A third party car insurance policy is a legally mandated cover as prescribed by the Indian Motor Vehicles Act, 1988. The Act mandates all cars running on Indian roads to carry a valid third party car insurance policy. The policy is a basic coverage plan which protects against third party liabilities. Under the policy, the beneficiary is a third party who is not the owner of the car, or the insurance company.
Any other individual or property suffering a loss due to the insured car is the third party and is covered under the policy. The policy pays for a financial loss suffered by the third party.
Importance of third party insurance
A third party car insurance policy is important for various aspects. Here is why –
- First and foremost, the policy is legally mandatory. So, not buying the policy is a legal offence or violation
- Like every other insurance, the coverage is extremely helpful if a liability run into lakhs due to accidental death or disablement. Paying substantial sums to the aggrieved third party might be financially distressing or impossible for car owners
- Many third party policies cover personal accidental contingencies suffered by the owner/driver of the car. Thus, the policy also provides additional coverage benefits against accidental death or disablements. A lump sum benefit is paid under these contingencies securing the financial loss suffered by the policyholder
- The premiums for third party car insurance plans are reasonable. They are determined by the Insurance Regulatory and Development Authority of India (IRDAI). The rates depend on the engine capacity, model, and age of the car.
Third Party Car Insurance Coverage
Coverage under a third party car insurance plan is offered against three contingencies. These are as follows –
- Third party bodily injury–if any third party is physically injured due to the car, the policy pays the financial loss suffered due to such injury. Even for a death occurring due to an accident involving the car, a financial compensation is paid by the third party policy. There is no limit on this financial compensation. Unlimited coverage is available for death and the benefit paid depends on the rulings of the Motor Accidents Claims Tribunal (MACT)
- Third party property damage – any financial loss suffered by the policyholder to replace or reconstruct a damage caused to a property belonging to a third party. The maximum liability offered by third party insurance under this case is up to Rs.7.5 lakhs
- Personal accident cover – under many third party car insurance plans, personal accident cover is allowed for the owner or driver of the car. Under this cover, accidental deaths and permanent total disablements due to accidents are covered. Coverage is usually allowed for a maximum of Rs.2 lakhs. In case of accidental death, 100% of the sum insured of the personal accident cover is paid. Similarly, in case of permanent disablements too, 100% of the sum insured is paid. However, in case of permanent-partial disablements like loss of one limb or loss of sight of one eye, 50% of the sum insured is paid. Thus, the payment under the personal accident cover depends on the nature and extent of accidental injury suffered. Personal accident cover covers only the owner or driver of the car. Other passengers travelling in the car are not covered.
Third party car insurance exclusions
Besides the above coverage benefits, there are some exclusions under the plan. Claim is not paid for these exclusions. Some common coverage exclusions include–
- Losses incurred outside Indian borders
- Claims due to contractual liabilities
- Violations of the ‘limitations of usage’ of the car
- When the car was being driven by anyone who is not the owner of the car
- Consequential losses
- Losses due to radioactive contaminations or nuclear perils
- Losses suffered by the car due to natural or man-made calamities
- Losses suffered due to war, riots, strikes, etc.
- Losses caused to third parties when the car was being driven without a valid driving license or under the influence of alcohol or drugs
Third party car insurance price 2018-19
The premiums of third party car insurance policies are specified by the Insurance Regulatory and Development Authority of India (IRDAI). These rates are reviewed every year. As in the current financial year of 2018-19, the rates were revised and communicated to all general insurance companies who offer third party car insurance policy.
The premium of the policy depends on the engine capacity of the car. A car with higher engine capacity has a higher value, and thus, a higher premium for third party car insurance policies. Here’s a look at the new revised premium rates applicable from 1st April 2018 for third party car insurance coverage –
|Engine Capacity of A Car||Premium Amount|
|Up to 1000 cubic centimetres||Rs.2055|
|More than 1000 cubic centimetres but limited to 1500 cubic centimetres||Rs.2863|
|Above 1500 cubic centimetres||Rs.7890|
The premium is for the third party coverage which covers third party bodily injury and third party property damage. If the third party car insurance plan has coverage for personal accident, the premium for such cover would be added to the plan. Moreover, the Goods and Services Tax (GST) of 18% is applicable and extra.
Thus, the total premium for a third party car insurance policy would be the third party premium as determined by the IRDA plus the premium for personal accident cover given to the owner or driver of the car and the Goods and Services Tax of 18%. While looking at premium rates offered, you need to remember tocheck the inclusion of GST.
Third party car insurance premium calculator
Use a third party car insurance premium calculator. It can calculate the total third party car insurance premium rate by adding the prescribed premium rate based on the engine capacity, the rate for personal accident cover and the applicable tax. Policyholders would just have to provide the required details – the registration details of the car, age of the policyholder, make, model and variant of the car to determine the engine capacity and the location of registration of the car.
Once all the details are provided, the calculator calculates the expected premiums. Moreover, the premium rates of different insurance plans are calculated simultaneously and displayed for easy comparison.
Claim settlement for third party car insurance
There are a series of steps the policyholder should follow for claim settlement of third party car insurance policies. These steps include–
- If the policyholder is liable for third party car insurance claims, he should obtain the insurance details of the other party. A FIR should be filed with the local police or other concerned authorities after which the claim would be taken to the MACT. The Tribunal would analyse the claim, the details and all the associated documents before announcing its verdict or the claim to be paid by the third party’s insurance company.
- A FIR should be filed with the local police authorities immediately
- If the policyholder himself causes a third party claim, he should inform the insurance company immediately
- The claim would be taken to the MACT. The Tribunal would assess the claim and then announce its verdicts
- The insurance company would then pay the third party the claim specified by the Tribunal’s verdict