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5 Important Reasons for Purchasing a Third-party Car Insurance Policy

By Juhi Walia
27 September 2022, 2:31 PM

"Precaution is better than cure" is an adage that holds true even when you drive on the road. This is because though you may be confident about your safe driving skills, someone else's recklessness or negligence can result in an unwanted or untoward incident.

The fault may be entirely that of the third party. But if your car is involved in the incident, you have to bear the expenses of treatment or damaged property restoration of that person, as per the country's existing laws. However, you can come out financially unharmed if you have a car insurance policy.  

Your insurer will pay the expenses incurred by the third party on the treatment of injuries or restoration of property damaged by your car. In the absence of a third-party car insurance policy cover, you risk facing legal consequences in the form of hefty fines or possible terms of imprisonment. This blog offers further insights into third-party car insurance's importance.

Importance of Third-Party Insurance Policy

The 3rd party car insurance allows you to drive on unsafe Indian roads stress-free. You cannot rule out the possibility of ramming into a stranger's property due to straying of attention for a single moment while driving the car.

Such an incident can grievously injure other persons. 3rd party car insurance reimburses the financial liabilities arising from such unfortunate incidents. You can learn more about its importance below:

1. Fulfills Your Legal Obligations

When you purchase a 3rd party car insurance, you show compliance with Motor Vehicles Act, 1988, which makes it necessary for all car owners to be protected with suitable insurance cover before driving.

If caught driving without valid third-party car insurance, you will be penalized as per Section 81 of the Motor Vehicles Act 2019, as can be seen below:

  • Fine of INR 2,000 with a chance of imprisonment up to 3 months for 1st offence
  • Fine of INR 4,000 with imprisonment up to 3 months for 2nd offence
  • Cancellation of driving licence

2. Offers You Immunity Against Financial Liabilities

If your car causes injury to a third person or damages their property, you are liable to pay for the treatment or property restoration expenses. The compensation for the victim is decided based on their:

  • Earning capacity
  • Profession
  • Age

The policy factors in the property damage before deciding the compensation amount for the same.

When you buy third-party car insurance, you can rest assured that your insurer will bear all financial liabilities arising from the damage caused by your car. You risk bankruptcy if the assessed damage compensation is too high without adequate coverage.

The insurer reimburses

  • Up to INR 7.5 Lakhs for restoration of damaged property of the third party.
  • The cost of repairing the vehicle of a third party hit by your car
  • Expenses incurred on the treatment of injured third party

The third party is optimally compensated if s/he is partially or fully impaired by the impact of the accident (per the directives of the Motor Accidents Claims Tribunal).

3. Facilitates Stress-Free Driving

You can enjoy absolute peace of mind while driving on the road because 3rd party car insurance policy will come to your aid whenever an unfortunate incident involving others happens on the road. Unpleasant thoughts about the financial crisis you may face if someone gets hit by your car won't play out in the back of your mind.

4. Allows Purchase of Insurance Coverage At A Nominal Cost

Third-party car insurance coverage can be purchased by paying a small premium. You can buy it as a standalone policy or club it with comprehensive accidental coverage. This policy can be bought even if your car has become old and the insurer is no longer ready to offer comprehensive car insurance coverage.

You can rest assured that the rates of 3rd party car insurance would not go up steeply as IRDAI calculates the third-party premiums every year and circulate the same to all insurers. You may also become eligible for some discounts on premiums if your car falls under the categories outlined below.

  • Vintage private cars (Approved by the Vintage and Classic Car Club of India) – 50% discount
  • Electric private car or environmental-friendly car- 15% discount
  • Hybrid electric car- 7.5% discount

5. Paves the Way for Hassle-free Claim Settlement

The process of registering a third-party claim after an accident is easy. Settlement is fast, provided the litigant respects the dictates of the Motor Accidents Claims Tribunal.

You can file a car insurance claim under a third-party car insurance policy by following the steps below:

  • The afflicted person or you will have to visit the local police station (where the accident had occurred) to file the FIR
  • You need to provide your licence number, and the complainant has to produce the name and address of the witness, if any
  • The charge sheet will have to be collected
  • The third party will ask for a copy of your 3rd party car insurance policy to intimate the insurer about the claim being filed (you can send a digital copy of the insurance too)
  • Both you and the complaining party will have to notify the insurer
  • The third party will then file a case against you in the local Motor Accident Claims Tribunal (MACT)
  • Your insurer will make legal representation on your behalf
  • The tribunal will hear both sides, inspect the circumstantial evidence, verify the incident through witnesses' narratives, factor in the economic and other conditions of the third party, and then declare a compensation amount
  • The insurer will adequately compensate the affected person

Key Takeaways

3rd party car insurance can be your saviour if you encounter an accident that endangers the lives of others or causes damage to others' property. Congested or poorly maintained roads or any other distraction that can lead your car into an unfortunate incident can no longer daunt you financially.

Your insurer will always be on your side, ready with all possible legal and financial support. Registering FIR at the local police station is part of the procedure laid down by the IRDAI.

It would be best if you did not get alarmed at the prospect of visiting the police station. The insurer's advocates will protect you against legal challenges and also make representations on your behalf in the tribunal.

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1. Why is third-party car insurance important from a legal standpoint?

All new car buyers must purchase third-party car insurance cover for five years compulsorily as they can be fined INR 2000 with imprisonment of 3 months for not having applied for the same.

2. Will the insurer compensate if my car accidentally damages another person’s property?

Yes, your insurer will pay a maximum of INR 7.5 lakhs for the restoration of damaged property of a third party.

3. Which authorized body decides the quantum of compensation to be paid to the third party after an accident?

The local Motor Accident Claims Tribunal hears the case filed against you by the affected third party, who will also register an FIR of the incident in the local police station.

4. What documents are required for a third-party car insurance claim?

The following documents will be required for initiating the claim process:

  • An adequately filled and signed Insurance claim form
  • FIR's copy
  • Your driving licence's copy
  • Policy document's copy- 1st two pages only
  • Registration certificate of your car

Optional documents include a damage assessment report by the surveyor, actual bills of damage repair cost,  the report of the inspecting officer, medical invoices, a doctor's prescription certifying accident-induced injury sustained by a third party, photographic proofs of the incident, etc.

5. After making a third-party car insurance claim, who will take care of the legal hassles involved in the claim settlement procedure?

Your insurer will look after all legal issues and processes like arranging advocates, carrying out investigations, representing you in court, and verifying facts at the accidental site.


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