The purpose of car insurance is to provide financial coverage to its owner in case of any damage to the car arising due to natural or man-made disasters. Primarily there are two types of car insurance policies in India – comprehensive and third party.
While a comprehensive car insurance policy provides 360-degree financial protection, a third-party car insurance plan offers coverage against expenses that you need to bear in case your vehicle cause damages to a third-party. Let’s learn more about this type of insurance policy.
What is third-party car insurance?
As the name suggests, a third party car insurance does not provide coverage for any damage caused to you or your vehicle. Rather it takes care of your liability, which may arise if your car causes any damage to a third person/party. In India, third party insurance is mandatory for all vehicle owners and is also known as the “Act Only” insurance.
When you buy an insurance policy, the policyholder i.e. you are the first party while the insurer is the second party. If your car is involved in an accident which leads to physical injury (or any other damage) to another person, then he/she is the third party. A third-party car insurance policy takes care of the liability arising due to damages caused by your vehicle to a third-party.
What is the need for third party insurance?
As per the Motor Vehicles Act, 1988, which governs and regulates the transportation of vehicles in India, every vehicle must have a third-party insurance cover. For injury or death caused to a third-party, there is no set compensation limit.
However, for property damages, the Insurance Regulatory and Development Authority (IRDAI) has prescribed the compensation limit up to Rs.7.5 lakh. In case of damage values exceeding the set limit, the insured has to bear the rest of the amount.
Apart from the legal mandate, remaining covered under third-party insurance, has several other benefits. Note that you on your own cannot evaluate the extent of the damage. When a third party makes a ‘no-fault liability claim’, your insurer takes the responsibility of covering the costs of bodily injuries and property damage among others.
Without a third-party four-wheeler insurance policy, an accident or damage involving your vehicle can entangle you in several legal nitty-gritty and massive financial burden. Since this insurance is obligatory, any damage induced to you or your property because of an accident caused by someone else’s vehicle would also be covered.
What all is covered under third party insurance?
Third-party coverage is applicable only if the insured party is at fault. The third party can seek coverage only under the category of ‘no-fault claims’. It implies that a third party has no obligation to assert and prove the fault or negligence of the car that caused the accident.
In case of property damage to the third party, your insurer will pay for the damages. As per the norms of the court tribunal, the claims will be evaluated and accordingly the insurer will make compensation for the same.
Also, the third party may suffer partial or permanent disability in the accident. The medical expenses for a partial disability will be compensated by the insurer. In case of a permanent disability, a pre-defined amount of money is paid to the victim as compensation. For bodily injuries, the insurer will cover complete medical cost.
As per a recent diktat by IRDAI, car owners now need to buy long-term four wheeler insurance of up to 3 years. One of the major benefits of the move is that it saves vehicle owners from hassles of renewing their policy every year.
You can also check out additional insurance policies that covers your everyday needs. Pocket Insurance from Bajaj Finserv offers a gamut of offerings including Key Replacement Insurance that helps you recover the costs of replacing a lost key for your vehicle.