car Insurance?

As per the Motor Vehicles Act, 1988, having a third-party insurance is mandatory for all vehicles in India. This type of car insurance only covers the policyholder against liabilities arising from accidental damages caused to a third party person or property. It provides financial protection if the insured vehicle injures someone, damages their property, or causes harm to any public property and is also known as a liability-only policy. However, this car insurance does not cover any damages incurred by the insured vehicle itself.

With third party insurance, the insurer is liable to pay for all third-party liabilities, person, or property damage. In case of property damage, the car insurance company is liable to pay up to ₹7.5 lakhs as per the extent of the damage. Whereas, in the unfortunate event of a death or disability, the MACT (Motor Accidents Claims Tribunal) takes the final decision.

A liability-only policy also includes compulsory personal accident cover of up to ₹15 lakhs to compensate the owner-driver in the event of an accident.

Why is Third-Party Car Insurance Mandatory?

Third party insurance is mandatory under the Indian Motor Laws to ensure that any liabilities caused due to the insured car are fully covered. Since it is a compulsory cover, it ensures that victims to receive adequate financial support. Here are some of the common reasons why it is mandatory to have this type of car insurance:

• Legal Compliance: It is mandatory as per the law for all vehicles to have a standard insurance coverage. Driving without a third-party insurance policy can lead to fines, penalties, or even legal action.
• Cost-Effective Option: The premium for a 3rd party car insurance is determined by the IRDAI and remains the same across all car insurance companies. This makes it an affordable and easy-to-buy option.
• Increases Financial Security: Unforeseen accidents and liabilities can be extremely expensive. Having mandatory third-party coverage ensures financial security and reduces out-of-pocket expenses.
• Reduces and Covers Legal Disputes: This type of insurance covers all legal liabilities, and since it follows a standardised process, it also helps in reducing any conflicts and disputes.

What is Covered in Third-Party Car Insurance?

Third-party car insurance provides financial coverage for the following scenarios:

• Third-party Injury or Death: Any injury, disablement, or death caused due to the insured vehicle is covered, and the compensation is decided by the Motor Accident Claims Tribunal (MACT).
• Third-party Property Damage: It covers repair or replacement costs of any third-party property damage, such as a vehicle or public or private property.
• Legal Liabilities: The cost of any legal liability arising due to any accident is also covered.

Third-party insurance is mandatory for all vehicles in India and provides essential financial protection in the event of accidental third-party liabilities. While it does not cover damages to the insured car, it fulfils legal requirements and protects the policyholder from a sudden financial burden.