It is mandatory to have a third-party car insurance policy to ride or drive a vehicle on Indian roads. Accidents and unexpected events do not come knocking on the door. So, while driving if your car gets involved in an accident, damaging a third-party property or injuring a third-party individual, insurance will come to your rescue. Wondering how? Well, in case the third party raises any claim related to his medical expenses or property damage, your insurer would pay him the monetary compensation. In addition, if there is any legal issue against you due to the accident, the insurer would take care to settle that as well. So, you are basically free of any liability. In the absence of an insurance cover, you will have to bear the entire burden—monetary or otherwise. Read on to learn about the advantages of having a third-party policy.
For a third-party liability car insurance policy, if you are the policyholder, you will be the first party. The insurer or the insurance company will be the second party and any other individual on the road is the third party. If you are caught driving your car without third-party insurance, you could be heavily fined or imprisoned or may have to face both, depending on the situation.
The benefits of having a third-party policy include:
- Vehicle damage
If an accident takes place, you can claim up to a certain limit as fixed by the IRDAI (Insurance Regulatory and Development Authority of India). The third-party policy will cover damages to the vehicle of the third party in case of a collision or accident with your car. This cover applies to both two-wheelers and four-wheelers belonging to the third party. Even if the third-party vehicle is parked on the road and it gets damaged if you hit it by mistake, your insurer is liable to pay for the damage when the third-party demands compensation. In the absence of any policy or expired policy, the entire amount of compensation has to be borne by you. So, take care to renew your car insurance policy on time to continue with the benefits of coverage.
- Accidental bodily injury
In an accident, it is not only the vehicles that get damaged all the time. The people riding them may not be lucky enough to get away only with minor cuts and bruises. There is a high risk of injury to the vehicle owner, particularly if he/she is riding a two-wheeler as his/her body is exposed from all sides to sudden injuries. He/She can get thrown off due to the impact of an accident, the two-wheeler can fall on them etc. If the third party gets severe injuries or fractures that require hospitalisation, your insurer would take care of the expenses.
- Loss of life due to accident
Unfortunately, there can be situations when the accident is severe and the third party may suffer permanent disability or lose his/her life. These can lead to complicated court proceedings and heavy financial compensations. The insurer is liable to pay the entire sum insured to the family in case of loss of life of the third party due to an accident with your car. The nominee or family of the deceased receives the sum insured to deal with their loss. This would help them overcome the financial difficulties, especially in cases where the third party was the primary income earner. The insurer would pay the amount as a lump sum or in instalments, depending on the terms of the policy.
- The longer policy term for third-party policy
Currently, third party policy consists of a mandatory policy term of three years. The advantage is that instead of renewing it every year, you can renew it every three years. Even if there is inflation or a rise in cost, your premium would remain unaffected. This would be a saving on your part. Also, the coverage will continue for a longer-term and there would be a lesser chance of break-in or expired policies for you.
- Budget-friendly policy
Third-party car insurance is cheaper than a comprehensive policy. The premium rate is fixed by the IRDAI in such a way that it is affordable due to the mandatory clause. The insurance companies do not have any right to change or modify the policy premium that it offers to their clients as they have to abide by the IRDAI rules.
- Option of combination or packages
Since there is no financial cover for the insured car under the third-party policy, you may get your own damage (OD) cover along with a standalone third-party policy. This bundled cover will consist of a five-year liability policy and a one-year term of OD policy. You can also go for a standalone third-party policy with a personal accident cover. Choose these combinations depending on your requirement and the condition of your car—whether it is a brand new car or an old one. You should buy a personal accident (PA) cover for yourself as accidents are unpredictable even if you are a responsible driver. The PA policy consists of financial coverage for hospital bills, treatment costs, medical expenses etc. for the policyholder in case of an accident. The insurer pays a lump sum amount or sum insured to the policyholder for permanent disability or loss of life due to an accident.
- The No Claim Bonus (NCB) stays intact
It is a compulsory policy and does not cover damages to your car. You do not earn or accumulate NCB for this. If you buy a package or comprehensive policy, you may get an NCB or renewal premium discount on the own damage component of the policy. For third-party claims, there is no loss of NCBs and you can continue to get discounts.
You have to buy a car insurance policy, especially a third-party liability policy, as it is compulsory for all cars. It covers damage to the property or vehicle of the third party, physical injury to the individual, temporary or permanent disability or loss of life due to the accident. The premium, taxes and charges etc. are fixed by the IRDAI. The policy alone is suitable if you have an old car that you are thinking of reselling or want a basic cover at a low price.