A third party auto insurance plan is a plan that covers the legal liability you face in the event of third party losses. In the event that your car causes damage to the third-party vehicle, personal property, and bodily injury, one could be held liable for the financial loss suffered by the individual. This is a type of plan that covers these financial losses and compensates the third party on your behalf.
According to the Motor Vehicles Act 1988 which governs traffic rules in India, every car traveling on Indian roads must be covered by valid third party insurance. The third party car insurance policy is the minimum essential insurance cover for every car. The coverage protects the interests of third parties if they suffer financial loss from the car. Let’s understand what this policy is all about.
Features of third party auto insurance policy
Some of the key features of third-party coverage are:
- Coverage is mandatory. If you are caught without valid coverage, you face legal complications that include fines, penalties, and even jail time in extreme situations.
- If you are buying a new car, third party cover must be purchased 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 for third party car insurance cover is set by the Insurance Regulatory and Development Authority of India (IRDAI). It all depends on the cylinder capacity of the car.
- The premium is fixed for all insurance companies
- The IRDAI reviews the premium every year and can change the rates if necessary.
Coverage under third-party auto insurance
A third party auto insurance plan covers financial liabilities that arise when your car causes any of the following losses –
- Death of a third party
- Bodily injury caused to a third party
- Damage to third party property
In either of these cases, if you suffer financial liability, the police will cover the liability and pay the compensation. However, if your car suffers damage or loss and you suffer a financial loss, such loss would not be covered by the policy.
Here are some examples to understand the coverage –
In the third and fourth cases, your car also suffers damage. However, a third party auto insurance policy does not cover these losses. If you are looking for coverage for the same, a comprehensive auto insurance policy is recommended.
The extent of coverage
In the event of death or personal injury, third-party auto insurance plans do not limit the scope of coverage. In other words, the coverage is unlimited. The policy would pay the amount of compensation that the Motor Accidents Claim Tribunal (MACT) dictates.
In case of property damage, however, the amount of cover is limited to a maximum of INR 7.5 lakh. If the claim is greater than this, the excess will constitute your disbursement.
Under the third party auto insurance scheme, claims that arise due to the following circumstances are not covered –
- Driving without a valid license
- Driving under the influence of alcohol and/or drugs
- Driving outside the borders of India
- Participate in criminal acts or acts of a dangerous nature
Premiums for third-party car insurance
As mentioned above, the premium is set by IRDAI. It depends on the following factors -.
- The engine capacity of the car
- The type of car – passenger cars or commercial vehicles
- The duration of the policy – annual premium or three-year long-term premium
- The variant of the car – petrol car or electric cars
- Discounts available
The current premium rates, excluding GST, effective June 1, 2022 are as follows:
For private cars
For commercial vehicles carrying up to 6 passengers on hire or for a fee
For commercial vehicles carrying more than 6 passengers on hire or for remuneration
For private electric cars
For commercial electric cars that carry up to 6 passengers on hire or for a fee
For commercial electric cars carrying more than 6 passengers on hire or for a fee
IRDAI allows discounts on these rates. These discounts are as follows –
If your private car is registered as a collector’s car, you benefit from a reduced third-party 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 benefit from a 7.5% discount on third-party rates.
Third Party Auto Insurance Application Process
If you are experiencing a third party claim, the process is as follows –
- Inform your insurance company immediately and register your claim
- File a police FIR detailing the claim. Also keep a copy of the FIR, as it would be required when filing a claim with your insurance company.
- The claim would be taken to the Motor Accidents Claim Tribunal (MACT). The Court would make the judgment on the amount of the claim you must pay to the third party for causing the financial loss.
- Once MACT has rendered its judgment, inform your insurance company and file your claim with the third party
- The insurance company will then indemnify the third party on your behalf.
For filing a third party claim, submit the following documents to the insurance company –
- Complaint form completed and signed
- Copy of your insurance policy
- Copy of police FIR
- Copy of your driving license
- Copy of your identity document
- Any other police report, if any
Advantages of third-party car insurance
Third party coverage on your car is beneficial for the following reasons –
- You can avoid statutory fines and penalties as the cover meets the requirements of the Motor Vehicles Act 1988
- It offers protection against suspension of your driver’s license
- Premiums are affordable and identical for all insurers
- Third party auto insurance provides legal protection against time-consuming legal hassles
You enjoy financial security knowing that any third party claims would be dealt with by the police
Is third-party car insurance sufficient?
If you look at the legal point of view, the third party automobile insurance policy is sufficient to meet the requirements of the Motor Vehicle Act. If you have coverage, you can avoid legal complications. However, when you look at it from a coverage perspective, third-party policy is definitely lacking. The policy does not cover damage your car may sustain due to natural or man-made disasters. Also, if the car is stolen, you will not get any compensation for the loss incurred.
This is why a comprehensive auto insurance policy is recommended for broader coverage. The comprehensive policy covers mandatory third party liability and also extends coverage to damage your car may sustain. Thus, you are compensated even when your car is damaged or stolen. Plus, with optional add-on coverage benefits, you can add more layers of protection and get 360-degree coverage.
Secure your car under a liability insurance policy and fulfill your legal obligation. The policy provides financial security in the event of third party liability where the compensation can be considerable.
In addition, you comply with the rules laid down by the Motor Vehicle Act and can avoid penalties. However, if you are looking for inclusive coverage, go for a comprehensive plan. Customize the plan with add-ons for complete protection and drive without any financial worries.