Third Party Liability Car Insurance

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A third-party liability car insurance policy is an agreement between the insurer and the insured (vehicle’s owner) where the insurer promises to offer financial protection to the insured against third-party liabilities arising due to a mishap in exchange for a fixed amount called premium.

There are a number of general insurers providing third-party car insurance plans, including the auto dealers who as of recently have been recognised by the Insurance Regulatory and Development Authority of India (IRDAI) as authorised Motor Insurance Service Providers (MISPs).

Key Benefits and Features of Third-Party Liability Car Insurance Policy

Third-party liability car insurance comes with a number of features and benefits such as:

• Offers financial support in the event of a mishap involving a third-party and protects you against the third-party liabilities that may arise
• Provides tax benefits to the policyholders
• Can be easily purchased via insurer or third-party insurance websites
• Available at low premium rates

IRDAI directs insurers to roll out long-term third-party insurance for four-wheelers

In August 2018, the Supreme Court of India issued a directive to the Insurance Regulatory Development Authority of India (IRDAI) to roll out the long-term third-party insurance for four-wheelers as well as for two-wheelers. Prior to the mandate, the long-term third-party insurance was available for only two-wheelers. Now, for all vehicles that are bought after 1 September 2018, the car owners as well as two-wheeler owners have to purchase the long-term third-party insurance. This is applicable for those vehicle owners that have to renew their motor  insurance policy.

The decision of the Supreme Court for the long-term third-party insurance was taken since a majority of the vehicles on the roads of India are uninsured, despite the fact that India has the most accidents and deaths on its roads in the world. In addition, a factor that has impeded vehicle owners from insuring their vehicle is that they have to go through the hassle of renewing their insurance policy year after year. Now, following the directive of the Supreme Court, four-wheelers have to have the 3-year long-term third-party insurance and two-wheelers have to insure their cars with the third-party liability insurance for a tenure of 5 years.

According to the Insurance Regulatory Development Authority of India (IRDAI), the long-term third-party insurance policy has to be availed by vehicle owners across the country irrespective of whether they have the comprehensive car insurance policy with a third-party liability cover. That said, insurers in the country have the option of offering two different types of policies - the long-term third-party insurance policy and the comprehensive insurance policy, or a comprehensive car insurance policy with the long-term third-party insurance.

Though car owners will be insured for a longer span and wouldn’t need to go through the process every year, the premiums of the third-party insurance policy have got more expensive as well. That said, the long-term third-party insurance is a one-time payment, and policyholders will save in the long run as they would avoid the hike in the third-party insurance premiums, which is the case every year.

Long-term Third-Party Insurance Premium Rates that are effective from 1 September 2018

As already mentioned, from 1 September 2018, all four-wheelers and two-wheelers that are sold have to have the long-term third-party insurance. Vehicle owners who need fresh policies or who  need to renew their motor insurance policy will have to buy the long-term third-party insurance. This is whether or not the vehicle owner has a comprehensive car insurance policy with the third-party liability cover. The long-term third-party motor insurance will be rolled out by insurers across the country as a new product and eventually, a comprehensive car insurance policy will come with the long-term third-party liability. While two-wheeler and four-wheeler vehicle owners will be insured for a longer span and wouldn’t need to go through the process every year, the premiums have been hiked significantly. For cars with an engine capacity less than 1,000 cc the premium of the long-term third-party insurance is set at Rs.5,286.  For cars with engine capacity between 1,000 cc to 1,500 cc policyholders will have to shell out Rs.9,534 as the premium for the long-term third-party insurance. For four-wheeler with an engine capacity more than 1,500 cc, the premium of the long-term third-party insurance is set at Rs.24,305 by the Insurance Regulatory Development Authority of India (IRDAI).

For two-wheelers, the long-term third-party insurance policy which will be valid for five years will cost the policyholder Rs.1,045 if the engine capacity of the vehicle is below 75 cc. For two-wheelers with an engine capacity between 75 cc and 150 cc, the premium is set at Rs.3,285. For two-wheelers with an engine capacity between 150 cc and 350 cc, the premium of the long-term third-party insurance is set at Rs.5,453. Lastly, for vehicles with an engine capacity more than 350 cc, the premium as set by the  Insurance Regulatory Development Authority of India (IRDAI) is Rs.13,034.

Table for the revised premium rates for the long-term third-party insurance policy following 1 September 2018

For four-wheelers (private and commercial):

For two-wheelers (private and commercial)

Long-term third party insurance for private cars

Following the Motor Vehicles Act, 1988, all cars on the roads of India have to have the third-party car insurance policy, and more recently, as mandated by the Supreme Court, all new cars and those who have to renew their motor insurance policy have to purchase the long-term third-party insurance. Now, car owners with a single premium payment can have their car insured with the third-party car insurance policy for a tenure of 3 years. The third-party insurance policy for private cars has been made mandatory to ensure that following an accident, the property of the third-party is taken care of by the insurance policy and the medical expenses are covered by the policy as well. However, with the third-party insurance policy, the policyholder cannot claim coverage for his/her own vehicle and for medical expenses, and would need to cover the expenses for the repairs and the medical treatment from their own pocket. To help car owners understand the extent of coverage of the third-party insurance policy, we’ve listed out what such a motor insurance policy takes care of and its exclusions.

Coverage of long-term third-party car insurance for private vehicles

Listed below is the extent of coverage of the long-term third-party insurance policy:

• The long-term third-party insurance offers coverage for the damage caused to the vehicle or the property of the third party only. Coverage of the long-term third-party insurance is not extended to the policyholder.
• Coverage is extended for medical treatment if the accident leads to bodily injury, or disability (partial or total) of the third party.
• Compensation if the accident leads to the death of the third party.

Exclusions of the long-term third-party car insurance for private vehicles

Listed below are situations in which the coverage of the long-term third-party will not be extended to the policyholder:

• No coverage of the long-term third-party insurance will be extended to repair the damages caused to the vehicle of the policyholder nor will any coverage be extended to cover the cost of medical treatment of the policyholder following an accident.
• If the accident occurs in an area, city, or state that is not covered by the insurer.
• If the accident was the fault of the third party and not the policyholder.
• If the policyholder was driving under the influence of alcohol, drugs, or any intoxicants.
• If the long-term third-party insurance policy has lapsed.
• If the policyholder was driving without a valid driving license.
• If the damage caused to the car was due to nuclear activity.
• If the vehicle was being used for commercial purposes.

Long-term third party insurance for commercial vehicles

For those who are using a commercial vehicle they would need to avail a commercial long-term third party insurance and not a third-party insurance for a private vehicle. Just like the third-party car insurance for private vehicle, the third-party car insurance policy for commercial vehicles extends coverage to the third-party only to take care of damages caused to his/her property and coverage for medical expenses if the third party is either injured or disabled by the accident. The long-term third party insurance for commercial vehicles also offers compensation in the case of death of the third-party.

Coverage of long-term third-party car insurance for commercial vehicles

Listed below is the extent of the coverage of the long-term third party car insurance policy:

• Coverage for repair or replacement of damaged parts of the vehicle of the third party.
• Coverage for medical expenses if the third party suffers from partial or complete disability or bodily injury.
• Compensation that will be passed on to the dependents of the third party if the accidents leads to the death of the third party.

Exclusions of the long-term third-party car insurance for commercial vehicles

No coverage will be extended to the policyholder if the accident takes places due to any of the below-listed circumstances:

• If the accident involving the commercial vehicle occurs outside the perimeter covered by the insurer.
• If the commercial vehicle driver was under the influence of alcohol, drugs, or any intoxicants when the accident took place.
• If the long-term third-party insurance policy for the commercial vehicle has expired.
• If the commercial vehicle driver was driving with an expired driving license.
• If damage was caused to the third party due to nuclear activity.
• If the commercial vehicle was used for a purpose other than what it was meant for.

Steps to raise a claim using the long-term third party insurance for cars

As soon as the accident takes place involving the private or the commercial vehicle, the policyholder has to follow the steps mentioned below to raise a claim for coverage caused to the property of the third party:

• The insurer has to be intimated as soon as the accident has taken place. Some insurers insist on sending a spot surveyor to gather information about the accident. The policyholder has to also take photographic evidence of the accident scene.
• The policyholder has to then go to the local police station and file an FIR and the statements of both will be taken into account by the police.
• Once the claim has been raised, the insurer will then forward the case to the Motor Accidents Claims Tribunal.
• Following investigation, the Motor Accidents Claims Tribunal will approve whether the claim amount has to be disbursed or not. If the policyholder is found guilty of the accident, the insurer will extend the coverage to the third party for repair or replacement of the damaged vehicle and coverage for medical expenses as well.

Both the parties will have to submit their statements and personal details to the police and the insurer. As per the limit set by the Insurance Regulatory Development Authority of India, the maximum payout for property damage of the third party is set at Rs.7 lakh.

Third-party Liability Car Insurance FAQs:

1. Can anyone buy a third-party liability car insurance policy?

   Yes, anyone who owns a car that is officially registered in his/her name can buy a third-party liability cover.

2. Can I port the existing third-party liability car insurance to another insurer?

   Yes, you can port your existing insurance policy to another insurer after submitting a duly filled portability form to your present insurer at least 45 days before the policy expires.

3. Do I have to buy a third-party liability cover even if I am a good driver?

   Yes, it is an absolute necessity as per the Motor Vehicle Act to purchase at least a third-party liability car insurance in India regardless of whether or not you are a good driver.

4. What is the maximum compensation I can avail under a third-party liability car insurance?

   In case of third-party injuries or loss of life, there is no limit on the compensation at present. But when it comes to third-party property damage, the maximum compensation you can avail is Rs.7.5 lakh.

5. How long after the mishap happens should I register for a third-party liability claim?

   You have to inform the insurer as soon as the mishap happens and raise a third-party liability claim request. You also have to file a case in the nearest Motor Accident Claims Tribunal (MACT) court within a period of 60 days from the date of mishap.