What Is The Third Party Insurance And Why Third-Party Insurance Needed

Jan 15 2019 05:46 PM
What Is The Third Party Insurance And Why Third-Party Insurance Needed

The ABC of Third Party Insurance in India

Driving is a wonderful experience even on Indian roads, only if you follow a few basic rules of smooth driving. The first rule requires insuring your prized possession before hitting the roads.

To ensure a smooth drive while taking her to the roads, all you need is a blend of skills, knowledge of traffic rules and above all peace of mind if anything goes wrong. Moreover, defensive driving is what makes you a skilled driver, which means driving “expecting the unexpected” on roads. And to overcome the outcome of an eventuality, you must be covered with vehicle insurance, at least third party car insurance. But before agreeing with us, you should know what is third party insurance.

Below is a brief rundown on the connect of third-party insurance and how it works throughout.

Why Third Party Insurance?

You may wonder, why is car insurance compulsory in India? After all, it is my money and I prefer to spend it the way I like. Why am I compelled to buy car insurance?

In metro-cities like Delhi, where accidental cases are taking a troll, a huge repair bill can burn your pocket if you haven’t get your car insured. Here comes car insurance into the picture, which saves you from being bankrupt. Apart from bearing the financial loss due to the damages, it also covers the legal liabilities of a third party caused by an accident. This is exactly why car insurance is introduced as a law under the provisions of Motor Vehicles Act 1988, which forces every vehicle owner to buy car insurance, at least third party insurance.

Usually, there are two types of basic car insurance policy. While third-party insurance is compulsory is mandatory in India, Comprehensive insurance is optional, and one can take it as per his/her insurance requirement.

How Does the Contract Work?

Third party car insurance is a contract between the insurer and the insured, where the first party (insurer) indemnifies the second party (insured) for being sued by the court of law for the accidental damage or bodily injury or death of a third party. In other words, it helps the insured in mitigating the unexpected financial burden towards medical treatment of the third party or third party vehicle repair cost.

Thus, the policy is famous as Third Party insurance as the beneficiary of this policy is not the insured but a pretentious third party, who might have suffered from injury/disability or death or loss of property.

Third Party Car Insurance Premium

The premium is decided by IRDA every year and subjects to be changed without prior notice. However, the premium is depended on the engine capacity of your vehicle. Usually, third party car insurance comes at a cost-effective rate as compared to the comprehensive policy. The premium sees a hike 5 to 10% every year.

Third Party Car Insurance: Inclusions Vs Exclusions

Policy Inclusions

Category

Compensation Limit

Accidental death of a third-party

No limit

Accident leading to disability

  • Rs 2,00,000 for total disability
  • Rs 1,00,000 for partial disability

Property Damage

Up to 7.5 lakh for private cars and commercial vehicles

Owner-driver Cover

Rs 2,00,000

 

Policy Exclusions

 

Damage to the Insured Vehicle

Any damage caused to the insured vehicle during a collision with another vehicle or property will not be covered by the policy. In such a case if any liability arises, the compensation cost given by the insurance company is made by excluding the damages to the insured vehicle.

Injury to Vehicle Owner/driver

No coverage will offer against any injury sustained during an accident. It can be from major injury leading to hospitalisation or surgery or a minor day-care procedure.  However, with a Personal Accident Cover, you can be covered against death and permanent disability.

 Personal belongings are excluded

The insurer doesn’t pay for the loss of personal belongings such as a laptop, mobile, cash, luggage etc. that means if you leave your car unattended or forget to lock the car doors and any important belongings inside the car get stolen, you claim for loss will be denied by the insurer.

 Inefficient in case of total-loss case

When your vehicle is damaged totally or crushed beyond repair and gets stolen, it is categorised under ‘Total Loss’ category. Under such case, third party insurance offers no pay-outs for replacing the same. In this ground, comprehensive car insurance outweighs third party insurance.

 

Other general exclusions include:

Apart from the afore-mentioned exclusions, car insurance claim also be rejected on the grounds that:

  • If the driver is fund driving without a valid driving license at the time of the accident
  • If driving under the influence of alcohol, drugs or other toxic substances.
  • If the accident is a result of an intentional act
  • Contractual liability claims are excluded
  • If driving the vehicle outside the prescribed geographical boundary
  • Ay damage due to war, war-like situation, act of terrorism, riot, strike, civil war, foreign invasion etc. are not covered

Recent Law on Third Party Insurance

Third party insurance is always mandatory, however, the recent announcement made by the Supreme Court in 2018, all four-wheeler owners have t third party insurance premium for 3 years. This is 5 years in case of bikes. Earlier, it comes with a one-year plan where the premium is paid for one year only and the policy requires to be renewed annually. This is in light with the recent survey made on road accidents that said approximately one lakh people died in road accidents in the past years. The court urged to make third party insurance for a longer period so that the maximum of victims on roads could get compensated fairly.

Buying third Party Insurance

Buying insurance is a complex thing. And even if you have crossed the first hurdle, you can’t be guaranteed of having the right policy. That’s why thorough research is required before zeroing down on a plan. Car insurance can be bought either online or offline. To buy online, you can visit the official websites of various insurers, compare the plans on the grounds like premiums, coverage offered, claim settlement ratio of the insurer etc. and if it suits your needs then buy online. This way you can offer optimum protection to the vehicle with no time.

If you’re going offline then approach the nearest branch offices and manually do the buying formalities. Fill the application form and pay the premium physically to acquire a plan.

However, online buying is more popular due to its convenience especially in the era when we’re running out of spare time. With online insurance, you can buy a policy even sitting in your office or lazing on your bed. Moreover, it offers the facility to compare the plans which is not possible with offline insurance.

Wrapping it Up!

Saving a small part of your earnings is the best way to prepare yourself for unexpected. The scope of these savings will aid you with a great extent if you are backed by an insurance policy. and if you own a car whether it is luxury or not, you are saved in a huge manner. The Indian law has made it mandatory so that no one suffers a financial loss from an accident. With third party insurance, the burden of the third party can be mitigated up to a certain extent, when you can’t soothe the emotional loss.

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