THIRD PARTY INSURANCE

 

THIRD PARTY INSURANCE

With proposed amendments to the Motor Vehicles Act, the premium for third party insurance for motor vehicles could increase by at least 10-15%. Third party insurance, which is the only mandatory component of a motor insurance policy, accounts for 30% of the premium.

The main objective behind the proposal is to increase the compensation offered to accident victims and provide timely assistance to them. If passed, the amendment seeks to revise the present compensation of ₹ 25,000 to ₹ 2,00,000 in case of death due to hit-and-run accidents.

For grave injuries, the proposed compensation is ₹ 50,000, as compared to the present compensation of ₹ 12,500. In case of fatal accidents where the offending vehicle and owner have been identified, there is a provision for compensation up to ₹ 10,00,000. Additionally, insurance companies will have to pay the compensation within 30 days.

It is believed that the proposed amendments will bring relief to victims of road crashes and their families by providing quick financial support. The revised act also proposes to double the fine for driving a vehicle without insurance, from the present fine of ₹ 1,000 to ₹ 2,000, to ensure all vehicles on road have insurance.

What is Third-Party Insurance Cover and How it Works

What is Third Party Insurance?

Third-party insurance, which is also sometimes referred to as ‘act-only’ insurance is a statutory requirement for all vehicle owners as per the Motor Vehicle Act. It is a type of insurance cover where the insurer offers protection against damage to the third-party vehicle, personal property and physical injury. The policy does not provide any coverage to the insurer. 

How does Third-Party Insurance work?

If a policyholder meets with an accident, then the insurer offers financial assistance to pay for the cost of repairs to the third-party property. Thus, it reduces the financial burden for the policyholder. In the event of an accident, the insured must inform the insurance company about it immediately before filing for a claim. 

When the claim is filed, the insurer appoints a surveyor to assess the damages and verify the estimated cost of repairs. Once the verification is completed, the insurer settles the claim. 

Importance of Third Party Insurance

• Third-party insurance is a mandatory requirement by law. So, having third-party cover allows the policyholder to comply with the legal obligation.
• Although it is a basic coverage option, it gives the policyholders peace of mind knowing that they have sufficient financial protection against the damage they may cause to other people in an accident.
• Third-party motor insurance secures the policy holder’s finance against accidental risks. 

The first step in understanding how a third-party insurance cover works are to make a note of the terminologies used. Some of the commonly used term associated with third-party cover includes:

First party: Policyholder or person who has purchased an insurance policy.

Second-party: Insurer or insurance company.

Third-party: Claimant or person who raises a claim for damages caused by the first party.

If the policyholder is involved in an accident with a third-party, then the policyholder is liable to pay for damages or injuries caused. When an accident takes place, the policyholder must inform the insurance company at the earliest and apprise them of the situation.

Also, it is essential that information is gathered regarding the accident and provided to the insurer with the following details:

• Description of an accident along with date and time.
• Details of insurance and policyholders present during the accident.
• Describe injuries sustained by driver, passengers, and/or to property or vehicle damaged.
• Details of witnesses.
• Weather and visibility condition at the time of the accident.
• Photographs of evidence collected from the accident site.

In case the police enquire, furnish details of the insurance company and make a note of the First Information Report (FIR) number, if applicable. Additionally, if the accident was not due to the policyholder, then the claimant can raise a claim for the cost of hiring a motor vehicle, repair costs, and injury compensation as per the conditions stated in the insurance policy document.

Features of Third Party Insurance

• Third-party insurance offers a basic level of protection to all policyholders. 
• It is also referred to as liability-only or act-only policy
• It offers protection against the legal liability to a third party that may arise due to policyholder’s involvement in the accident. It compensates for the personal injury, loss of life, and property damage to the third-party
• A significant feature of this type of policy is that it has an affordable premium
• Third-party insurance does not offer protection to the insured car itself

The process to Claim Third Party Insurance

To get compensation from the insurance company, the policyholder must comply with the claim rules. The process to claim third-party insurance involves the following steps:

• First and foremost, the insurance holder must inform the insurance company about the accident within the stipulated time, as mentioned in the policy document. 
• The policyholder must file an FIR at the nearest police state from the spot of the accident, and get a copy of the same
• File for a claim with the lender – fill the form, comply with the necessary documents requirement
• Following the claim file, the insurer will send a surveyor to assess the damage and verify the estimated cost. Post assessment, the surveyor files a report
• Based on the report, the insurer settles the claim

Inclusion / Exclusion of third party Insurance Plan

Inclusions

Third-party insurance offers protection against damages to the third-party by the insured vehicle. It covers physical injuries, damages to the vehicle, damage to the property, and death.

Exclusions

Third-party insurance does not provide any compensation, if:

• The accident was caused due to drunken driving
• The driver is underaged or was found guilty of driving without a valid driving license
• The accident was a deliberate act
• The vehicle was used for any commercial purposes or illegal activities
• The vehicle gets stolen

 

WHAT ARE THE CONSEQUENCES OF NOT HAVING THIRD PARTY CAR INSURANCE?

 

Why is it important to have third party car insurance?

Third party insurance is mandatory as per the Motor Vehicles Act, 1988. If there is a car accident, where your car is at fault, you are liable to pay for the damages to the property of the third party, and for the injury or death of the third party.

If you do not have a third party motor insurance, you would have to pay the claim costs from your pocket, as well as pay penalty for driving without a third party car insurance.

What is Third Party Car Insurance

Road Accidents in India - 2016, is a report by Ministry of Road Transport & Highways. As per the report, there are 55 road accidents, and 17 consequential deaths every hour in 2016. Third party car insurance is a risk cover, where the insurance companies compensate for the legal liabilities which are claimed by a third party, when the vehicle of the insured is at fault.

It is important to note here that the third party car insurance does not cover the insured or the damage to his/her car.

Third party motor insurance policy covers:

·         Death, bodily injury, or disability of the third party

·         Damage to the property of the third party

There is no limit on the liability covered for injury or death, but the limit for third party property is capped at ₹7.5 lakh by Insurance Regulatory and Development Authority of India (IRDAI). For damages exceeding this limit, the policyholders will have to pay the balance themselves.

Consequences of Not Having Third Party Car Insurance

As per the law, it is an offence to ply an uninsured vehicle. Third party car insurance is also called 'Act only' insurance. Third party car insurance needs to be taken while purchasing the vehicle. It is as important as a driving license, without which the car owner can be penalised. The penalty could include:

·         Surrendering of driving license

·         Suspension of your vehicle’s registration

·         Fine and/or imprisonment

If you are buying a vehicle, get your third party car insurance now, you will not only be saving yourself from getting penalised but will also be insured against third party legal liabilities arising out of an accident.