Third-party insurance is a type of car insurance that covers the damages or injuries caused by your car to another person or property. It is mandatory by law in India to have at least a third-party insurance policy for your car.
In this article, we will explain what third-party insurance is, how it works, what it covers and excludes, its benefits and importance, its claim process, and how to purchase it online.
Understanding Third-Party Insurance
What is third-party insurance?
Third-party insurance is also known as liability insurance or act-only insurance. It is the basic and minimum level of car insurance that you need to drive legally on the roads. It protects you from the financial and legal liabilities arising from an accident involving your car that causes damage or injury to a third party, which can be another person, vehicle, or property.
How does third-party insurance work?
Third-party insurance works on the principle of indemnity, which means that it compensates the third party for the losses or damages caused by your car, but not for your own losses or damages.
For example, if you hit another car with your car cause damage to both vehicles, and injure the other driver, your third-party insurance will cover the repair costs of the other car and the medical expenses of the other driver, but not your own repair costs and medical expenses.
Coverage under third-party insurance
Third-party insurance covers the following types of liabilities:
- Bodily injury or death of a third party: This includes the medical expenses, compensation for pain and suffering, loss of income, and legal fees of the third party who is injured or killed by your car.
- Property damage of a third party: This includes the repair or replacement costs of the third party’s vehicle or property that is damaged by your car.
- Personal accident cover for the owner-driver: This is an optional cover that provides compensation to you in case of death or permanent disability caused by an accident involving your car.
Exclusions
Third-party insurance does not cover the following types of liabilities:
- Damage or injury to yourself or your own car: You need a comprehensive or collision insurance policy to cover these risks.
- Damage or injury caused by natural calamities, riots, wars, terrorism, etc.: These are considered acts of God or force majeure and are not covered by any type of car insurance.
- Damage or injury caused by driving under the influence of alcohol, drugs, etc.: These are considered deliberate or negligent acts and are not covered by any type of car insurance.
- Damage or injury caused by driving without a valid license, registration, etc.: These are considered illegal acts and are not covered by any type of car insurance.
Benefits and Importance of Third-Party Insurance
Who needs third-party insurance?
Third-party insurance is required for anyone who owns or drives a car in India. It is a legal obligation under the Motor Vehicles Act, of 1988. If you drive without a valid third-party insurance policy, you can face penalties such as fines, imprisonment, suspension of license, etc.
The benefits of third-party insurance
Third-party insurance has several benefits for you as a car owner or driver:
- It protects you from the financial burden of paying for the damages or injuries caused by your car to a third party.
- It protects you from the legal hassles of dealing with the claims and lawsuits filed by the third party.
- It gives you peace of mind and confidence while driving on the roads.
What third-party insurance doesn’t cover?
Third-party insurance has some limitations that you should be aware of:
- It does not cover your own losses or damages in case of an accident involving your car.
- It does not cover any damage or injury caused by factors beyond your control such as natural calamities, riots, wars, terrorism, etc.
- It does not cover any damage or injury caused by your intentional or negligent acts such as driving under the influence of alcohol, drugs, etc.
- It does not cover any damage or injury caused by driving without a valid license, registration, etc.
Claim Process of Third-Party Car Insurance
How to file a third-party insurance claim?
If you are involved in an accident with your car that causes damage or injury to a third party, you need to follow these steps to file a third-party insurance claim:
- Inform your insurer about the accident as soon as possible and get a claim number.
- Collect the details of the third party such as name, address, phone number, vehicle number, etc.
- Collect the details of any witnesses such as name, address, phone number, etc.
- File an FIR (First Information Report) at the nearest police station and get a copy of it.
- Take photos of the accident scene, the damage to both vehicles and the injuries to both parties.
- Submit the claim form and the supporting documents such as FIR, photos, medical bills, etc. to your insurer.
- Cooperate with the surveyor or investigator appointed by your insurer to assess the extent of the damage or injury and the liability.
- Wait for the approval or rejection of your claim from your insurer.
At-fault vs. no-fault third-party claims
Third-party insurance claims can be classified into two types: at-fault and no-fault.
- At-fault claims: These are the claims where you are found to be responsible or partially responsible for the accident that caused damage or injury to the third party. In these cases, your insurer will pay the compensation to the third party on your behalf, but you may have to pay a deductible or an excess amount depending on your policy terms and conditions. Your insurer may also increase your premium or reduce your no-claim bonus at the time of renewal.
- No-fault claims: These are the claims where you are not found to be responsible or partially responsible for the accident that caused damage or injury to the third party. In these cases, your insurer will pay the compensation to the third party on your behalf, but you will not have to pay any deductible or excess amount. Your insurer will not increase your premium or reduce your no-claim bonus at the time of renewal.
Dealing with uninsured drivers
If you are involved in an accident with your car that causes damage or injury to a third party who is uninsured or underinsured, you may face some challenges in getting your claim settled. You have two options in such cases:
- File a claim with your own insurer: If you have a comprehensive or collision insurance policy that covers uninsured or underinsured motorist coverage, you can file a claim with your own insurer and get compensated for your own losses or damages. However, this may affect your premium or no-claim bonus at the time of renewal.
- File a lawsuit against the third party: If you do not have a comprehensive or collision insurance policy that covers uninsured or underinsured motorist coverage, you can file a lawsuit against the third party and seek compensation for your own losses or damages. However, this may involve a lot of time, money, and effort, and there is no guarantee that you will get a favorable verdict or recovery.
How to Purchase Third-Party Insurance?
Where to buy third-party insurance?
You can buy third-party insurance from any of the following sources:
- Online: You can buy third-party insurance online from the websites or apps of various insurers or aggregators. This is a convenient and fast way of purchasing insurance as you can compare different plans, features, prices, reviews, etc., and choose the best one for your needs. You can also get instant quotes, policy documents, and support online.
- Offline: You can buy third-party insurance offline from the offices or agents of various insurers. This is a traditional and reliable way of purchasing insurance as you can get personalized advice, guidance, and service from the experts. You can also negotiate for better deals, discounts, and benefits offline.
Factors to consider when purchasing
When purchasing third-party insurance for your car, you should consider the following factors:
- Coverage: You should check what type of liabilities are covered and excluded by the policy. You should also check if there are any optional covers such as personal accident cover for the owner-driver that you can add to enhance your protection.
- Cost: You should compare the premiums of different plans and choose the one that offers adequate coverage at an affordable price. You should also check if there are any discounts or offers available that can reduce your cost.
- Claim settlement ratio: You should check how efficient and reliable the insurer is in settling the claims of its customers. You should look for an insurer that has a high claim settlement ratio, which indicates that it has a good track record of paying out claims quickly and fairly.
- Customer service: You should check how responsive and helpful the insurer is in providing support and assistance to its customers. You should look for an insurer that has a good customer service rating, which indicates that it has a good reputation for resolving queries and complaints satisfactorily.
Cost of third-party insurance
The cost of third-party insurance for your car depends on various factors such as:
- Engine capacity: The higher the engine capacity of your car, the higher will be the premium for third-party insurance. This is because cars with higher engine capacity are considered more powerful and risky on the roads.
- Location: The premium for third-party insurance varies according to the zone where your car is registered. There are two zones in India: Zone A (metro cities) and Zone B (rest of India). The premium for Zone A is higher than Zone A is higher than Zone B because the traffic density and accident risk are higher in metro cities than in the rest of India.
The premium for third-party insurance is also revised every year by the Insurance Regulatory and Development Authority of India (IRDAI) based on the inflation and claims data.
