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Third-party insurance is a type of motor insurance policy that financially protects the car owner against third-party legal liabilities resulting from an accident involving the insured car. It provides coverage against any property damages, physical injuries or death of third parties if the car owner is at fault. For example, bumping the insured car with another car on the road.
Third-party insurance provides coverage against any accidental injuries or damages caused to the third party by the insured four-wheeler. It covers third-party liabilities arising out of:
However, third-party insurance does not pay compensation on behalf of the policyholder if he/she was drunk driving the insured vehicle.
Apart from third-party liability insurance, it is recommended to purchase a comprehensive insurance plan that can provide financial aid for your own loss and damages in an unforeseen road accident as well as natural calamities, theft, etc.
Besides the legal clause, third party insurance comes in handy when the insured vehicle hits another vehicle. Nobody can measure the level of damage caused by an accident - it may lead to death as well. In such instances, the victim is allowed to register a case claiming compensation. Here third party insurance comes into the picture. It covers the insured vehicle in case any liability claim arises for causing bodily injury, property damage, or death of the third party.
As per the guidelines of IRDA, while there is no limit in case of death, the property damage cover is limited up to Rs 7.5 lakh in case of car insurance. It is better to stick to third party liability insurance if the insured vehicle is more than 5 years old.
As stated earlier, third party insurance is liability insurance that works towards easing out the legal liabilities of the first party for causing damages or injuries to the third party. The first party refers to the vehicle owner who is responsible for the injuries/ damages caused to the third party. The third party is the person filing liability claims against the first party. The second party or the insurance company aids the financial burden of the vehicle owner by paying the legal liabilities towards the third party.
Insurance companies cover two kinds of motor third party insurance claims – bodily injury liability and property damage liability.
Third party bodily injury liability claim arises out of the insured causing physical injuries to another person with his/ her vehicle. Such claims provide coverage for hospitalization expenses, pain & suffering, loss of income as well as death or permanent disability as a result of the accident.
Third party property damage liability claim covers the property damage or complete loss of property caused by the insured vehicle. It includes claims related to damaged landscapes, such as a ruined fence, front lawn, etc., damaged property such as mailboxes, the fence gates, etc. as well as replacement of loss of structures, such as shops.
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Third party insurance comes with its own set of advantages. To know why third party cover is important for a vehicle, take a look at some of the benefits and advantages of buying a third party insurance policy:
Legal liabilities can be financially draining and can lead to bankruptcy if the vehicle owner is unable to pay for the losses or damages caused to a third party person. This is where third party insurance comes into the picture as it provides the policyholder with the required financial assistance and helps him/her to pay off the third party liabilities without exhausting all the savings.
As the name suggests, third party insurance covers all third party legal liabilities of the policyholder if he/ she causes accidental damages or injuries to a third party person. Not only does it pay for the damages caused to someone else’s car or property, but also provides compensation to the third party person in case of injury or death. Although neither the insurance company nor the insured is the direct beneficiary of third party insurance but a third party, this is the most crucial benefit that can be ensured for the owner or the driver of the insured vehicle.
As per the Motor Vehicles Act of India, 1988, it is legally mandatory for all vehicle owners in India to own a third party insurance cover to be able to use their vehicles on public roads. Thus, if someone buys third party insurance for his/her vehicle, he/she abides by the laws of the country and avoid earning a challan or fine for its violation.
Buying third party insurance is extremely easy and a quick process. Anyone can easily buy this insurance cover for his/her vehicle anytime online, including at home. Besides, the price for third party insurance is fixed by the Insurance Regulatory & Development Authority (IRDA) of India and thus, there is no scope for discrepancies. The policyholder can also renew this policy online by visiting the insurer website or insurance broker website and by following the given instructions.
The coverage offered under third party liability insurance appears exceptionally cost-effective and rewarding in terms of its cost and premium rate. Even if it has to be used as either an essential or an add-on part of the main policy, it benefits the vehicle owner fully. However, at the time of calculating the compensation amount, the vehicle owner’s annual income is considered.
Third party liability insurance helps a vehicle owner to drive in peace and without any worries. This is possible because he/she doesn’t have to worry about arranging the finances in case of an accident as the policy ensures monetary protection from any unforeseen third party liabilities. Thus, third party insurance provides the policyholder with peace of mind and allows him/her to enjoy driving the insured vehicle.
The following salient features are a part and parcel of a third party insurance plan:
| Car Insurance Companies in India | Incurred Claim Ratio (2019-2020) |
Personal Accident Cover for Owner-Driver |
| Bajaj Allianz Car Insurance | 65.83% | Covered |
| Bharti AXA Car Insurance | 81.91% | Not Covered |
| Cholamandalam MS Car Insurance | 82.95% | Not Covered |
| Edelweiss Car Insurance | 116.31% | Not Covered |
| Future Generali Car Insurance | 57.67% | Covered |
| Go Digit Car Insurance | 74.82% | Covered |
| IFFCO Tokio Car Insurance | 87.77% | Covered |
| Kotak Mahindra Car Insurance | 75.66% | Covered |
| Liberty Car Insurance | 70.95% | Covered |
| National Car Insurance | 116.44% | Not Covered |
| New India Assurance Car Insurance | 85.35% | Covered |
| Oriental Car Insurance | 101.63% | Covered |
| Raheja QBE Car Insurance | 103.90% | Covered |
| Reliance General Car Insurance | 84.63% | Covered |
| Royal Sundaram Car Insurance | 92.23% | Covered |
| SBI Car Insurance | 92.05% | Available as an optional cover |
| Shriram Car Insurance | 65.43% | Covered |
| Tata AIG Car Insurance | 80.29% | Covered |
| United India Car Insurance | 96.45% | Covered |
| Universal Sompo Car Insurance | 89.54% | Covered |
Third party car insurance covers the liabilities arising due to a third-party accidental damage, injury or death. The policy compensates for the Third-party liabilities which can be up to Rs 7.5 lakh in case of property damage. There is no exact limit for death claim as it is based on the verdict by the Motor Tribunal Court.
Third party liabilities result out of any damages or injuries caused by the insured car to a third party during an accident. Since the accident is caused by the insured car, paying for the damages is the responsibility of the insured car’s owner. Third party liability insurance covers legal liabilities arising out of causing:
A few motor insurance companies also offer personal accident cover to the owner-driver of the insured car under third party car insurance. As part of this cover, the owner-driver of the car is granted compensation in case he/ she ends up suffering from a disability or dies as a result of the car accident. In case of death of the policyholder, the compensation is paid to the nominee appointed by the car owner. The compulsory personal accident cover for the owner-driver is available for up to Rs15 lakh.
Like in the basic motor insurance plan, the standard third party insurance is not applicable to certain situations. The following coverage is not provided under a third party car insurance policy:
The details in the list above are the most common exceptions; make sure to check the documents of the policy for a comprehensive list of exclusions.
Third party liability insurance for commercial vehicle covers:
Third party insurance does come with certain disadvantages. Take a look at them below:
During a car accident, the policyholder does not have to worry about the legal liabilities arising out of causing bodily injuries or property damages to a third party person. But what about the damages to the insured car? Accidents may cause major damages to the insured car as well which won’t be covered under the third party liability insurance policy. As a result, the car owner will have to pay for the incurred losses or damages to the insured car in case of third party insurance.
Besides accidents, a car is constantly at the risk of getting stolen or catching fire. In case the insured car catches fire or gets stolen, the third party insurance policy will be of no use as it will not pay for the loss of the insured car.
A third party insurance policy does not come with a wide range of add-on covers unlike in the case of a comprehensive insurance policy. Add-on covers help to expand the coverage for the car and can also help to save money in the long run. Zero depreciation cover, conveyance benefit, roadside assistance cover, no claim bonus protection, return to invoice, etc are some of the add-on covers available under comprehensive insurance. Unfortunately, these covers cannot be availed under a third party insurance cover.
The victim or the legal heir of the departed can make an application against the owner of the vehicle for third-party liability compensation.
Once the application is completed, file an FIR with the police, furnishing the required details. He/she must have a copy of the FIR and the original records of the expenses incurred by the victim.
After filling the First Information Report (FIR) successfully, the next step is to register the case with Motor Accidents Claims Tribunal.
There is no pre-decided limit for claiming third party insurance. The insurer compensates the full amount decided by the court in its final verdict. However, IRDA limits the coverage for property damage to up to Rs 7.5 lakh.
NOTE: The police complaint must have the following information:
Third-party car insurance is different from comprehensive car insurance on the basis of its coverage. Third party car insurance financially protects the car owner from any third party claims arising out of death or bodily injuries or damages to that person’s property in an accident. Besides, this insurance is legally mandatory to ply a car on public roads.
Comprehensive car insurance, on the other hand, is quite extensive in nature. It safeguards the insured vehicle from natural and man-made calamities. Any damage to the insured car due to vandalism, earthquake, flood, storm, strike, riot, terrorist attack, or theft etc. will be taken care of by this plan. While third party insurance only covers third party liabilities, comprehensive insurance covers the insured against both own damages as well as third party liabilities. That’s the reason why most experts recommend a comprehensive insurance plan to ensure optimum protection of the car.
To understand the differences between third party and comprehensive car insurance better, go through the table given below:
| Third Party Liability Insurance | Comprehensive Car Insurance |
| The insurance premium is less | Offers a wide range of coverage but comes with a considerably high premium |
| Covers bodily injury and accidental death caused to the third party | Covers accidental damages to the insured/insured vehicle and third-party liability as well |
| Covers property damage caused to the third party | Covers third party property damages and own damages due to man-made and natural calamities, fire, theft, accidents |
| In case the value of the vehicle is low, it's worth taking third party car insurance | This cover is beneficial for luxury or expensive cars that offers protection against all damages |
| Only liability coverage is offered | Compensates the insured for more than vehicular collision as both third party liabilities and own damages are covered |
| This cover is mandatory under motor laws | This cover is not mandatory and can be opted as per the car owner’s discretion |
| No add-on covers are available | A wide range of add-on covers can be bought, such as return to invoice cover, nil depreciation cover, etc. |
As per the recent guidelines from IRDA, all general insurers are instructed to offer long-term third party insurance for new vehicles. As per this rule, all insurers will offer three-year third party insurance for cars. However, this will slightly impact the premiums to be paid.
Third-Party Insurance Premium Rates with effect from June 16, 2019:
| S. No. | Category | Description of Vehicle Class | Premiums w.e.f. June 16, 2019 (in Rs) | |
| 1 | Third-Party Insurance Premium For Private Cars* | |||
| Less than 1000 CC | 2,072.00 | |||
| More than 1000 CC but less than 1500 CC | 3,221.00 | |||
| More than 1500 CC | 7,890.00 | |||
| 2 | A1 | Public Carrier Vehicles that Carry Goods (other than 3-wheelers) | ||
| GVW less than 7500 Kg | 15,746.00 | |||
| More than 7500 Kg but less than 12,000 Kg | 26,935.00 | |||
| More than 12,000 Kg but less than 20,000 Kg | 33,418.00 | |||
| More than 20,000 Kg but less than 40,000 Kg | 43,037.00 | |||
| More than 40.000 Kg | 41,561.00 | |||
| 3 | A2 | Private Carrier Vehicles that Carry Goods (other than 3-wheelers) | ||
| GVW less than 7500 Kg | 8,438.00 | |||
| More than 7500 Kg but less than 12,000 Kg | 17,204.00 | |||
| More than 12,000 Kg but less than 20,000 Kg | 10,876.00 | |||
| More than 20,000 Kg but less than 40,000 Kg | 17,476.00 | |||
| More than 40,000 Kg | 24,825.00 | |||
| 4 | A3 | Public Carriers Vehicles Carrying Motorised 3-wheelers and Motorised Pedal Cycles | ||
| Other than E-carts | 4,092.00 | |||
| E-Carts | 2,859.00 | |||
| 5 | A4 | Private Carriers Vehicles Carrying Motorised 3-wheelers and Motorised Pedal Cycles | ||
| Other than E-carts | 3,914.00 | |||
| E-carts | 3,204.00 | |||
| 6 | B | Trailers | ||
| Agricultural Tractors up to 6 HP | 857.00 | |||
| Vehicles that include Special and Miscellaneous Type of Vehicles (Class-C) | 2,341.00 | |||
| 7 | D | Special Types of Vehicles | ||
| (i) Agricultural Tractors controlled by Pedestrian with 6 HP, Plane Loaders and Hearses | 1,550.00 | |||
| (ii) Other Special and miscellaneous types of vehicles | 6,847.00 | |||
| 8 | E | Motor Trade (Road Transit Risks) | ||
| (i) Distance not more that 2400 km | 1,055.00 | |||
| (ii) Distance more than 2400 km | 1,268.00 | |||
| 9 | F | Motor Trade (Road Risks) (Excludes Motorised 2-wheelers) (Trade Certificate or Named Driver) | ||
| 1st Name certificate or driver | 1,345.00 | |||
| For additional certificates/drivers up to 5 (per certificate/driver) | 651.00 | |||
| For additional certificates/drivers more than 5 but less than 10 (per certificate/driver) | 419.00 | |||
| For additional certificates/drivers more than 10 but less than 15 (per certificate/driver) | 363.00 | |||
| 10 | C1a | 4-wheelers used to carry passengers for reward or hire with a capacity of a maximum of 6 passengers | Basic TP Premium (A) | Premium (per licensed passenger) (B)# |
| Less than 1000 CC | 5,769.00 | 1,110.00 | ||
| More than 1000 CC but less than 1500 CC | 7,584.00 | 934.00 | ||
| More than 1500 CC | 10,051.00 | 1,067.00 | ||
| 11 | C1b | 3-wheeler used to carry passengers for reward or hire with a capacity of a maximum of 6 passengers | ||
| E-rickshaw | 2,595.00 | 1,241.00 | ||
| Vehicles other than E-rickshaw | 1,685.00 | 806.00 | ||
| 12 | C2 | Vehicles with 4 or more wheels used to carry passengers with a capacity of a maximum of 6 passengers for hire or reward | ||
| School Buses | 13,874 | 848 | ||
| Other Buses | 14,494 | 886 | ||
| 13 | C3 | Motorised 3-wheeler passenger vehicles used to carry passengers for reward or hire with a capacity of more than 6 passengers but less than 17 passengers | 6,913.00 | 1,379.00 |
| 14 | C2 | 3-wheeler passenger vehicle used to carry passengers for reward or hire with a capacity of more than 17 passengers | 15,845.00 | 969.00 |
| *Vintage Cars: A discount of 25% shall be permitted for private cars under the Vintage Cars segment that is certified as Vintage Cars by Vintage and Classic Car Club of India as the erstwhile IMT. | ||||
| # TP Premium is the total of the Basic TP Premium (A) along with an amount derived by the multiplication of the Licensed carrying capacity by the amount in (B) | ||||
Once the car owner has decided on the plan, the next step is to compare third party motor insurance online. The online comparison will help to get the best deals that meet his/her insurance requirements. He/she can compare the plans on the parameters like benefits, features, coverage, claim settlement process, premium etc.
We, at Policybazaar.com, help car owners to compare these plans in the blink of an eye. The vehicle owners just need to visit our official website, fill in the relevant information and compare third party car insurance plans from a relatively large number of insurers. Once they find a plan that suits their budget and requirements, then they can proceed to purchase it directly from our website. This way, with adequate third party insurance, ride your passion into the sunset with gusto!
Apart from these, there are personal accident insurance cover and other add-on covers, such as zero depreciation cover, roadside assistance cover, NCB protector and so on.
The third-party insurance premium rates are to be increased from June 16 onwards. The general insurance As per the general insurance providers, the premium rates have to be revised in order to make the segment sustainable. The increase in the premium rates of third-party insurance is to be disclosed by the Insurance Regulatory and Development Authority of India (IRDAI) every year. Due to the ongoing pandemic, it could not be possible to change the premium rates FY2020.
Motor premium insurance has been facing a bit of traction. As per the insurance providers, there has been a decrease in motor claims in the initial months of lockdown but now as the traffic has increased it has started coming back to normal. As per the industry records, the third-party insurance premium rates increased by 4.4% to Rs. 10,650 Crore in the year 2020-2021 as compared to 2019-2020 when it was Rs. 10,198 Crore. However, in the last fiscal the overall downfall in the premium rates was 1.68% to Rs. 67,790 Crore.
