Does Third-Party Insurance Offers Enough Protection on Indian Roads?

Car insurance is essential for protecting against financial losses from unexpected incidents. In India, third-party insurance is mandatory under the Motor Vehicles Act, 1988, covering damages caused to another person or their property. Driving without it is a punishable offence. However, this policy does not cover the insured car or its owner’s expenses in an accident they cause. Relying solely on third-party insurance leaves significant gaps in protection. 

This blog explores the importance of third-party coverage of vehicles and why it alone isn't enough for complete financial security on the road.

Also referred to as "act only policy", the third party car insurance is a statutory mandate for all kinds of motor vehicles in India. It compensates for financial losses incurred due to a mishap causing a third party's physical injury, damage to their vehicle and property. 

For example, suppose Girish accidentally hit Soumen's car while driving on a congested road. The impact caused a dent on the bumper and damaged the tail light of Soumen's car. Soumen took the details of Girish's insurance policy and made a claim. As mentioned in Girish's policy term, Soumen could easily repair his car without paying a single penny from his pocket.

The third party insurance policy covers the following: 

The following are the reasons why third-party insurance is not enough:

1. It Does Not Cover the Policyholder: Third-party vehicle insurance is specifically designed to cover third-party damages. Therefore, it does not include the damages of the policyholder. You get this particular policy to stay compliant with the law. So, if your car hits a tree and gets damaged, third-party insurance will not cover the repair. 

2. Offers Minimum Coverage for Personal Accident: Third-party insurance offers personal accident cover for the policyholder only up to Rs. 2 Lakhs. Given the way medical expenses are rising consistently, that amount is insufficient. Your medical expenses may be higher than the claim amount.

3. It Does Not Allow Add-Ons : Another reason why third-party insurance is not sufficient is that it does not provide any scope to have add-ons. Usually, a comprehensive plan offers add-ons like engine protection, zero depreciation, which help to protect your vehicle in different scenarios.

4. Does Not Cover Natural Calamities: If the policyholder has damage to their car because of a natural calamity like a flood or an earthquake, the repair costs are not included in the policy. 

5. No Coverage for Theft of a Vehicle: In case your car gets stolen, this policy will not provide any theft coverage. To get coverage for these instances, it is best to choose a comprehensive car insurance plan.  

6. No NCB Benefits: Third-party insurance is a basic plan, therefore, it does not have any NCB or No Claim Bonus benefits. NCB is the discount you can avail at the time of renewing a plan, if you did not claim your insurance during the previous term. 

7. Does Not Offer Coverage for Fire or Explosions: In cases of fire or explosions, which could damage your car, you will not get any coverage from the third-party liability plan. Only comprehensive car insurance plans cover such incidents.

Third-party liability and own damage are two common terms you must have heard multiple times while looking for a car insurance policy. The reason is, every car insurance company offers these basic types of policies. Based on your requirements, you make the final call. Whereas third-party insurance policy is a legal mandate, it does not offer any coverage that might be beneficial for you. Therefore, it is recommended to opt for a comprehensive car insurance plan since that will offer coverage not only for you, but for third parties too.