Key Takeaways:
Accidents can happen despite your being careful. To protect yourself against health and financial risks, insurance is important for both legal and financial needs. This is where the most basic form of coverage comes in – third-party car insurance.
As mandated by the Motor Vehicles Act of 1988, every car owner must have third-party coverage to drive legally on Indian roads. So, before investing in a vehicle, it's important to know what is third-party car insurance and how it works.
To understand the meaning of this, you first need to know what third-party refers to. The following points will make this concept clear:
Third-party insurance means a plan that will protect the policyholder from legal liabilities arising out of injury or damage caused to a third party in an accident. In such cases, the insurance company compensates the affected person based on its policy’s terms and conditions.
In simpler terms, if you, as a policyholder, cause an accident, third-party insurance will cover the accidental damage to another person.
Some legal provisions of third-party insurance are:
With third-party insurance, your insurer pays if you damage property or injure a third party. To understand this coverage clearly, note the following points:
In case of an accident, you need to follow certain steps for the claim settlement:
The importance of this lies in its role as a financial protector. It will protect you from unexpected expenses that arise after accidents. Without this coverage, it will be challenging to bear the full cost of compensating third-party damages.
Beyond legal compliance, third-party insurance offers key benefits like:
Apart from helping you comply with the Motor Vehicles Act, its key features are:
Note that it does not cover damage to the insured vehicle or your injury.
Coverage typically includes the following:
Third-party insurance offers essential protection, but it excludes certain circumstances. Be mindful of the following:
Comprehensive insurance not only protects against third-party liability but also covers your own vehicle against accidents, theft, fire, natural disasters, and vandalism.
With a proper understanding of both kinds of insurance, you can choose the right plan depending on your budget and needs. Here’s a table illustrating their differences:
| Aspect | Third-Party Insurance | Comprehensive Insurance |
|---|---|---|
| Definition | Mandatory policy for third-party liabilities. | Covers own damage and third-party liabilities |
| Add-ons | Not offered | Offered |
| Requirement | Compulsory | Optional |
| Cost | Lower due to limited coverage | Higher due to a wide range of coverage |
| Pricing Method | Set by IRDAI on engine size | Set by insurer as per terms |
Third-party insurance fulfils the legal requirement and protects against liabilities towards others. But keep in mind that it does not cover your own vehicle or personal losses. To make sure you are getting complete financial security, consider opting for comprehensive car insurance.
Is third-party insurance enough for my car?
As a vehicle owner, it is mandatory, and it will protect you against legal or accidental liability. However, it will not protect your car or you. So, you can go for a comprehensive insurance plan to get complete security.
Can I convert a third-party policy to comprehensive?
Yes, you can upgrade to comprehensive insurance at the time of renewal. For this, you need to pay an additional premium and follow the inspection required by the insurance company.
What is the maximum third-party property damage cover?
The Insurance Regulatory and Development Authority of India (IRDAI) mandates a maximum cover of ₹7.5 lakh for third-party property damage.
Does third-party insurance cover passengers?
No, it does not cover passengers in the insured vehicle. A comprehensive car insurance policy may provide this coverage.
