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What is Third-party Insurance Coverage?

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What is Third-party Insurance Coverage?

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Third party insurance is a kind of motor insurance. You can purchase this kind of plan for your car or your two-wheeler. The interesting thing is, unlike other kinds of insurance, third party insurance isn’t just optional. It is a legal requirement in India. 

The Motor Vehicles Act, 1988, makes this kind of insurance a mandatory requirement for all vehicles that ply on Indian roads. So, if you drive a car, a bike or a scooter, make sure you have third party insurance in your kitty. Otherwise, you will have to pay a fine of Rs. 2,000 and/or face imprisonment of up to 3 months. 

But legal requirements aside, what is third party insurance? How does it work and why do you need it? If these are the questions on your mind, you’ll find all the answers below. 

First things first; what is third party insurance?

Third party insurance protects you from any liabilities that you may incur towards third parties due to any accidental injuries caused to the person or any accidental damages caused to the property.

To understand what this kind of insurance is all about, let me take you through a little scenario. You drive to work every day, and you’re a fairly decent driver. But one morning, you’re a little flustered, and your attention wanders a bit when you’re on the road. Not surprisingly, you accidentally bump into another vehicle, causing a massive dent and breaking the taillights.

You can easily write the rest of the story yourself. The owner of that vehicle gets out of their car and inspects the damage. And as expected, they ask you to compensate them for the repairs that need to be done. Since the damaged vehicle is a luxury car, you find yourself parting with close to Rs. 1 lakh. All because of an unforeseen accident!

This kind of scenario, where you find yourself facing a liability due to a third party, is not uncommon. And if they keep recurring, you may end up shelling out a huge part of your savings or your income simply to take care of these third party liabilities.

Here’s where third party insurance comes into the picture. 

If you have a third party insurance plan in place, you can rest assured that in case such liabilities crop up, your insurer will take care of these expenses. All you need to do is pay your renewal premiums on time, so your third party cover remains active.

How does third party insurance work?

Third party insurance coverage works pretty much like most insurance plans. You can purchase this kind of insurance for your car, your bike or your scooter. In fact, you need to get a third party cover if you own and use any of these vehicles. Each year, you will have to renew your third party cover. This ensures that your insurance plan remains active. 

In case any accident occurs when you are driving your insured vehicle, and you find that your car or two-wheeler has injured another person or damaged their property, you can raise a claim for the same. 

The insurance provider will verify the details, assess your claim, and decide whether or not to approve the same. In case your claim is approved, the insurance provider will pay out the sum that is due, as per the terms and conditions of the policy.

What is covered under a third party insurance plan?

Here is a preview of what a third party cover — whether it is for your car or your two wheeler — typically includes.

  • Injuries or personal damages to third parties

If you accidentally injure somebody with your vehicle, it may cause them some temporary or permanent disabilities or even lead to death, depending on the seriousness of the incident. All the liabilities stemming from such incidents are covered by a third party insurance plan.

  • Damages to third party properties

Your car or two-wheeler may also accidentally damage another person’s property, such as their vehicle, their home, or any of their belongings. In such scenarios, you will have to pay the third party for the repairs or replacement costs involved. Third party insurance covers this.

  • Personal accident coverage

Some third party insurance plans also offer personal accident coverage. This means you will also be covered in case of any personal injuries that you sustain during the accident. It does not include any damages to your vehicle or property though.

What is not covered under a third party insurance plan?

Since a third party bike insurance or car insurance plan offers very limited coverage, there are many contingencies and expenses that are excluded from this kind of a policy. Here is a list of the most common exclusions. 

  • Any damages to your car or two-wheeler
  • Any personal injury (except in case the insurance plan comes with personal accident coverage)

Third party covers vs. comprehensive insurance covers

If you want to also protect yourself against possible damages to your own vehicle, you will need to buy a comprehensive vehicle insurance plan. This kind of policy offers all the benefits of a third party bike insurance or car insurance plan. And in addition to this, any damages or repairs to your own vehicle are also covered. 

Summing up 

A comprehensive insurance plan will cost more than a third party cover. However, it also offers more extensive protection. But if you are a safe driver, you may not opt for this kind of comprehensive policy. Nevertheless, make sure that you have a third party insurance plan at the very least, because it is mandatory, and also because it can save you a lot of financial trouble over the years. 

Frequently Asked Questions (FAQs)

  • What are the types of third party automobile insurance?

Third party automobile insurance can be of different types, depending on the kind of vehicle they cover. Third party bike insurance, for instance, is for bikes and motorcycles, while third party car insurance covers cars. 

  • What is the significance of third party insurance?

Third party insurance is significant because it is legally mandated by The Motor Vehicles Act, 1988. In addition to this legal requirement, having a third party cover also ensures that you are financially affected in case of any accidental injury or damages to third party persons or property.

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