In 1983, the Government of India passed the Motor Vehicles Act - making it mandatory for all motor vehicles to have a third-party insurance. A third-party insurance covers liable cost to the third-party in an accident involving your vehicle - causing injury, damage or death. Despite the fact that a third-party insurance is mandatory, according to a survey, more than 60% of the vehicles on the road in India do not have an motor vehicle insurance.
What is a third-party insurance?
Insurance companies offer customers owning vehicles either a third-party insurance, a liability insurance or a comprehensive insurance. Comprehensive insurance covers the costs of both the first-party and the third-party - the second-party being the insurance company. Third-party insurance, also known as a compulsory insurance, covers the damages caused to the third-party involving the vehicle of the first-party.
Revised rate of third-party insurance
After persistence from insurance firms across the country, the Insurance Regulatory and Development Authority (IRDA) of India announced the hike of third-party insurance premiums. TS Vijayan, the Chairman of IRDA announced that as of April 2017, the third-party insurance premiums for motor vehicles will be hiked by 40%.
Listed below are the third-party insurance hikes for four-wheeler motor vehicles:
- For private cars with less than 1000cc capacity engine, the third-party insurance premium is hiked to Rs.1,129 from Rs. 941.
- For cars with more than 1000cc engine capacity and less than 1500cc, the third-party insurance premium is hiked to Rs.1,332. The previous insurance premium for cars in this segment was Rs.1,110.
- The third-party insurance premium for cars with an engine capacity of more than 1500cc has been increased from Rs.3,424 to Rs.4,109.
Listed below are the third-party insurance hikes for two-wheeler motor vehicles:
- For two-wheelers less than 75cc engine capacity, the third-party insurance premium as of April 2017 is set at Rs.455 from Rs.414.
- For two-wheelers having an engine capacity less than 150cc, the third-party insurance is hiked to Rs.464 from Rs.422.
- For two-wheelers having an engine capacity more than 150cc but less than 350cc, the third-party insurance premium has been revised to Rs.462.
- The revised rate for the third-party insurance premium for two-wheelers more than 350cc engine capacity is set at Rs.884.
- Is it mandatory to have motor insurance to ride a two-wheeler?
Yes, since the Government of India’s Motor Vehicles Act of 1983, it is mandatory for all motor vehicles to have a motor insurance. Third-party insurance is the most basic type of insurance. It is also called a compulsory insurance.
- What is the difference between a third-party insurance and a comprehensive insurance?
A third-party insurance covers the damages caused to the third-party during an accident - involving the vehicle of the first-party. A comprehensive insurance covers the costs/damages of both the third-party and the first-party involved in the accident.
- Do I need a third-party insurance even if I have a comprehensive insurance? It is called compulsory insurance after all.
That wouldn’t be required. If you have a comprehensive insurance you do not need a third-party insurance. In fact, having a comprehensive insurance is a bonus as it covers even the costs - damage of vehicle, injury, etc. - when you meet in an accident and not only the costs of the third-party insurer.
- What is the difference between the first-party insurance holder and the third-party? Who is the second party? I’m confused.
The first-party is the insurance holder. The second party is the insurance company and the third-party is the person one meets an accident with - the person you are liable to, in the case of injury, vehicle damage or death, while holding a third-party insurance.
- I have a Pulsar 220cc, what is the current third-party insurance premium?
The current third-party insurance premium, as of April 2017, for two-wheeler vehicles more than 150cc and less than 350cc is set as Rs.462.
GST Update: GST of 18% is applicable on car insurance effective from the 1st of July, 2017