Third Party Insurance

What is Third Party Insurance?

Third-party insurance is the basic insurance coverage that is compulsory for every four-wheeler. 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.

It covers third-party liabilities arising out of

• Property damages
• Damages to the vehicle
• Bodily injuries, and
• Death of the 3rd party

Features of Third-Party Car Insurance

The following salient features are a part and parcel of a third party insurance plan:

• The policyholder and the injured third party are the beneficiaries of the third-party liability insurance.  In practice, the money is directly paid to the third party or his solicitor by the insurance company.
• Injuries to the car owner are not covered under third-party car insurance unless the personal accident cover for the owner-driver has opted. It covers the injuries caused by the insured car to the rest of the world.
• In these plans, third-party car insurance premiums do not consider the insured vehicle’s value as it is a 'legal liability and it is impossible to know beforehand what that liability would be.
• Third-party car insurance involves lawyers’ help.
• With an option to renew or buy third-party car insurance online, the process has become easy, quick, and seamless. It entirely depends on the time and convenience of the car owner.

Why Do You Need Third Party Insurance?

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 coverage is limited up to Rs 7.5 lakh in the case of car insurance. It is better to stick to third-party liability insurance if the insured vehicle is more than 5 years old.

How Does Third Party Insurance Works?

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  third party insurance claims – bodily injury liability and property damage liability.

Key Benefits & Importance of Third-Party Insurance

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:

• Offers Legal Cover and Financial Assistance:

  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.

• Covers Third Party Legal Liabilities

  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. 

• Fulfils Legal Mandate

  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.

• Cost-Effective Policy

  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.

• Ensures Peace of Mind

  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.

List of Third Party Car Insurance Providers

What is Covered Under Third-Party Insurance?

Third-party car insurance covers the liabilities arising due to 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.

1. Third-Party Liabilities

Third-party liabilities result  from 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:

• Property Damages-  In case someone, unfortunately, rams his/her car in a third party person’s property, such as the boundary wall or a shop, the third party insurance policy will pay for the loss or damages caused to that person. The motor insurer will cover your damage liability up to the limit of Rs 7.5 lakh.
• Car Damages - If a car owner accidentally hits a third party’s car with his/her own car while driving, the insurance policy will come to the rescue and pay for the damages caused to that third-party’s car on the policyholder’s behalf.
• Accidental Bodily Injuries -In case the victim suffers from a disability as a result of the accident, the compensation amount that needs to be paid will be decided by the Motor Accidents Claims Tribunal. But only 50% of the compensation amount is paid by the insurer in case the victim suffers from lost limb or partial blindness.
• Accidental Death - If the car owner accidentally runs over his/her car on someone or causes fatal injuries to a third party person leading to his/ her untimely death, the motor insurance provider will pay compensation to the victim’s family on the policyholder’s behalf.

2. Personal Accident Cover

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 the 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.

What is Not Covered Under a Third Party Insurance?

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:

• Own Damages - It does not cover any damages sustained by the insured car, be it accidental damages, fire damages, damages due to natural & manmade calamities, or theft.
• Drunk Driving - It does not cover any third-party liabilities if the car was being driven under the influence of alcohol or drugs.
• Invalid License - It does not cover any third-party injuries or damages if the driver of the insured car has an invalid driving license.
• Outside Geographical Limit - If the insured car causes third-party damages or injuries outside the geographical limit of the country, it will not be covered.
• Unauthorized Usage - It does not cover any third-party injuries or damages caused while using the insured car for illegal activities, racing, commercial purposes, etc.
• Contractual Liability - It does not cover any claims arising out of contractual liability.
• Undesignated Driver - If any individual, other than the owner of the car or the designated driver was driving the vehicle, the resultant damages or injuries to the third party are not covered.
• Substantial Loss - It does not cover any accidental loss or damage sustained by the third party, which has accrued from any substantial loss.
• Nuclear Perils - It does not include any liability caused by a nuclear weapon or radioactive contamination directly or indirectly.
• War - It does not cover any damage, loss, and/or liability caused to the third party due to invasion, war, or any other war-like operations.

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.

Coverage of Third Party Liability Insurance for Commercial Vehicle

Third-party liability insurance for commercial vehicles covers:

• The policy covers the legal liability of the vehicle owner for any injury or damage caused by the insured vehicle to the third party
• Demise or any bodily injury to the third party
• Property damage caused to the third party for up to Rs 7.5 lakh

How to Claim Third Party Insurance?

Step 1- Application

The victim or the legal heir of the departed can make an application against the owner of the vehicle for third-party liability compensation.

Step 2- Lodge an FIR

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.

Step 3- Approach the Motor Accidents Claims Tribunal

After filling the First Information Report (FIR) successfully, the next step is to register the case with Motor Accidents Claims Tribunal.

Step 4- Get the Cover Amount

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:

• Driver’s Licence Number
• Witnesses’ name and contact details (if any)

Comprehensive V/s Third Party Liability Car Insurance

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 Insurance Premium Rates

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:

Third-party Car Insurance Premium Rates to Increase for FY 2022-23

Third-party car insurance premium rates are likely to increase for FY 2022-23. The Union Government in consultation with IRDAI has issued a notification proposing a change in the prescribed base premium rates of third party insurance for all segments of motor vehicles including cars. Third-party motor insurance rates continued to be the same for the last two years which have now witnessed an increase for the financial year 2022-23. 

The proposed revised rates of third party insurance as per engine displacement of cars are as follows:

With an intent to encourage usage of e-vehicles, the Government has also proposed a discount of 15% on the premium of electric cars. The revised discounted rates on the premium of private electric cars are as follows:

The Government has asked for suggestions and objections from persons who will be affected by an increase in the premium rates by 14 March 2022.

Compare Third Party Insurance Online and Save More!

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 Insurance Brokers Private Limited, 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!

News