Motor Insurance 359 views April 9, 2021

One can face hefty financial damages while bearing the liabilities arising due to loss or damage to a third party (person or property) caused by a vehicle. Therefore, it is mandatory to have third-party insurance for all motor vehicle owners as per the Motor Vehicles Act, 1988. This type of insurance provides protection against damages to third-party vehicles and personal property.

Available for Cars, Two-wheelers and Commercial Vehicles, Third Party Insurance does not provide any coverage to the insured person i.e. policyholder in case of any damage or loss. To get the same, you can choose a Comprehensive Insurance policy that provides comprehensive coverage to the policyholder in case of any mishappenings. Third-party insurance provides the much-needed peace of mind while driving on the road as you are financially protected against third-party liabilities that your vehicle may cause.

On this page, we will be discussing important aspects of Third party Insurance. Read on to know more about reasons to choose third party insurance, what is covered & not covered, factors affecting the premium amount, etc.

What Exactly is the Third Party Insurance?

Also known as ‘Liability Insurance’ or ‘Act Only Coverage’, Third Party Insurance protects the vehicle owner against any losses incurred due to bodily injury or death of a third party, or damage to a property or vehicle. This insurance is referred to as a third party because the coverage will be provided to someone other than the insurance company and the vehicle owner. To understand Third-Party Insurance in a simple term, you should know the following basic terms associated with it.

First Party – Policyholder or an insured person who has purchased a Third Party Insurance plan

Second-party – Insurer or Insurance company from where you purchase the plan

Third-party – Claimant or Beneficiary person who raises a claim for damages or losses caused by the first party (policyholder)

Why Should You Choose Third Party Insurance?

Choose Third Party Insurance to prevent yourself from being fined up to INR 2,000 from Traffic and Motor Department Officials as it is mandatory to have while driving your vehicle. It means having a Third Party Insurance plan allows policyholders to comply with the legal obligation under the Motor Vehicles Act, 1988.

Apart from this, when you choose Third Party Insurance, you are not worried about the financial liabilities that you may have to face in case your vehicle hits another person, vehicle or property. In such a case, your insurance plan will provide coverage to the beneficiary. As per the Insurance Regulatory Development Authority of India (IRDAI), there is no coverage limit (up to 100%) in case of a third party’s death, while the property damage coverage stands up to INR 7.5 lakh in case of  Third-Party Car Insurance.

What is Covered under Third Party Insurance?

The following risks are covered when you choose Third Party Insurance for your vehicles. Please check!

Third party Liability – If the car owner hits a third-party person during an accident, Third Party Insurance will provide coverage towards the treatment of the person’s bodily injuries sustained during that accident. In case a third-party individual dies due to an accident caused by the policyholder’s vehicle, the insurer will provide compensation to the victim’s family on the behalf of the policyholder.

Third party Property Damage – In case the policyholder’s vehicle causes any damage to third-party property, the Third Party Insurance plan will compensate for the damages or losses up to a limit of INR 7.5 lakh in case of car insurance, while up to INR 1 lakh with two-wheeler insurance.

Personal Accident – With the Third Party Insurance, a few insurers also provide personal accident coverage where a coverage up to INR 15 lakh is provided to the owner or driver of the policyholder’s car. With this, if the policyholder ends up getting any bodily injuries due to an accident, this type of vehicle insurance provides coverage against the same.

How to Claim Third Party Insurance?

To get a successful claim for Third party insurance, the policyholder needs to follow a few simple steps shown below. Do check!

Step 1: Inform your respective insurance company about the accident as soon as possible. Each insurer has a stipulated time within which the insured person must inform.

Step 2: After informing about the accident, the policyholder must file a First Information Report (FIR) at the nearest police station from where the accident has happened. Also, he or she should remember to take a copy of the same.

Step 3: After filing the FIR, the policyholder needs to register the case with Motor Accident Claims Tribunal. For this, you will need to fill the form with the necessary documents.

Step 4: The insurer will assess all these details to verify the estimated cost. On successful approval, the insurer will compensate the full amount up to the specified limit fixed by IRDAI.

Note: The FIR must contain the Driver’s Licence Number and Witnesses’ name & contact number (if any).

Factors that Affect Third Party Insurance Premium Amount

One of the best things about Third Party Insurance is its affordable premium. However, it may change from one insurer to another. The below table can give you the necessary information about the factors affecting the Third-Party Insurance premium amount. Have a look!

Factors Affecting Third-Party Insurance Premium AmountDetails
Age of the VehicleThe premium amount increases as your vehicle gets older.
Fuel TypeThe premium amount of cars running on diesel and CNG tend to be higher compared to cars running on petrol.
Value of the Vehicle (Insured Declared Value)If the current value of the vehicle is higher, the premium amount will be more and vice versa.
Geographical LocationThe location where you live and park your vehicle also affects the premium amount.

What is Not Covered Under Third Party Insurance?

You should know the exclusions under Third Party Insurance before purchasing the same for your vehicle. Your insurance plan will not provide compensation in the following situations. Please check!

  1. Any claims arising out of contractual liabilities related to your vehicle
  2. Own damages such as accidental damages, fire, damages due to natural or manmade calamities, theft, etc.
  3. If your vehicle is involved in speed test events, organized racing, commercial purposes, illegal driving, etc.
  4. Any damages caused to a third party person or property due to war & nuclear risks
  5. If the policyholder remains under the influence of drugs or alcohol while driving
  6. If the policyholder is found underage or driving without a legal driving license
  7. If the damage or injuries happened to third party outside the geographical limit of the country
  8. Damages from substantial loss to third party

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