Third Party Car Insurance

These days our daily morning coffee is often accompanied by reports of gruesome road accidents in the country. While we are benumbed by flash news and trending stories on all news channels/media, we should take a moment to understand why so many lives are being lost on the roads.

Impatience while driving has been attributed as one of the main factors for road rage among drivers, both new and experienced alike. The plight of roads in our country and poor infrastructure, coupled with inadequate use of safety gear fuel the incidence of fatalities.

If you own a car, you should have adequate insurance cover to protect yourself from accidents. In fact, the Motor Vehicles Act has made it mandatory for all vehicles to be armoured with a minimum of third-party car insurance.

Third Party Car Insurance

What is Third Party Car Insurance?

In the auto insurance realm, companies offer two types of car insurance plans that can be bought by car owners to protect their prized possessions:

  • Third Party Liability Insurance - This insurance cover offers you a basic level of protection and it is mandated by law. It is also referred to as liability-only plan or act-only policy.
    • This insurance plan offers protection from legal liability to a third party following an accident that causes injuries, death, or property damage.
    • This is also the cheapest form of car insurance available in the market.
    • This insurance plan does not offer coverage for the insured car itself. The owner of the insured car also does not get personal accident coverage.
    • Almost all insurance companies offer third party liability insurance, and it is the most optimum plan for a person who does not use his/her car too often. For an individual who has a very old car, the last straw that gives rise to a total loss situation may be an accident. In such a case, it is sufficient to have a minimal liability-only insurance for the vehicle.
  • Comprehensive Car Insurance - This insurance plan offers wider insurance coverage when compared to a liability-only policy. The instances covered by a comprehensive car insurance plan are the following:
    • This plan protects the insured car from accidents. It also provides personal accident cover for the owner-driver.
    • The comprehensive car insurance policy, also referred to as a package policy by some insurers, protects the vehicle from man-made disasters such as vandalism, riots, strikes, etc.
    • The insured car is protected from theft under a comprehensive plan. The insurer will reimburse the Insured Declared Value (IDV) of the car in the event of a car theft.
    • The package policy protects the insured car from natural calamities like earthquakes, hurricanes, floods, lightning, etc.`
    • The comprehensive car insurance policy has an in-built third-party liability insurance cover. This offers protection to the policyholder against liability to a third party following an accident. The coverage includes liability for injuries, death, and property damage of the third party.

The coverage of a comprehensive car insurance policy can be amplified by opting for add-on covers that can be purchased from the insurance company at a nominal cost. Some of these add-on plans include:

  • Zero depreciation cover or nil depreciation plan
  • Return to invoice (RTI) cover
  • Engine protect cover
  • Personal accident cover for the passengers
  • No Claim Bonus (NCB) preserve cover

Key Benefits of Third-Party Insurance Policy for Cars:

The significant advantages of buying third party car insurance for your vehicle are detailed below:

  • Offers legal cover and financial assistance - This insurance cover takes care of the financial burden in the event of an accident that causes damages to a third party. However, the direct beneficiary is neither the policyholder nor the insurance company.
  • Provides complete peace of mind - A liability-only plan provides the insured peace of mind in taxing situations that hinge on huge financial liabilities.
  • Quick and easy purchase option - Third party car insurance policies can be bought easily, either through the website of the insurance company or through its branch office. It can also be renewed without too many complications.
  • Cost-effective insurance plan - Third party liability insurance can be afforded by all as the premiums are low. In fact, the premium for third-party liability insurance is a fixed nominal value and is updated on an annual basis by the IRDA.

Why Buy Third Party Car Insurance?

is the cheapest insurance policy you can buy. It is available for private four-wheelers, two-wheelers, and commercial vehicles as well. It is necessitated by the Motor Vehicles Act, 1988, for all vehicles in India. Even if you do not use your vehicle too often, it should be protected with a minimum of third party car insurance.

Apart from enabling you to abide by the law, the third party liability insurance offers you the much-needed protection to safeguard yourself financially from accidental expenses incurred by a third party. If you are facing financial issues and are looking to insure your car on a shoestring budget, you can opt for third party liability insurance.

Third Party Liability Insurance - Inclusions:

  • As mentioned above, a third party car insurance plan offers protection from the damages caused to a third party by the insured vehicle in an accident. The damages include injuries, death, and property damage.

So,consider a scenario in which your insured vehicle meets with an accident in which another car was damaged to a large extent. Then the person who has suffered the damage can claim for reimbursement under your car insurance policy. This implies that your insurance company is liable to pay for the damages incurred by the third party.

  • Third party liability insurance is an inherent part of all car insurance policies available in the country. It is like a safety net that protects you from the unprecedented and extremely undesirable event of an accident in which someone else reports a loss.
  • Some insurance companies today offer a personal accident cover for the owner-driver of the insured vehicle along with the third party liability cover. From the perspective of the insurer, this rounds off the coverage offered by the liability-only policy and makes it more desirable to the customer.

Third Party Liability Insurance - Exclusions:

It is important to have a clear idea on what is excluded from your car insurance coverage, so that you can make judicious decisions at the time of a claim. In line with this, it is crucial to read through your policy documentation thoroughly.

The instances that are usually excluded from a third party car insurance plan are as follows:

  • Intoxicated driving - Damages caused when the driver is intoxicated with drugs or alcohol is not covered under third party liability car insurance.
  • Staged collisions - If an accident was deliberately performed/staged, then it will not be covered under the insurance.
  • Illegal acts - If the driver was underaged, driving without a valid license, or driving on the wrong side of the road at the time of the accident, the insurance company will not honour the claim.
  • Commercial purposes - If the insured private car was being used for commercial purposes at the time of the accident, the insurer will reject the car insurance claim.
  • Car thefts and damages - The third party liability insurance plan does not protect the insured car or its owner-driver from accidents. Theft of the insured car is also not covered.
  • Other reasons - If the car insurance of the vehicle was in expired status at the time of the accident, the insurance company will not honour the claim. Also, regular wear and tear of the car with age, mechanical or electrical failures, consequential damages, and driving outside the predefined geographical limits are not offered coverage under the liability-only plan.

Third Party Premium Calculator:

Third party car insurance premium is a fixed value that is published on an annual basis by the Insurance Regulatory and Development Authority (IRDA). The rate of premium varies according to the cubic capacity of the vehicle’s engine.

The third party liability insurance premium for private cars for the financial year 2017-18 are as follows:

Engine capacity Premium
Up to 1,000cc Rs.2,055
More than 1,000cc but not more than 1,500cc Rs.2,863
More than 1,500cc Rs.7,890

How are Claims under Third Party Car Insurance Settled?

With the increase in the incidence of road accidents, it is imperative that one is well aware of the claim process accompanying an accident. But in reality, car owners seem to know very little about how they can proceed with a claim after an accident. In most cases, they end up paying from their own pockets for damages to their car or raising a claim under their car insurance. The latter parts them from the No Claim Bonus (NCB) that they have accrued over the years.

Raising a third party liability car insurance claim consists of three main parts:

  1. Informing the police and filing an FIR. The charge sheet should also be procured from the police station.
  2. Filing a case at the Motor Accident Claims Tribunal (MACT). This can be done with the assistance of a lawyer. The case should be filed in the court that is closest to the place of the accident or the residence of the injured.
  3. Settling the claim in court and coming to a decision on the liability.

Although the process seems uncomplicated, the involvement of the court usually makes it cumbersome. Listed below are the different possibilities that may arise while raising claims under third party car insurance:

Scenario 1 - When Your Vehicle Is Protected With Third Party Liability Insurance Only:

Consider a scenario in which your car was involved in an accident and was damaged by the vehicle of a third party, say X. You cannot claim for damages under your car insurance policy as you do not have extensive coverage. However, you can claim insurance under the car insurance policy of the other party involved in the accident. You should also be able to establish that X was at fault at the time of the accident. If the court decides in your favour, you will receive the amount that is decided by the tribunal, not the entire claim amount. You will also not be able to claim the remaining amount from your insurer.

Subrogation: This is the process by which your insurance company pays you for the accident damages. The insurer then claims this from the insurance company of X in the form of a reimbursement. It is possible only when you have comprehensive car insurance coverage. Your insurer should also be willing to go for subrogation.

Scenario 2 - When Your Vehicle is Protected with Comprehensive Car Insurance:

Say, at the time of the accident your car was protected with comprehensive insurance. In this situation, you can opt for any of the following:

  1. You can claim for compensation under your car insurance policy’s “own damage” coverage. This is the method that is followed by most people, as it is hassle-free and provides quick payout. However, you will have to forgo your hard-earned NCB when you receive the claim payout.
  2. You can approach the Motor Accident Claims Tribunal and fight a case to avail compensation under the car insurance policy of the other party involved in the accident, as elaborated in scenario 1.
  3. You can request your own insurance company to subrogate the case and fight in court on your behalf. If the insurer is not willing to do the same, then you will be left only with either of the two options above.

Scenario 3 - When Both Vehicles Have Comprehensive Car Insurance Protection:

It is possible to approach the court for situations that involve “only-vehicle” damages. However, it is not advisable to opt for this route, as the entire process is time consuming and cumbersome. You should ideally settle such situations outside the court.

For cases where disability or death is involved, the case can be fought in court, but you should be aware that it is a long-winded process. Hence, it is advisable to keep all relevant documents in tact and ensure that the incident is narrated clearly and recorded in the FIR. The original records of all expenses should also be maintained.

Insurance companies usually agree for subrogation only when there is death or disability involved.

Third Party Laws: The Motor Vehicles Act, 1988, mentions that a third party can raise a claim under two categories, i.e., no-fault liability claims or fault liability claims.

  • No-fault liability claims - The accident happens by chance and it is not the fault of any party involved.
  • Fault liability claims - In this case, the accident could be the result of negligence of one of the involved parties. The claimant will have to prove in court that the other party is at fault. Once this is proved, the compensation can be higher than that offered under no-fault liability claims. The actual compensation depends upon the judgement passed by the court on the basis of various other factors such as loss of earnings of the victim or residual human asset value.

Things to Consider Before Making a Third Party Liability Claim:

  1. Claiming compensation under the insurance policy of a third party is a rather complex process, as indicated above. If you are faced with such a situation you should ensure that you are well prepared with all the relevant documentation to be presented in court.
  2. Going to court is inevitable if the accident resulted in death or disability. You should note that the entire process may take a long time for settlement in court and you should be prepared for some negotiations.
  3. Ideally, you should get the assistance of a good lawyer to help you with all the formalities.
  4. As indicated previously, if the accident has not resulted in serious conditions like a death or disability, it is best to get into a verbal agreement with the involved parties and settle the matter outside the tribunal.

Third Party Car Insurance FAQs:

  1. How do I know if I am eligible for a third party car insurance policy?
  2. If you have a valid driving license and a car that is registered with the regional transport authority, you can buy a third party liability insurance cover for it. It is offered by various Motor Insurance providers in the country, such as National Insurance Company Limited, Oriental Insurance, Bajaj Allianz, ICICI Lombard, IFFCO Tokio, etc.

  3. Can I shift my third party liability insurance policy from one insurer to another?
  4. Yes this is possible. You will have to fill up a portability form and reach an agreement with your current insurer at least 45 days before the date of policy renewal.

  5. I am a good driver; do I still need to buy third party liability insurance?
  6. Yes it is necessary that your car is protected with a minimum of third party car insurance. This is the law and everyone has to abide by it.

    Even if you are a careful driver, your car may be involved in an accident due to no fault of yours. If a third party has suffered injuries, death, or property damage, he/she will be appropriately compensated by your insurance company.

  7. What is the maximum amount I can get as compensation under third party car insurance?
  8. There is no limit on the compensation amount for bodily injuries or death of the third party. For third party property damage, the maximum amount provided as compensation is capped at Rs.7.5 lakh.

  9. After an accident, within how much time should I initiate a claim under third party car insurance?
  10. You will have to file a case in the Motor Accident Claims Tribunal within a timeframe of 60 days from the date of the accident. But is is always advisable to file a case as soon as possible.

  11. How can I buy third party liability insurance?
  12. You can buy third party car insurance through the website of the insurance company or by approaching their branch office. Alternatively, you can compare policies and make a purchase decision on the best offer at neutral financial websites. Most insurance companies offer you discounts when you buy car insurance online. So, buying a digital policy can save you some money.

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