Third Party Insurance in India: Coverage, Claim and Exclusions

Updated: 13-10-2022 06:38:01 AM

Third party insurance is mandatory for vehicles plying on Indian roads under the Motor Vehicles Act, 1988. Those who get to benefit from this type of insurance are neither the insurance provider nor the policyholder. In fact, the beneficiary is a third party not mentioned in the insurance contract. The third party motor insurance plan protects the policyholder from financial and legal liabilities towards the third party. It covers liabilities resulting from any accidental injury, death or physical damage to the third party (person, property or vehicle) caused by the insured vehicle.

According to the IRDAI, Rs. 7.5 lakh is the maximum limit up to which a third party can be compensated for property damage caused by an insured car. The amount is Rs. 1 lakh in case the damage is caused by an insured two wheeler. However, there is no claim limit in case of death.

Types of Third Party Insurance

Third party motor insurance can be classified into 2 parts:

• Third Party Liability Car Insurance
• Third Party Liability Two wheeler Insurance

1. Third Party Liability Car Insurance: In case of an accident, this insurance provides compensation to the third party for any damage or injury because of the insured car. The plan does not provide any coverage for loss/damage to the insured vehicle.
2. Third Party Liability Two wheeler Insurance: The statutory requirement of having a Third Party Motor Insurance for all vehicles operating on Indian roads extends to two-wheelers as well. Thus, this type of cover compensates the third party for any legal liabilities in case the insured vehicle (two wheeler) is at fault.

What Third Party Liability Insurance Covers?

The following are covered under a third party liability insurance, in case the accident is caused by the insured car/two wheeler:

• Physical injury to third party
• Death of third party
• Damage to property belonging to a third party
• Expenses incurred in case of lawsuits filed by the third party

Claim Process for Third Party Liability Insurance

The claim process for Third Party Liability Insurance consists of the following steps:

1. An application is needed against the vehicle owner from the victim or the legal representative of the deceased for third-party liability compensation.
2. After successful submission of the application, an FIR has to be filed. A copy of the FIR along with the record of expenses incurred by the victim must be maintained for future reference.
3. Following this, the case must be registered with Motor Accidents Claims Tribunal.
4. The third party then gets compensated for the entire amount or the amount that is decided by the court. Third Party insurance claims have no maximum capping. However, IRDA has limited the maximum cover for property damage to Rs. 7.5 lakh.

Exclusions

Here are few things/conditions that Third Party Insurance does not cover:

• Accidental damage/loss/liability incurred outside the specified geographical location
• Damage, loss and/or liability that is a result of invasion, war or warlike operations
• Claims that may arise out of any contractual liability
• Liability that is a result of nuclear weapons or radioactive contamination, directly or indirectly
• Using the car in a manner that is not aligned with the commonly stated limitations to use
• Accidental damage/loss suffered by the third party which is a result of any substantial loss
• In case the vehicle was being driven by someone other than the designated driver or owner
• In case the driver at the time of accident is not carrying a valid driving license or in case the policy is inactive at the time of the incident

Benefits of Buying Third Party Liability Insurance

Third party protects you from big financial losses. Let us look at some other benefits:

• Financial Assistance and Legal Cover: It covers the legal liability of the insured in case of injury, disability, demise or any loss or damage to property of the third party. It offers financial assistance and takes care of the legal burden of the insured
• Easy and Quick to Acquire: Third Party Liability Insurance can be purchased and accessed easily. It can also be easily renewed online.
• Cost Effective Plan: The insurance plans are affordable as premiums are low. In fact, IRDA updates the premium amount annually and it is usually a fixed nominal value.

Important Aspects

Let us look at some points to be kept in mind regarding third party insurance:

• The primary beneficiary in a Third Party Liability insurance is the third party and not the insured (policyholder) as money is directly paid to the third party (victim or the legal representative of the deceased) by the insurance company
• Injuries of the insured or damage to his own property are not covered under the Third Party Liability insurance
• Premiums do not differ with the value of the insured vehicle as it is “legal liability” and it is not possible to predict the liability

FAQs

Q1. What is the time limit to raise a third party liability insurance claim after an accident?

The claim must be filed as early as possible. However, the case must be reported to the Motor Accidents Case Tribunal within a period of 60 days from the occurrence of the accident.

Q2. Can a third party insurance be purchased online?

 Yes, numerous insurance providers offer you the option to purchase this insurance plan online in a hassle-free way.

Q3. Is there a way to transfer my third party liability insurance to a different insurer?

Yes, you can do so by filling up the portability form and reaching an agreement with your present insurer at least 45 days prior to the renewal date of the policy.

Q4. What is the duration of a third party liability insurance?

For cars bought after September 1, 2018, it is mandatory to get a third party insurance of 3 years. In case of two wheeler, third party insurance of 5 years is mandatory.

Q5. In case I decide to sell my car, can my third party liability insurance be transferred to the new owner?

Yes, it can be transferred to the new owner. The new owner must submit to the insurer an application for the transfer of insurance within 14 days from the date the vehicle has been transferred to his name and once the endorsement premium for the remaining duration of the policy has been paid.