Why Is Third-Party Insurance Important?

​​Third-party insurance is a basic insurance policy that is legally mandated by the Motor Vehicles Act in India for all two and four-wheeler owners.

If you are wondering why third-party insurance is necessary, we will address that in this article. First, let us understand the meaning of third-party insurance in detail.

​What is Third-Party Insurance?

​Third-party insurance is a risk cover, which has been designed to compensate for damages to third parties while protecting the policyholder from financial and legal liabilities. This policy is also called “act-only” insurance.

In other words, compensation for damages inflicted upon any individual other than the insurer and insured, is provided for by the insurer in case the insured car or bike meets with an accident.

This motor insurance policy coverage includes the following:

• Disability, physical injury or death of the third party.

• Property damage of the third party.

This insurance does not cover:

• Physical or property damage of the insured individual.

However, insurers provide personal accident cover (mandatory) along with the third-party insurance policy. This way, the policyholder can manage the expenses involved in getting medical treatment if they themselves are injured in an accident that involved their insured car.

However, your claim under a third-party insurance will not be accepted if:

• You were intoxicated while driving the car.

• You do not own a valid driver’s licence

• If it is found out that the accident was caused on purpose.

• If it is found that your insured vehicle has been reported as stolen.

• If the insured vehicle was being used for carrying out illegal activities.

Importance of Third-Party Insurance

The Motor Vehicles Act of 1988 made it compulsory for vehicle owners to own this insurance policy, which is why this car insurance coverage is so important for all car owners in India.

Also, it is mandated by the IRDAI for new car owners to own a three-year third-party insurance policy. So, when you are purchasing a new car, make sure that you have a three-year third-party insurance coverage for your new vehicle.

To explain the importance of this insurance coverage, let us assume that your car is responsible, during an accident, for damages to a third party. In such a situation, you will have to pay for the cost of treatment of the third party or to compensate for the third party’s damaged property.

This can be a costly affair, which may completely disrupt your routine expenses and budget. That is why owning a third-party insurance is necessary, as the insurer will cover you financially when you face such a situation.

Also, not owning this insurance policy can lead to penalties, including:

• ​Fine or/and imprisonment.
• Surrender of driver’s licence.
• Vehicle registration suspension.

Third-Party Insurance Benefits: Why Insurance Against a Third Party is Necessary?

There are several benefits of third-party insurance, which are provided below:

• ​​Provides Financial Assistance

  When your insured car is involved in an accident that also involves a third party with damages, either property-based or physical harm, you will be provided with legal and financial assistance. It will spare you from stressing about third-party claims.​

• ​Easy Accessibility

  Since this insurance policy is mandatory to purchase, it is available quite easily, especially online. You can compare, choose and buy this policy online, saving you a lot of time compared to the offline purchase process.

• ​Encourages Mental Satisfaction

  The risk of your car meeting with an accident is a worrying thought that pesters you as a car owner. However, with third-party car insurance, you can do away with this stress, as you will be covered financially in case of unforeseen events.

• ​Cost-Efficient

  Again, because this policy is mandated legally, the premium cost is regulated so that it can be affordable for all vehicle owners. The IRDAI sets the premium rates for this motor insurance policy.​

How Third-party Insurance Works

Here is an example that will help you better understand the way this insurance policy works:

• As the policyholder, you are the First Party in this scenario.

• The insurance company from which you bought the third-party car insurance is the Second Party.

• Mr. A, whose car was totaled by your vehicle on the road, is the Third Party.

• In this scenario, the third-party insurance policy that you own will come into use when Mr. A makes claims for damage to his car. Compensation for the loss or damage of his vehicle will be provided by your insurer, saving you this unnecessary financial loss.

  This compensation will be made in accordance with the policy terms as well as the coverage amount that is stated for property damage of a third party.​​

Conclusion

Hopefully, now that you are better informed about third-party car insurance and bike insurance, you will adhere to the laws of the country before you start driving your new vehicle. In the end, this insurance coverage proves to be highly beneficial if your insured vehicle meets with an accident.

Reliance General Insurance ensures that your car insurance claim settlement process is swift and uncomplicated. We also ensure that you get financial assistance for medical care through our Personal Accident Cover, which comes along with this insurance policy.

Also, you can consider opting for our comprehensive car insurance policy, which covers third-party liabilities and several other incidents like theft and vehicle damages due to natural and man-made causes. Check our official website to know more about the benefits of opting for an insurance policy from us.

Frequently Asked Questions

Is it possible to upgrade my third-party motor insurance to comprehensive insurance?

Yes, you can upgrade your existing third-party motor insurance plan to a comprehensive insurance policy for your car or bike. A comprehensive motor insurance policy not only caters to providing financial relief by compensating the third party, but it also protects you from financial losses due to your vehicle being damaged by natural or man-made disasters.

What are the steps to follow in case my car meets with an accident?

First, ensure that everyone is safe.
Next, notify the police and file an FIR, if necessary.
Contact your insurer and provide them with all necessary information.
Take information from the involved third party.