What are the benefits of Third-Party Auto Insurance?
India records one of the highest numbers of accidents that happen annually and lakhs of deaths due to these accidents. Hence, third-party insurance has been made mandatory, for all types of vehicles, as per the Motor Vehicles Act. It is the minimum legal insurance requirement to drive in India. Third-party insurance covers any type of damage caused to a third party. However, It is not enough to cover you. It is the minimum basic requirement, and hence a vehicle owner needs adequate insurance cover against all kinds of risks.
What is Third Party Insurance?
Third-party auto insurance indemnifies the insured for any damage or loss caused to a third party due to an accident by the insured’s vehicle. Third-party insurance meaning can be explained by the fact that the insured or the first party is not the beneficiary here. There is a third party other than the insured (first-party) and the insurance company (second-party) that gets the insurance benefit of the first party. Therefore, in case of an accident caused by a first-party or the insured where a third party suffers a loss or damage, the insurance company pays the compensation to the third party on behalf of the first party. As it covers the legal liability of the insured towards a third party, it is also called third-party liability insurance and is the cheapest insurance available in the market.
Importance of Third Party Insurance
Third-party insurance is important because it safeguards the interest of a third party in case of an accident caused by the fault of the insured. The compensation is always paid directly to the third party by the insurance company. On the other hand, it also takes care of any liability on the insured by the third party. The motor vehicle’s act 1988 has made it a statutory requirement to have and all insurance companies provide third-party liability insurance. The premium for third-party insurance is decided by IRDA and is the same for all insurance providers but it may differ according to the engine capacity of a car.
Benefits of Third Party Insurance
- Provides peace of mind: It provides peace of mind in unfortunate situations by easing the financial pressure of the insured for any legal third-party hassles.
- Cost-Effective: It is the most cost-effective and affordable insurance with a low premium which is a fixed value updated annually by the IRDAI.
- Provides financial assistance and legal cover: It is most useful in times of crisis. Covering the legal and financial burden of the insured in case of damage or loss to a third party is the most essential benefit of 3rd party insurance.
- Quick and easy to purchase: A third-party insurance can be easily purchased or renewed either online or through the insurer’s office. It can be easily accessed by anyone at their convenience.
- Mandated by the law: The Government of India mandates you to have a valid third-party motor insurance plan before plying your vehicle on the Indian roads.
What is covered in Third Party Insurance?
- Property Damage: If you cause damage to a third party’s property (third party’s vehicle) in an accident, third party insurance covers the damage on your behalf up to ₹ 7.5 lakhs.
- Physical Injuries: All types of physical injuries are covered in third-party insurance and there is no limit for the compensation. It provides full financial support on behalf of the insured to the injured.
- Partial and Permanent Disability: In the case of partial disability, such as fracture, which can be cured with time, necessary medical expenses are covered. But if there is a permanent disability caused, a pre assured sum is offered to the third party by the insurer.
- Death: In a death situation where the insured is responsible for the death of a third-party, compensation is covered by the insurance company. However, the compensation amount is decided by the court according to the consequences of death and earning capacity of third party.
Third-party insurance coverage in India does not include the damage to the insured’s vehicle. To cover damage to a vehicle or driver, the owner needs comprehensive insurance along with personal accident cover.
How does Third-Party Insurance Work?
According to the motor vehicle act, there are two types of claims in third-party insurance; no-fault liability claim and fault liability claim. A no-fault liability claim does not involve the fault of any party rather it is a case of by chance accident. Fault liability claims are when the accident occurs as a result of the negligence of one of the parties. Once proved, the compensation decided by the court is higher than a no-fault liability claim. Now let’s understand the process to claim third-party insurance,
- First, inform the insurance company about the accident with all the details.
- Raise a third-party claim with your insurance company.
- The insurer will send a surveyor to assess the damage caused to the third party.
- After approval of the claim, the insurer will pay the compensation to the third party.
But claim settlement is not as simple as it appears, if you are third-party, raising a claim includes,
- Filing an FIR at the nearest police station from the spot of the accident and obtaining a charge-sheet against the insured or offender.
- File a case under the Motor Accident Claims Tribunal(MACT) with the help of a lawyer.
- Provide evidence and full details of the accident in court.
- Settling the claim in court.
Points to remember before raising a Third Party Liability Claim
- Raising a claim requires legal proceedings so be prepared with proper documentation before appearing in court.
- In case of death or disability of the third party arising out of the accident, claim settlement takes a long time in court, maybe up to 3-4 years. Be prepared for negotiation.
- You will need a good lawyer to help in the process.
- In case the accident is not major and has not caused any serious or permanent damage, it doesn’t make any sense to go to court for a claim settlement. Go for an out-of-court settlement.
The Importance of motor insurance can not be ruled out as it acts as a financial question in case of a mishap. It also takes away the liability suffered by a third party.