What Is Third Party Insurance? Important Things You Should Know about Third Party Insurance

What-is-covered-under-third-party-car-insurance-policy

Meaning Of Third Party Insurance

Third Party Insurance, by the name it belongs to the someone from the third party. Let us discuss the three parties here.

First party is the one who buys the insurance, for the car. suppose you brought the insurance.

Second party is the company from which you buy the insurance. Suppose a company XYZ.

Third Party is the victim, which got affected by your insured property (in this case it’s a car). You may hit someone with your car, accidentally, so that person who got hit is the third party.

By Definition Motor third-party insurance or third-party liability cover, which is sometimes also referred to as the ‘act only’ cover, is a statutory requirement under the Motor Vehicles Act. It is referred to as a ‘third-party’ cover since the beneficiary of the policy is someone other than the two parties involved in the contract (the car owner and the insurance company). The policy does not provide any benefit to the insured. However, it covers the insured’s legal liability for death/disability of third-party loss or damage to the third-party property.

Since the third-party insurance cover is mandatory, all non-life insurance companies have an obligation to provide this cover. In the Indian context, automobile dealers arrange for a comprehensive insurance cover along with vehicle registration. This comprehensive cover is an add-on to the mandatory third party cover and protects the car owner from financial losses, caused by damage or theft of the vehicle.

The cost of a comprehensive cover is several times that of a stand-alone third-party cover, since damage claims are more frequent than third-party claims. Until now, the premium for motor third-party insurance was calculated on the basis of a schedule of rates provided by the Tariff Advisory Committee, an arm of IRDA, the insurance regulator. But IRDA has done away with the motor tariff. The compensation to the victim is largely decided by the earning capacity of the accident victim.

What Third Party Insurance Do?

Third Party Insurance is the cover offered to the third party only, neither the first party or second will willl get the benefits from it. Suppose you hit someone with your car, then the victim that means the third party will get the claim of your insurance, the insurance company will pay for the disability, death or damage to the property of the third party.

How Does It Work?

  • Application: The application for a third-party claim can be made against the vehicle owned by the victim, the owner of the property, or the legal envoy of the deceased.
  • Police complaint: After completing the third-party claim application, an FIR must be filed with the police.
Quote the following information in the first information report (FIR):
  • Registration number of the vehicle involved in case of an accident
  • The license number of the driver
  • Name and contact details of witnesses, if any.
  • Claims tribunal: Once done with FIR process, the claimant should file a case with the Motor Accident Claims Tribunal. Note that it should be under the jurisdiction of the area where the petitioner resides or the accident occurred.
  • Documents: The documents including a copy of the FIR and the original records of expenses incurred by the applicant must be offered to authenticate the damages/loss.
  • Cover amount: The limit for third-party cover has not been defined in case of an accident that causes injury or death. The total compensation is borne by the insurance firm once the court decides on the amount.

What Third Party Insurance Covers?

  • Death or bodily injury to a third party
  • The accidental death of a third-party
  • Damage to third party property
  • Permanent total disabilities of a third-person

 While there is no limit on the liability covered for injury or death, the cover for third-party property (usually the third party’s car) damage is capped at Rs 7.5 lakh. “In case damages exceed the upper limit, the balance has to be paid by the policyholder himself,” says Sanjay Datta, Chief Underwriting & Claims, ICICI Lombard General Insurance.

What Third Party Insurance Does Not Covers?

  • Personal injury to the first party
  • Damage to the car of the first party
  • The insured victim needs to stick on to the terms and conditions of the insurance company while filing a third party claim. Any claim that doesn’t fall under the company’s terms and conditions will not be covered.

Why Third Party Insurance is mandatory?

Nowadays people are comfortable in taking a loan, and with an increase in the number of people taking a loan, people also go for insurance as it is very important, for coverage against all the damages.
It is not mandatory to take insurance for the car, but part insurance is mandatory. But legally, they cannot force you to take one.
In fact, according to the Motor Vehicles Act, 1988, it is mandatory for every owner of a vehicle plying on the public roads to take an insurance policy to cover the amount, which owner has to pay as he is legally bounded as a result of accidental death, bodily injury or damage to property.
long-term third party insurance policy has been made mandatory by the Irdai following a Supreme Court order.
The three-year third-party insurance will cost Rs 5,286 for cars with engine capacity of less than 1,000 cc, Rs 9,534 (1,000 – 1,500 cc) and Rs 24,305 for cars with engine capacity of 1,500 cc and more.
In case of two-wheelers, the five year-third party insurance will cost Rs 1,045 for vehicles with engine capacity below 75 cc, Rs 3,285 (75-150 cc), Rs 5,453 (150-350 cc)
As regards the comprehensive insurance, which covers theft and damage among others, the vehicle buyer would have the option to buy it for one year or three years in case of cars and five years in case two-wheelers.

Which insurance will cover First Party or The owner of the car?

Comprehensive Car Insurance
 
Comprehensive car insurance is third party insurance plus some additional benefits, which will pay out in the event of your vehicle being stolen or set on fire, and also pay for any sort of damages to your vehicle.
It covers damage to insured vehicle also, it can be via lightning, burglary, riot and strike, malicious act, terrorist act, earthquake, (fire and shock) damage, flood, typhoon, hurricane, storm, tempest, inundation, cyclone and hailstorm, transit by road, inland waterway, lift, elevator or air. So, this brings us to what type of car insurance cover is best for you? As a general rule of thumb, the following points are worth noting:
If you are inexperienced and driving a costly car, comprehensive insurance can be high.
  • Of course, if you are in a fault in the accident, you have to pay for all the damages. But if you are young and driving a more expensive car, then you need to have comprehensive insurance.
  • Remember that the no-claim bonus follows the individual and not the vehicle. Resulting in availing of discount at the time of renewal of the policy. The bonus ranges from 20% to 50%, depending on the number of years for which no claim has been made.
  • Some aspects which policy does not consider are wear and tear, breakdowns, consequential loss, loss when driving with an invalid driving license or under the influence of alcohol, use of vehicle otherwise than in accordance with limitations as to use, etc.
  • Now, you can do online processing of claims and premium payments. This implies that life is going to become much easier for the end user.

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