Everything About Third-Party Liability Insurance

Third-party insurance is mandatory at the time of purchase of any new car. Most car buyers are usually clueless and end up paying the amount without being in the know. If you are in the process of buying a new car and want to know what third-party insurance is all about, we have got you covered. Just like the insurance.

Photo Credit: cdn.pixabay.com

What is third-party insurance?

Photo Credit: cdn.pixabay.com

Third-party insurance insures you against all the third-party legal liabilities which may arise due to any mishap such as a road accident involving your car. It basically provides protection against damage to the third-party vehicle, personal property and physical injury. This policy does not provide any coverage to the insurer. 

How does third-party insurance work?

Photo Credit: cdn.pixabay.com

To understand how third-party insurance works, we first need to understand who the first, second and third parties are. In a car accident, for instance, the first party is the policyholder; the second party is the insurance company, and the third party is the person who claims damages from the first and second parties.

If the policyholder (first-party) meets with an accident, then the insurance company (second party) offers financial assistance to pay for the cost of repairs against damage to the third party's property. Thus, it reduces the financial burden for the policyholder. In the event of an accident, the insured must inform the insurance company about it immediately before filing for a claim. When the claim is filed, the insurer appoints a surveyor to assess the damages and verify the estimated cost of repairs. Once the verification is completed, the insurer settles the claim. 

Why is third-party insurance necessary?

Photo Credit: cdn.pixabay.com

Apart from the legal benefits, third-party car insurance acts as a boon when the insured car hits another vehicle. It covers the insured vehicle in case any liability claim arises for causing bodily injury, property damage, or death of the third party. As per the guidelines of IRDAI, while there is no limit in case of death, the property damage coverage is limited up to Rs 7.5 lakh in the case of car insurance.

What are the benefits of third-party insurance?

Photo Credit: cdn.pixabay.com

Third-party insurance has many benefits associated with it. Let's take a look at those below.

Legal cover and financial assistance - This insurance cover takes care of the financial burden in the event of an accident that causes damages to a third party. However, the direct beneficiary is neither the policyholder nor the insurance company.

Complete peace of mind - A liability-only plan provides the insured peace of mind in taxing situations that hinge on huge financial liabilities.

Quick and easy purchase option - Third-party car insurance policies can be bought easily, either through the website of the insurance company or through its branch office. It can also be renewed without too many complications.

Cost-effective insurance plan - Third-party liability insurance can be afforded by all as the premiums are low. In fact, the premium for third-party liability insurance is a fixed nominal value and is updated on an annual basis by the IRDA.

What are the disadvantages of third-party insurance?

Photo Credit: cdn.pixabay.com

Now that we have looked at the benefits, let's take a look at the disadvantages of the same.

No add-on covers - Being a basic plan, third-party insurance does not give you the option of add-ons to enhance the benefits of the plan. You can only opt for these add-ons if you have something like the comprehensive plan.

No coverage for own damages - As the name suggests, third-party insurance only covers damages incurred by the third party. This means there is no cover for your own damage. To get coverage for your own damage, you will have to buy comprehensive insurance separately.

What all is covered under a third-party insurance cover?

The third-party insurance cover includes the following:

Third-party property damage – Third-party property damage to the extent of Rs 7.5 lakh is covered under this insurance.

Third-Party Death/Bodily Injury: Under a third-party plan, the insurer provides 100% compensation in case of death of a third party and 50% indemnification in case of partial blindness or loss of a limb. The compensation amount for third-party liabilities is decided by a court of law.