Third Party Insurance

Third-party insurance also referred to as liability insurance essentially provides financial coverage to an insured person against any liability incurred in case of any loss/damage caused to third-party property or the person.

Under motor laws of India, third party insurance is compulsory. The policy is termed as a 'third-party' cover as the beneficiary of the car policy is a third party, who is not a part of the insurance contract. Hence, the policy doesn’t extend policy coverage to the insured. As per the contract between the two parties, the insurance company pays for the liability arising out of the insured car. It covers any legal liability of policyholder for causing accidental death/ bodily injury or property damage to a third party, As mentioned above, third party car insurance online does not cover any loss or damages to the insured car due to theft, accident, etc.

As per the rules of the Motor Vehicles Act 1988, the Insurance Regulatory and Development Authority (IRDA) of India computes the third party damages.

What is Third Party Insurance?

Third party insurance is a type of insurance policy that covers only third party liabilities of the insured. It provides financial protection against damages caused to a third party property, vehicle and physical injuries to third parties. Also known as the act-only insurance’, the beneficiary under this insurance is a third party and not the policyholder (first party) or the insurance company (second party).

What is Third Party Car insurance?

Third party car insurance is a type of motor insurance policy that financially protects the car owner against third party legal liabilities resulting out of an accident involving the 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 your car with another car on the road. Third party car insurance does not cover own damages of the insured car. While property damages are covered up to Rs 7.5 lakh, bodily injury or death of third parties are covered as per the compensation decided by the Motor Accidents Claims Tribunal.

Third party car insurance is a risk cover, under which the insurer compensates any legal liabilities claimed by the third party involved in an accident, where the insured vehicle is at fault. As per the Motor Vehicles Act 1988, Section 146, plying an uninsured vehicle on Indian roads is an offence. This is why liability insurance is also known as ‘Act Only’ plan. However, the scope of cover doesn’t include damage or loss of the insured vehicle.

Why Do You Need Third Party Insurance?

Besides the legal clause, third party insurance comes in handy when your vehicle hits another vehicle. You can’t measure the level of damage caused by an accident - it might lead to death as well. In such instances, the victim is allowed to register a case claiming for compensation. Here third party insurance comes into the picture. It covers the insured vehicle in case any liability claim arises out of 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 you own a vehicle that 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 to the third party. The first party refers to the insured who is responsible for the losses/ damages caused to the third party, who is the person filing liability claims against the insured. The second party or the insurance company aids the financial burden of the insured 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.

Key Benefits & Importance of Third-Party Insurance

• Offers Legal Cover and Financial Assistance:

  The legal liability of the insured person is covered under the third party insurance policy in the case of disability or demise of the third party, and any damage or loss to the property of the third party. The third-party liability policy takes care of the financial and legal burden on the insured. Despite the fact that the direct beneficiary is neither the insurance company nor the insured, but a third party, this is the most crucial benefit that third party insurance ensures for the owner or the driver of the insured vehicle.

• Easy, Seamless and Fast Process to Acquire the Third Party Insurance:

  The third party liability insurance can be bought and accessed easily. You can also renew this policy online by visiting the insurer website or insurance broker website and by following the instructions online.

• 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 you have to use this as either an essential or an add-on part of the main policy, it benefits you fully. However, at the time of calculating the compensation amount, the insured’s annual income is considered.

Features of Third-Party Car Insurance:

The standard third party car insurance covers your legal liabilities in case the accident caused by your vehicle results in:

• Death or bodily injury to a third party
• Damage to third party property
• Compulsory personal accidental cover for owner/driver up to Rs15 lakh (only in case the personal accident component is included in the policy)

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

• The policyholder, the insured or the injured third party are the beneficiaries of the third party liability insurance. These beneficiaries are only the nominal beneficiary of the third party car insurance. In practice, the money is directly paid to the third party or his solicitor by the insurance company.
• Injuries to the insured himself are not covered under third party car insurance. It covers the injuries caused by the insured to the rest of the world.
• In these plans, third party car insurance premiums do not considerthe insured vehicle’s value as it is the '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 is easy, quick, and seamless and entirely dependson your time and convenience.

Importance of Third Party Car Insurance

Take a look at the importance of buying third party car insurance in India:

• Third party insurance cover is mandatory for all four wheelers in India as per the Motor Vehicle Act, 1988. Therefore, you abide by the Indian motor laws by buying third party car insurance for your vehicle.
• It covers any third party liabilities that may arise due tocausing accidental damages or injuries to an unknown person on the road.
• It ensures that your car has the minimum basic insurance protection against any unforeseen incidents resulting in legal liability.
• It prevents you from inviting a fine or penalty for driving an uninsured car on the Indian roads.
• It provides you with peace of mind as you are assured of adequate financial support in case you end up accidentally hurting a third party or damaginghis/ her property.

List of Third Party Car Insurance Providers

Take a look at the motor insurance companies in India that offer third party car insurance:

What is Covered Under Third-Party Insurance?

A third party car insurance policy provides coverage against the following risks:

• Third Party Liabilities

  Third party liabilities arise out of any loss or damages 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 you, unfortunately, ram your car in a third party person’s property, such as the boundary wall or a shop, your third party insurance policy will pay for the loss or damages sustained by that person.
  • Car Damages - If you accidentally hit a third party person’s car with your own car while driving, your insurance policy will come to your rescue and pay for the damages caused to that person’s car on your behalf.
  • Accidental Bodily Injuries - In case you accidentally hit a third party person with your car, your third party insurer will pay for the treatment of his/her bodily injuries.
  • Accidental Death - If you accidentally run over your car on someone or cause fatal injuries to a third party person leading to his/ heruntimely death, your motor insurance provider will pay compensation to the victim’s family on your behalf.

• Personal Accident Cover

  A few motor insurance companies also offer personal accident cover to the owner-driver of the insured car. As part of this cover, the owner-driver of the car is granted with compensation in case he/ she ends up suffering from a disability or dies as a result of a car accident. In case of death of the policyholder, the compensation is paid to the nominee appointed by the car owner.

What is Covered Under Third-Party Car Insurance?

A third party car insurance policy covers the following:

• Third Party Bodily Injury/ Death - It covers the car owner against physical injuries, disability or death of a third party person due to an accident caused by the insured car. The compensation amount, to be paid by the car owner to the victim, is decided by the Motor Tribunal court. In the case of third party death, 100% of the compensation amount is paid by the motor insurance company. But only 50% of the compensation amount is paid by the insurer in case the victim suffers from lost limb or partial blindness.
• Third Party Property Damages - It covers the car owner against any accidental damages caused to the property of a third party person by the insured car. The motor insurer will cover the damage liability of the policyholder for up to the limit of Rs 7.5 lakh.
• Personal Accident Cover - A few motor insurers provide personal accident cover for the owner-driver of the insured car under third party car insurance policy.

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 is a list of a few such situations:

• Accidental damage/liability/loss outside any particular geographical boundary
• Claims arising out of contractual liability
• If any individual, other than the owner or the designated driver was driving the vehicle
• If the third party sustains accidental loss or damage, which has accrued from any substantial loss
• Liability caused by a nuclear weapon or radioactive contamination directly or indirectly
• Any damage, loss and/or liability caused due to invasion, war or any other war-like operations
• Claim raised when the policy is inactive or if the driver is not carrying a valid driving license at the time of the accident

The details in the list above are the most common exceptions; you must check the documents of your policy for a comprehensive list of exclusions.

What is Not Covered Under a Third Party Car Insurance Policy?

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 due to theft.
• Drunk Driving - It does not cover any third party liabilities arising while driving the car under the influence of alcohol or drugs.
• Invalid License - It does not cover any third party loss 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.
• Authorized Usage - It does not cover any third party loss or damages caused while using the insured car for illegal activities, racing, commercial purposes, etc.

Coverage of Third Party Liability Insurance for Commercial Vehicle

Third party liability insurance for commercial vehicle covers:

• The policy covers your legal liability for the injury or damage caused by your vehicleto the third party
• Demise or any bodily injury to the third party
• Property damage caused to the third party for up to Rs5 lakh

Advantages of Third Party Insurance

Third party insurance comes with its own set of advantages. To know how is it beneficial to buy third party cover for your car, take a look at some of the advantages of buying a third party insurance policy:

• Fulfils Legal Mandate

  As per the Motor Vehicles Act of India, 1988, it is legally mandatory for all car owners in India to own a third party insurance cover to be able to use their cars on public roads. Thus, if you buy third party insurance for your car, you abide by the laws of the country and avoid earning a challan or fine for its violation.

• 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 loss or damages 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.

• Provides Financial Assistance

  Legal liabilities can be financially draining and can lead to bankruptcy if you are 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 you with the required financial assistance and helps you pay off your third party liabilities without exhausting all your savings.

• More Affordable

  Besides third party insurance, car owners also have the option to buy comprehensive car insurance that not only covers third party liabilities but also the damages sustained by the insured car. Since third party insurance provides narrower coverage as compared to a comprehensive car insurance policy, it is more affordable. Thus, you can buy a third party insurance policy at a lesser price than a comprehensive car insurance policy.

• Ensures Peace of Mind

  Third party liability insurance helps a car owner to drive in peace and without any worries. This is possible because you don’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 you with peace of mind and allows you to enjoy driving your car.

• Easy to Purchase

  Buying third party insurance is extremely easy and a quick process. You can easily buy this insurance cover for your car anytime online, including your 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.

• Disadvantages of Third Party Insurance

  Third party insurance does come with certain disadvantages. Take a look at them below:

• No Coverage for Damages to Own Car

  During a car accident, you don’t 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 your own car? Accidents may cause major damages to your car as well which won’t be covered under your third party liability insurance policy. As a result, you will have to pay for the incurred losses or damages to your car on your own in case of third party insurance.

• No Protection From Theft/Fire

  Besides accidents, a car is constantly under the risk of getting stolen or catching fire. In case your car catches fire or gets stolen, your third party insurance policy will be of no use to you as it will not pay for the loss of your car.

• No Add-On Covers

  A third party insurance policy does not come with a wide range of add-on covers as in the case of a comprehensive insurance policy. Add-on covers help to expand the coverage for your 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.

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 a third-party liability compensation.

• Step 2- Lodge an FIR

  Once the application is completed, file an FIR with the police, furnishing the required details. You 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 you from any third party claims arising out of death or bodily injury or damages to that person’s property in an accident. Besides, this insurance is legally mandatory to ply your car on public roads.

Comprehensive car insurance, on the other hand, is quite extensive in nature. It safeguards your vehicle from natural and man-made calamities. Any damage to your 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 your car.

To understand the differences between third party and comprehensive car insurance better, go through the table given below:

Recent Updates on Third Party Insurance

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 in the near future.

Third-Party Insurance Premium Rates with effect from June 16, 2019:

Compare Third Party Insurance Online and Save More!

Once you’ve decided on the plan, the next step is to compare third party motor insurance online. Online comparison helps you to get the best deals that meet your insurance requirements. You can compare the plans on the parameters like benefits, features, coverage, claim settlement process, premium etc. We, at Policybazaar.com, help you compare these plans in the blink of an eye. You 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 you find a plan that suits your budget and requirements, then you can proceed to purchase it directly from our website. This way, with adequate third party insurance, ride your passion into the sunset with gusto!