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If you want to drive your car on the Indian streets, you mandatorily need to own a Third-party Insurance Plan as per The Motor Vehicles Act. Here, let's look at what is Third-party Insurance, how does it work, inclusions, exclusions and many more.
Third-party car insurance is the mandatory insurance, which all Indian car owners must purchase for their cars as per The Motor Vehicles Act, 1988. Third-party car insurance is also known as Act-only or Liability Car Insurance.
It helps you to comply with the law and protect your savings against third-party liabilities such as injuries to someone else or damages to their property.
Third-party car insurance works by insuring the policyholder against liabilities arising due to injury sustained by a third party or damage to a third party’s property by the insured car. In such a scenario, the third party will most likely demand compensation to treat injuries or repair damages from the car’s owner.
In case of third-party liabilities, a case will be filed and the owner’s car insurance company reimburses the third party. This is a simplistic explanation of how third-party car insurance works. The situation gets complex when you happen to crash your car into another vehicle. In almost all cases, there is a need for a First Information Report to be filed with the police. Third-party cases are settled as per the Motor Accident Claims Tribunal.
There are three parties involved in third-party car insurance.
The first party i.e. the policyholder is liable to compensate the third party for the injuries or damages to their property.
The second party is the policyholder's insurance company, which compensates the third party as per the terms and conditions of the insurance policy.
Third party can be any other person, for example, a pedestrian who has sustained injuries or damages to their property by the first party's insured vehicle.
If the injury to the third party is such that it doesn’t allow the injured to work, the policyholder is liable to pay the compensation accordingly. In case of death, the deceased person’s worth shall be ascertained and the policyholder will be liable to pay the amount to the deceased person’s family.
Here’s a list of top features for a third-party car insurance policy.
A third-party liability policy is available at a low price. It is available at a nominal price as compared to the Comprehensive car insurance policy.
The process to purchase a third-party liability is simple. As it is a standard policy, there is not much to choose from. You simply have to select your car’s model and purchase the policy.
A third-party liability policy will cover you against personal injuries to a third party and property damages to a third party up to Rs. 7.5 lakhs.
Personal Accident Cover is mandatory by law. Hence, it is recommended to buy a Personal Accident Cover along with a third-party liability plan. It offers insurance coverage up to Rs. 15 lakhs for the owner/driver in case of death/permanent disability while driving.
Unlike a Comprehensive policy, the premiums for a Third-party Liability policy are not decided by the insurance companies. The premium is decided by the Insurance Regulatory and Development Authority of India (IRDAI) based on the cubic capacity of the car’s engine. The IRDAI usually revises this premium on an annual basis. Here’s a table showcasing third-party car insurance premium rates for FY2019-20.
|The capacity of the vehicle’s engine||Revised premium Rates for FY 19-20 (Rs.)|
|Not exceeding 1000cc||Rs. 2,072|
|Exceeding 1000cc but not exceeding 1500cc||Rs. 3,221|
|Exceeding 1500cc||Rs. 7,890|
Here’s a list of third-party car insurance policy benefits.
A third-party car insurance policy is a simple plan. It does not have complex features like a Comprehensive policy. If you plan to buy it online, you can do it conveniently through your smartphone within minutes.
Buying a third-party car insurance policy makes you compliant with the law of the land. An active policy will save you from paying penalties. By buying this plan and renewing it before its expiry, you stay away from being imprisoned for legal violations.
The policy offers a liability cover against injury to third party and damages to third party property. In a way, it is a financial cover for you when it comes to paying third parties.
Here’s a list of all that’s covered in a basic third-party car insurance Policy.
There might be an instance where your car accidentally injures a third party. For example, your car might accidentally go out of control for a moment and injure a pedestrian walking on the footpath. The third-party policy will cover the cost to treat such injuries.
In an unfortunate event, you might accidentally injure a person with your car leading to the person’s death. The third-party policy will take care of reimbursing the deceased person’s family members as per the terms and conditions.
Damage to a third person’s property is also covered under a third-party policy. For example, your car might go out of control and crash into someone’s shop along the road. This policy insures you against the expenses arising out of such instances up to Rs. 7.5 lakhs.
This cover is a part of the third-party property point but mentioned separately as it is a common occurrence. Your car might run into a third-party’s bike on the road. The policy will cover damages to the bike as per the terms and conditions.
To get a complete overview of the third-party policy, you must know what is excluded by the policy as well. Here’s a list of things that are not covered under the third-party policy.
A third-party car insurance policy does not offer ‘Own Damage’ cover. For that, you will have to purchase a comprehensive plan. Own Damage (OD Insurance) cover insures you against damage to your car in case of an accident, fire, man-made calamities, natural calamities and theft.
Personal Accident Cover is mandatory by law. A third-party policy does not cover you in case of permanent disabilities/death arising out of a car accident. The cover for such instances is Rs. 15 lakhs as per the terms and conditions.
Your third-party policy will not cover you against situations in which you were found to be violating traffic rules. For example, drunk driving, driving in an intoxicated state, driving without a valid license, etc. will not be covered.
Your third-party policy will not offer any cover if you are driving on the streets with an expired car insurance policy.
Buying and renewing third-party car insurance online is a paperless, quick and hassle-free way.
Visit www.acko.com or download the mobile app. Enter basic details such as car model, pin code, registration year, previous policy details, etc. and purchase the policy. In case you want to renew your third-party policy, simply login to your account, and renew the existing policy by making the payment.
You have the option to choose a different insurer while renewing your policy. The premium charged for the policy will remain the same as it is prescribed by the IRDAI. You can also choose to opt for a Comprehensive policy. It includes the mandatory third-party cover and also offers Own Damage cover. Since a Comprehensive plan offers enhanced coverage, you need to pay a higher premium amount.
Claim settlement in a third-party insurance policy is a complex process. It is not as simple as it is in a Comprehensive policy. You cannot simply call your insurance company to take care of the matter. There’s a legal process involved. The steps to raise a claim might be different on a claim-to-claim basis. Here’s a broad overview of the steps that are involved in settling a Third-party claim.
Informing the insurance company (ACKO in this case) and filing the First Information Report (FIR) with the police. Normally, the third party files the FIR.
Registration and hearing of the case in the Motor Accident Claims Tribunal. The Tribunal will go through all the collected evidence and the testimonials.
Result of the case in the Motor Vehicle Tribunal. The hearing and the declaration of the result can take time. This will be followed by the settlement of the claim amount by ACKO.
Unlike a Comprehensive Plan, the rates for a Third-party Car Insurance policy do not change from one insurer to another. The rates are determined by the IRDAI and remain standard for all insurers. The IRDAI might decide to vary it on an annual basis but all insurers have to abide by the rate stated by the IRDAI. Thus, there is no way to get the cheapest Third-party Insurance policy as the third-party policies offered by all insurers are priced the same.
Whether you own a private vehicle for commuting or a commercial vehicle for business purposes, you need to purchase a Third-party policy. The basics of a Third-party car insurance policy remain the same for a private and a commercial vehicle. However, there might be slight variations concerning the cover, premium, and terms and conditions. The online purchase process of a commercial policy is also different from the process for a private one.
Whether you buy a private car insurance policy or a commercial car insurance policy, there are two types of car insurance plans for you.
This is a basic plan mandated by law. It has no frills and comes at a low premium. The rates for this policy are fixed by the Insurance Regulatory and Development Authority of India (IRDAI).
A Comprehensive plan offers Own Damage cover as well as the features of the Third-party Liability Car insurance policy. You also have the option to choose from a wide range of add-on covers.
Also, read: 8 Advantages of Buying Car Insurance Online
Buying and Renewal Related FAQs
It is mandatory to purchase Third-party car insurance in India as it is demanded by The Motor Vehicles Act, 1988. Not abiding by this rule can lead to heavy monetary penalties.I am a good driver with a clean claim record. Is it possible for me to not buy a third-party policy and drive my car?
All car owners must purchase a third-party policy irrespective of their driving skills or claim records.What happens if I am caught driving my car without a valid Third-party car insurance policy?
Driving without a Third-party car insurance policy is a legal offence. Therefore, you will be penalized for it. The penalty includes a monetary fine and can even lead to imprisonment. Also, you cannot raise any claim in case of third party injuries or damages if you don’t have a valid Third-party insurance policy.Is there a better policy than a Third-party liability policy?
A Comprehensive policy can be a better option than a Third-party Liability policy as it offers wider coverage. It also covers damages to your car in case of an accident, fire, man-made calamities, natural calamities and even theft.Is it possible to purchase a Roadside Assistance Add-on with a Third-party Car Insurance policy?
No, you cannot purchase a Roadside Assistance add-on with a Third-party car insurance policy. You cannot purchase any add-ons with a third-party policy. You can purchase add-ons only with a Comprehensive policy.Does the model of my car matter while buying a third-party policy?
The premium for a Third-party Car Insurance Policy based on the vehicle engine’s cubic capacity is regulated by IRDAI. As different car model engines might have different cubic capacities, the premium for them might be different.From where can I purchase a Third-party Liability car insurance policy?
You can buy third-party car insurance from multiple places such as the showroom (from where you purchased your car), from a certified agent, from the insurance company’s branch office or online. However, buying third-party car insurance online is a quick and hassle-free process.Does a Third-party car insurance policy offer sufficient coverage?
A third-party cover only looks after third-party liabilities. If you are looking for a policy that will offer you sufficient coverage for your car as well, you should consider a Comprehensive policy.What are the eligibility criteria for purchasing a Third-party car insurance policy?
You need to own a registered car to buy a Third-party car insurance policy.On what basis should I compare Third-party car insurance policy providers as the premium for it is the same across insurers?
You can compare insurers offering third-party policies based on their service quotient.Where can I find the detailed Policy Wordings of the Third-party Liability car insurance policy?
You can find the detailed Policy Wordings of the Third-party Liability car insurance policy on the insurance company’s website. Usually, it should be placed under the Downloads section. You can download the Policy Wordings for a Liability-only car insurance policy for a private vehicle for three years offered by ACKO over here.
Is it possible to renew a Third-party car insurance policy online if I had purchased it offline?
Yes, it is possible to do so. You will have to visit www.acko.com for details. However, you can also choose to renew Third-party car insurance online from a different insurer.
Documentation Related FAQs
Usually, there is no need for any paperwork while buying Third-party car insurance from Insurtech companies such as ACKO.How do I physically carry my online Third-party car insurance policy?
You can take a printout of your online Third-party car insurance policy and carry it in the physical format. You can also download in it a PDF format or store it in DigiLocker for easy access. What if there is a mistake in my Third-party car insurance policy document?
If there are any typographical errors or minor errors such as a change in address or contact number, you can get those done quickly via an endorsement process by contacting your insurance company. Major changes such as modifications in the engine can also be done via an endorsement but it can affect the premium.What happens to my Third-party car insurance policy if I sell my car?
If you are selling your car, you have two options for your Third-party car insurance policy. You can either cancel it or transfer it to the new owner. In both cases, you will have to submit the required documents.
Claim Related FAQs
Yes, there is a need to file a First Information Report in case of a third-party claim.Who handles the cases filed for third-party claims?
Third-party claims are handled by a dedicated court known as the Motor Accident Claims Tribunal.Is there a limit when it comes to the compensation offered by the insurance company under the third-party property damage clause?
Yes, there is a limit of Rs. 7.5 lakhs concerning the compensation offered by the insurance company under the third-party property damage clause.Is there a limit when it comes to the compensation offered by the insurance company under the third-party injury/death clause?
There is no limit when it comes to the compensation offered by the insurance company under the third-party injury/death clause.Is there a time limit before which one has to file a claim?
Ideally, a third-party claim needs to be filed within 60 days of the accident. However, it is recommended to do it at the earliest.Someone else was driving my car at the time of the third-party accident? Will my insurance company settle the claim?
The third-party policy is for the vehicle. Therefore, the insurance company can settle the claim provided the person driving the car was driving it legally with a valid driving license.Will my third-party policy cover me if I purchase it from one city but the car accident takes place in another city?
Yes, a Third-party car insurance policy offers nationwide coverage. You can purchase the policy from anywhere in India and it shall cover you throughout the country.
Long-Term Third-Party Liability Vehicle Insurance Withdrawn
– June 10, 2020
The long-term Third-Party Package, which includes Own Damage cover as well for three and five years, has been withdrawn by the IRDAI. This applies for both two and four-wheelers with effect from 1 August 2020. The IRDAI observed that the delivery of long-term Third-Party Liability policies is difficult as it is expensive for both two-wheeler and four-wheeler owners. It added that the possibility of being linked to loans or forced selling was high and that the vehicle owners have no choice but to opt for the long-term product with no options. Additionally, the IRDAI said that the NCB is not the same across insurance companies, which could lead to dissatisfaction and confusion among policyholders. With this notification, customers won’t be given the option of long-term Own Damage plans, only long-term Third-party plans will be offered to customers.
COVID-19: Third-Party Vehicle Insurance Premium To Remain Unchanged in Next Fiscal
– April 2, 2020
The Insurance Regulatory and Development Authority of India (IRDAI), in an order dated 27 March 2020 has directed that the premium for Third-party vehicle insurance will not be revised for FY 21. In the wake of the rising Coronavirus infections in the country, the government has announced a 21-day lockdown. The order issued by the insurance regulatory states that the premium for the Third-party motor insurance which was set for the year 2019-20 will continue beyond 31 March 2020 till there is further notice. Insurance companies will continue to charge the same third-party vehicle insurance premium from 1 April 2020 to provide some relief to policyholders in the country.
Third-Party Vehicle Insurance Premium Increase Put on Hold for Now
– March 30, 2020
The Insurance Regulatory and Authority of India (IRDAI) has announced that the current third-party insurance premium prices for the year 2019-20 will continue beyond 31 March 2020. The announcement comes amid the ongoing lockdown due to the deadly novel Coronavirus infections. In an order released by the IRDA, the validity of third-party insurance premium will be increased and remain unchanged beyond the due date of 31 March 2020 until further notice. This effectively means that insurers cannot increase or will continue to offer third-party vehicle insurance at the current rate set by the IRDA until the regulator revises the premium.
Third-party Motor Insurance Premiums Expected to Increase by up to 15%
– March 11, 2020
The third-party vehicle insurance for the next financial year 2020-21 is expected to rise by 15%. The revised structure will be effective from 1 April 2020. The increase in premium for the insurance will be across all automobile segments. A proposal of a 2% hike is expected on commercial vehicles, while electric vehicles will witness a hike as well. Long-term third-party vehicle insurance for both two-wheelers and four-wheelers is mandatory as per the directive by the Supreme court. While the long-term insurance policy is 3-years for four-wheelers, it is 5-years for two-wheelers.
ACKO General Insurance Limited
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