What is Third-Party Insurance?
Third-party insurance is a mandatory liability insurance that provides financial protection to the policyholder against legal liabilities arising from damages or injuries caused to a third party. It is also known as an “Act-Only Cover” and is a legal requirement for all vehicle owners under the Motor Vehicles Act.
Key Features:
- Covers bodily injury, disability, or death of a third party.
- Covers damage to third-party property (up to ₹7,50,000).
- Does not cover damages to the insured vehicle or injuries to the policyholder.
Legal Provisions on Third-Party Insurance
- Mandatory under the Motor Vehicles Act, 1988 – Driving without third-party insurance is illegal and punishable by a fine or imprisonment.
- Third-party insurance is required from the moment a new vehicle is purchased.
- The Insurance Regulatory and Development Authority of India (IRDAI) regulates premium rates for third-party insurance, ensuring affordability.
Coverage Under Third-Party Insurance
- Injury or Death – Covers partial disability, permanent disability, or death of a third party.
- Medical Expenses – Covers hospitalisation and medical treatment costs of the injured third party.
- Property Damage – Covers damage to third-party property up to a limit of ₹7,50,000.
- Legal Expenses – Covers basic legal costs arising due to third-party claims.
Exclusions Under Third Party Insurance
- If you are underage or don’t have a valid driving license.
- If the vehicle is used for illegal activities.
- If the accident is caused by drunk driving or substance abuse.
- If the accident is intentional by the insured.
- If your vehicle is stolen and not in your possession at the time of the accident.
- No coverage for damage to your vehicle or bodily injury to yourself.
Benefits of Third-Party Insurance
- Legal Compliance – Meets mandatory legal requirements.
- Financial Protection – Covers third-party liabilities and financial burdens.
- Low Premiums – Cheaper than comprehensive insurance.
- Easy Process – Simple and fast to buy and renew.
Key Takeaways
Third party insurance is a must have and legally required protection against third party claims in case of accidents. It may not cover damage to your vehicle but it provides financial security by covering third party liabilities, medical expenses and legal costs.
