A third-party car insurance plan is one that covers the legal liability that you face in the case of third-party losses. In case your car causes damage to the third-party vehicle, personal property and physical injury, one might be held responsible for the financial loss that the individual suffers. It is a type of plan that covers these financial losses and compensates the third party on your behalf.
According to the Motor Vehicles Act of 1988 governs the traffic rules in India, every car which runs on Indian roads should have valid third-party coverage on it. The third-party car insurance policy is the bare minimum insurance cover that is a must for every car. The cover protects the interest of third parties if they suffer any financial losses due to the car. Let’s understand what this policy is all about.
Features of Third-party Car Insurance Policy
Some of the salient features of third-party coverage are as follows –
- The cover is mandatory. If you are caught without a valid cover, you face legal complications that include fines, penalties and even imprisonment in extreme situations.
- If you buy a new car, the third-party coverage should be bought for a continuous period of three years. This long-term coverage is also mandatory
- In the case of older cars, however, only annual coverage is available
- The premium of the third-party car insurance coverage is fixed by the Insurance Regulatory and Development Authority of India (IRDAI). It depends on the cubic capacity of the car
- The premium is fixed across all insurance companies
- The IRDAI reviews the premium every year and might change the rates if required.
Coverage Under Third-party Car Insurance
A third-party car insurance plan covers financial liabilities arising when your car causes any of the following losses –
- Death of a third party
- Physical injury caused to a third party
- Third-party property damage
In any of these instances if you suffer a financial liability, the policy would cover the liability and pay the compensation. However, if your car suffers any damage or loss and you suffer a financial loss, such a loss would not be covered by the policy.
Here are some instances to understand the coverage –
In the third and fourth instances, your car also suffers damage. However, a third-party car insurance policy does not cover such losses. If you seek coverage for the same, a comprehensive car insurance policy is recommended.
The extent of coverage
In the case of death or physical injuries, third-party car insurance plans do not limit the extent of coverage. In other words, the coverage is unlimited. The policy would pay the compensation amount that the Motor Accidents Claim Tribunal (MACT) dictates.
In the case of property damage, however, the coverage amount is limited to a maximum of INR 7.5 lakh. If the claim is more than this, the excess would form your out-of-pocket expense.
Under the third-party car insurance plan, claims that occur due to the following instances are not covered –
- Driving without a valid license
- Driving under the influence of alcohol and/or drugs
- Driving outside the boundaries of India
- Participating in criminal acts or acts of hazardous nature
Premiums for Third-party Car Insurance
As stated earlier, the premium is fixed by the IRDAI. It depends on the following factors -.
- The cubic capacity of the car
- The type of car – private cars or commercial ones
- The term of the policy – annual premium or three-year long-term premium
- The variant of the car – fuel-powered car or electric cars
- The discounts available
Tea current premium ratesexclusive of GST, with effect from June 1, 2022, are as follows –
For private cars
For commercial vehicles that carry up to 6 passengers for hire or for reward
For commercial vehicles that carry more than 6 passengers for hire or for reward
For private electric cars
For commercial electric cars that carry up to 6 passengers for hire or for reward
For commercial electric cars that carry more than 6 passengers for hire or for reward
The IRDAI allows discounts on these rates. These discounts are as follows –
If your private car is registered as a vintage car, you get a discounted third-party premium rate. The discount is 50% on the third-party premium specified under the Indian Motor Tariff (IMT).
If you buy a hybrid electric vehicle, you can claim a discount of 7.5% on the third-party premium rates.
Claim Process of Third-party Car Insurance
If you suffer a third-party claim, the process for the same is as follows –
- Inform your insurance company immediately and register your claim
- File a police FIR detailing the claim. Also, retain a copy of the FIR as it would be required when you file a claim with your insurance company.
- The claim would be taken to the Motor Accidents Claim Tribunal (MACT). The Tribunal would pass the judgment on the amount of claim that you have to pay to the third party for causing the financial loss.
- Once the MACT passes its judgement, inform your insurance company and file your third-party claim
- The insurance company would then compensate the third party on your behalf.
For filing a third-party claim, submit the following documents to the insurance company –
- The claim form, filled and signed
- Copy of your insurance policy
- Copy of the police FIR
- Copy of your driving license
- Copy of your identity proof
- Any other police reports, if any
Benefits of Third-party Car Insurance
A third-party coverage on your car is beneficial because of the following reasons –
- You can avoid legal fines and penalties since the cover fulfills the requirements of the Motor Vehicles Act, 1988
- It provides protection against suspension of your driving license
- The premiums are affordable and same across insurers
- Third-party car insurance provides legal protection from time-consuming legal hassles
You get financial security knowing that any third-party claim would be handled by the policy
Is Third-party Car Insurance Enough?
If you look from the legal point of view, the third-party car insurance policy is sufficient in taking care of the Motor Vehicles Act’s requirements. If you have the coverage, you can avoid legal complications. However, when you look from the coverage point of view, the third-party policy is definitely lacking. The policy does not cover the damages that your car might suffer due to natural or man-made disasters. Moreover, if the car is stolen, you would get no compensation for the loss incurred.
That is why a comprehensive car insurance policy is recommended for a wider scope of coverage. The comprehensive policy covers the mandatory third-party legal liability and also extends coverage to the damages that your car might suffer. As such, you get compensated even when your car is damaged or stolen. Moreover, with the optional add-on coverage benefits, you can add further layers of protection and get 360-degree coverage.
Secure your car under a third-party policy and fulfill your legal duty. The policy provides financial security in the case of third-party liabilities wherein the compensation can be considerable.
Moreover, you comply with the rules laid down under the Motor Vehicles Act and can avoid penalties. However, if you are seeking an inclusive scope of coverage, go for a comprehensive plan. Customize the plan with add-ons for all-round protection and drive without any financial worries.