All about Third Party Insurance
In India, there are two types of motor insurance available from insurance company i.e. comprehensive insurance and third party insurance. Comprehensive insurance comprises of OD (Own Damage) Insurance and TP (Third Party Insurance. Third-party car insurance shields the car owner against any losses that might incur due to any bodily injury, the demise of a third-party or damage to the property of that person. In India, it is mandatory to have third-party car insurance. Anyone can easily buy third-party car insurance online right from the comfort of his/her home or anywhere across the globe. Buying third-party car insurance online is easy, convenient and also saves time.
What is third party insurance (TP)?
Third party insurance is a type of insurance policy that covers only third party liabilities of the vehicle owner. It provides financial protection against any damages or physical injuries to the third parties caused by an accident. Also known as the act-only insurance’, the beneficiary under this insurance is a third party and not the policyholder (first party) or the insurance company (second party). Third party insurance provides damage protection coverage to the third party by the insured vehicle. It covers damages to the property, damages to the vehicle, physical injuries and death of the third party. However, third party insurance will not offer compensation if the accident was caused due to drunken driving.
Third party insurance is a legal requirement as per the Motor vehicles act 1988. You can run a vehicle without the OD component of the car insurance but you can not run a vehicle without the Third Party (TP) component.
Other than the legal cause, third party insurance comes in handy when the insured vehicle hits other vehicle, property or person. It covers the insured vehicle in case any liability claim arises for causing bodily injury, property damage, or death of the third party.
How does the Third Party Insurance Work?
As mentioned, third party insurance is liability insurance that works towards easing out the legal liabilities of the first party for causing damages or injuries to the third party. The first party refers to the vehicle owner who is responsible for the injuries/ damages caused to the third party. The third party is the person filing liability claims against the first party. The second party or the insurance company aids the financial burden of the vehicle owner by paying the legal liabilities towards the third party.
- First Party- Vehicle Owner
- Second Party – Insurance Company
- Third Party – Somebody injured and claiming liability from first party.
Insurance companies cover two kinds of motor third party insurance claims – bodily injury liability and property damage liability.
Benefits of Third Party Insurance
Financial Assistance for Legal Liabilities
Legal liabilities can be financially draining and can lead to bankruptcy if the vehicle owner is unable to pay for the losses or damages caused to a third party person. This is where third party insurance comes into the picture as it provides the policyholder with the required financial assistance and helps him/her to pay off the third party liabilities without exhausting all the savings.
Fulfils Legal Compliance
As per the Motor Vehicles Act of India, 1988, it is legally mandatory for all vehicle owners in India to own a third party insurance cover to be able to use their vehicles on public roads. Thus, if someone buys third party insurance for his/her vehicle, he/she abides by the laws of the country and avoid earning a challan or fine for its violation.
Cost Effective Insurance Policy
The coverage offered under third party liability insurance appears exceptionally cost-effective and rewarding in terms of its cost and premium rate. In general the TP Policy is less than 50% in premium value as compared to a complete comprehensive insurance package. Even if it has to be used as either an essential or an add-on part of the main policy, it benefits the vehicle owner fully. However, at the time of calculating the compensation amount, the vehicle owner’s annual income is considered.
What is not covered in Third Party Insurance?
Like in the basic motor insurance plan, the standard third party insurance is not applicable to certain situations. The following coverage is not provided under a third party car insurance policy
- Own Damages – It does not cover any damages sustained by the insured car, be it accidental damages, fire damages, damages due to natural & manmade calamities or due to theft.
- Drunk Driving – It does not cover any third party liabilities if the car was being driven under the influence of alcohol or drugs.
- Invalid License – It does not cover any third party injuries or damages if the driver of the insured car has an invalid driving license.
- Outside Geographical Limit – If the insured car causes third party damages or injuries outside the geographical limit of the country, it will not be covered.
- Undesignated Driver – If any individual, other than the owner of the car or the designated driver was driving the vehicle, the resultant damages or injuries to the third party are not covered.
The details in the list above are the most common exceptions which are generally present in almost all the third party insurance contracts. One should always go through the exclusive list of exceptions before signing up for any third party insurance.