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Third Party Insurance Guide for Dummies

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Published on March 29, 2021. EST READ TIME: 4 minutes

Driving a vehicle on the road entails a certain amount of risk. Did you know that as per data provided by the states and union territories to the Supreme Court Committee on Road Safety, 20,732 people died in road accidents in the period of April to June 2020? A high fatality rate when the country was in an unprecedented, nationwide lockdown simply boggles the mind! This is one reason that road laws in India mandate that any vehicle being driven on public roads must have at least a third party insurance. Despite the best efforts, a country as large as India is expected to have road safety problems and mandatory insurance is a good way to reduce the impact of such problems.

Getting to know third party vehicle insurance

Considering the large number of road accidents in the country, the government has decided to create an insurance corpus from which they can provide compensation to victims of accidents. Such corpus is created by collecting premium of mandatory third party insurance policies. If you look at the policy of your vehicle, you will find two components in it – a third-party cover and an own damage cover. This third-party component is the part of insurance legally required for every vehicle. As per a Supreme Court ruling of 2018, when a new car is purchased, a minimum of three years of third party insurance must be purchased with it. This duration goes up to five years in case of new two-wheeler purchases.

Who regulates third party premium prices?

Unlike your own damage cover, where your insurance cost is calculated according to add-ons decided by you, third party vehicle insurance is charged at a fixed price. The job of deciding the price of third-party motor insurance policy has been delegated to the Insurance Regulatory and Development Authority of India (IRDAI).

The IRDAI decides the pricing of third-party insurance policy based on many factors including engine cubic capacity, registration zone. Ideally, the IRDAI revises the cost of third-party policies on an annual basis though this rule is not set in stone. Moreover, since insurance companies have no control over pricing, they are unable to offer any discounts on such policies either.

Coverage and features of a third-party insurance policy

It must be understood that you do not purchase a third-party insurance policy for providing protection to your own vehicle. By the very name, a third party car insurance for vehicle is meant to provide protection to people who have suffered because of the accident. The following protection features are built-in the third-party policy:

• Compensation to family members of a person who died in an accident because of no fault of their own

• Compensation to other people who were injured or have become disabled in the accident because of no fault of their own

• Compensation to other people whose property was damaged in the accident because of no fault of their own

• Compensation to other people whose vehicle was damaged in the accident because of no fault of their own

If you are looking to get protection for covering damages to your own car, you must get a comprehensive car insurance policy with own damage cover. You do not have any recourse to cover your own vehicle repair cost under a third-party policy.

What are the benefits of a third-party policy?

Buying a third-party car insurance for vehicle has a few benefits:

1. It fulfils the legal mandate of compulsory insurance and thus keeps you safe from challans.

2. It is cheaper than comprehensive car insurance policy and thus can be purchased for car, which are to be sparingly used or are kept in long-term storage conditions.

3. It provides you a peace of mind that if an accident happens and you are ordered by the Motor Accidents Claims Tribunals to pay for damages to the victims; you will not have to hurt your own finances. This is very important because tribunal-ordered compensation can be very high.

Conclusion

Every car owner in India should have third party insurance. Regulated by IRDAI, this basic motor insurance type provides protection to the third-party person involved. So, if an accident, you injure a third person or their property, you can provide compensation without having to empty your pockets. However, this insurance does not cover own damage, and hence it is advisable that you take a comprehensive insurance policy with appropriate add-on covers for more holistic protection when driving on Indian roads!

Disclaimer: The above information is for illustrative purposes only. For more details, please refer to policy wordings and prospectus before concluding the sales.

This blog has been written by:

S. Gopalakrishnan | Motor Insurance Expert | 40+ years of experience in insurance industry

A veteran in insurance industry, S. Gopalakrishnan is a name to reckon with in the field of reinsurance; he has headed the Reinsurance department and has rich experience in other fields of motor insurance. He loves to share his opinion on the latest topics in the insurance industry and how he can help people in safeguarding their assets using insurance products.

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Few Other Articles:

• Importance of Third Party Car Insurance

• Why You Should Have A Third Party Insurance Policy

• Rise of Third Party Motor Insurance and Its Impact

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