Let’s face it - the public transport system in urban areas in India cannot support the population wanting to use it. The buses and trains are either too few or too crowded. So, it’s not unusual for some commuters to use their own cars or motorcycles to get to work and back. And if you’ve ever been stopped by the traffic police for a quick document check, then you know that insurance is a must.

This is where third-party car insurance or bike insurance comes to the rescue. This isn’t only important to keep you safe against fines from the traffic police but also generally shields you from the cost implications of getting your vehicle stolen or involved in an accident.

What is third-party insurance?

Also called liability insurance or act-only insurance, third-party car insurance is one where the insurance company offers you, the car owner/ driver, coverage against damages that you cause to a third party. The rules of the Motor Vehicle Act, 1988, state that it’s compulsory for all two-wheelers and four-wheelers that ply the road to have third-party insurance.

Here’s what you need to know about third party insurance:

• You, the insurance policy holder, are the first party
• The insurance company is the second party
• And the outsider or any other person or property, apart from above two, that you cause damage to is the third party.

Third-party damages include the damage caused to the third party’s vehicle or property. It also includes the physical injury or death of a third-party person.

What a third party insurance covers:

• When a person is injured due to a collision with your car or bike
• When a person gets hurt due to the accident
• When a person’s property is damaged because of the accident

So, while driving if you accidentally cause any loss or damage to a third party, the insurance company will bear the liability. A surveyor will be sent to analyse the extent of loss and validate the repair cost. The financial burden will then be borne by your insurer and not you. However, damages to your bike/ car will not be covered.

What is the need for third-party liability insurance?

Let us take a look at the various aspects that make third-party bike insurance and third-party car insurance so important:

Legal requirement

Under the Motor Vehicle Act, you need to have third-party insurance for your car or bike. Without a valid policy, you can get into legal trouble and would also have to pay a penalty which can lead to imprisonment as well.

Simplified procedure

Buying third-party bike insurance online has made the purchase and renewal of policies fairly simple. And the best part is that most insurance companies these days provide all kinds of plans online.

Very affordable

The rates of third-party insurance are governed by the IRDAI and are very reasonable. All insurer companies, both government and public, offer similar prices of premiums depending on the type of vehicle and plan.

Long-Term Cover

For bikes or two-wheelers that were purchased after September 1, 2018, you have to buy third-party liability insurance cover for 5 years. For cars, this period is 3 years. Comprehensive covers provide both own damage and third-party insurance as well.

What factors affect the premium rates of third-party bike insurance?

The premium you need to pay for your bike insurance would depend on the cubic capacity of your bike.

How to make a claim for third-party liability insurance?

Under third-party insurance, there are two scenarios under which a claim can be made. Let us take a look at both:

When you cause the accident:

If you have accidentally caused some injury to a third party person or damage to a third party property, you need to follow the steps given below:

• After the accident, make sure that everyone is safe. Seek medical help if required
• Try to click pictures of the accident and gather witnesses if possible.
• You then need to file an FIR at the nearest police station.
• Inform the insurance company about the accident and submit all necessary documents.
• The matter would be addressed to the Motor Accident Claim Tribunal (MACT), where a judgement for the claim amount would be issued.
• Your insurance company will then release the compensation to the third party directly.
• In case the compensation exceeds the insurer’s limit, you would have to pay the difference.

When you are the victim

In case you or your property is damaged because of someone who has a third-party insurance cover, follow the steps given below:

• Ensure that you and the people around you are safe. Arrange medical help if required.
• Inform the police about the accident and give them all the details of the person/ vehicle who caused the accident.
• Click pictures and try to gather witnesses.
• You would then have to file a case with the MACT.
• On the hearing date, you will be called to the court, and you’ll be asked how your car/ bike was damaged by the accused.
• If the decision goes in your favour, the insurer of the other person (who has caused the accident) would compensate you for the losses.

What your third-party insurance doesn’t cover

While it’s good to have third-party insurance that covers you financially for a multitude of reasons, there are some exceptions where you cannot claim its benefit.

1. Outside geographies - if you’re involved in an accident in an area that is not specified in the locations mentioned in the policy, then you won’t be compensated for the same.
2. Drunk driving - if you’re involved in a case where you are proven to be drunk while driving, your third-party insurance won’t cover you for the loss.
3. Invalid licence - if the driving licence of the insured is invalid or expired, then it is not possible to claim third-party coverage.
4. Undesignated driver - if anyone apart from the designated driver of the vehicle is involved in a case, then the third-party claim cannot be done.

Wrapping up

Since having third-party insurance is compulsory as per law, there are several benefits to it apart from legal requirements and cost protection. If you don’t have one, apart from paying a fine, your licence can also be confiscated, and you can go to prison as well. So, isn’t it better to just pay the premiums rather than going through all these hassles?

Frequently Asked Question

1. What is the meaning of the third party in two-wheeler insurance?

When it comes to two-wheeler insurance, you are the first party, the insurer is the second party. Any other person or property apart from these two is the third party. With a third-party bike insurance plan, you protect yourself from the financial and legal liabilities that may arise if you accidentally cause damage or injury to a third party.

2. Is 3rd party insurance compulsory?

Yes, as per the Motor Vehicle Act, 1988, it is mandatory for all motorised vehicles to have third-party liability insurance. You can opt for a comprehensive policy which is a combination of the third party and own damage cover.  

3. What is the maximum coverage that one can get with a third-party insurance policy?

There is no specified coverage for injury and death. The compensation is given by the company. However, if there is damage to property, the coverage can go up to ₹7.5 lakh. The policyholder will have to bear the amount over this. In case of a personal accident, cover of up to ₹15 lakh can be claimed.