The aim of insurance is to ensure a minimum financial loss in the event of unfortunate events. In auto insurance, the harm caused will be on your car as well as on others. A third-party liability auto insurance policy is intended to protect third parties who might suffer damage by your car.
Even though third-party liability insurance is one of the cheapest forms of insurance, it is not the most suitable coverage for the intent as mentioned above. There are various reasons for this argument.
Read on to find out why a third-party insurance policy is not enough and the alternatives available to a policy seeker.
What does a Third-party Car Insurance Policy Include?
A third-party car insurance contract offers insurance against any civil responsibility resulting from damage to a third party where the policyholder is at fault. It covers damages and injuries caused by the insured car to a third-party individual or property. It is required in compliance with the Motor Vehicles Act, 1988, and driving without a third-party liability policy is a criminal offense.
Third-party auto insurance includes the following risks:
- Third-Party Injuries/Death: The third party is compensated if he/she is injured or dies due to an accident caused by your vehicle.
- Third-Party Property Damages: This includes your legal responsibility to third parties for damage to the third-party property up to INR 7.5 lakh.
What are the Drawbacks of a Third-party Insurance Policy?
Following are the significant reasons why third-party liability insurance is not enough for your car:
Your car is not covered
Any third-party insurance does not cover damages to the vehicle insured. Here, you pay insurance premiums only to comply with the rule. At the same time, your vehicle is uninsured when it comes to its losses.
However, for example, if the insured vehicle hits a tree, the insurance does not cover the financial costs caused, such as fixing the car or the cost of loading the car. Besides, a third party often would not insure a vehicle against losses caused by natural disasters such as floods, hurricanes, earthquakes, or human-made disasters such as riots, burning, fires, etc.
Zero compensation if your car gets stolen
A third-party insurance policy does not cover theft of the insured vehicle. This feature can only be made available with the option of comprehensive and stand-alone auto damage insurance policies.
Insufficient cover for your accident
The policy of a third-party liability does not compensate for losses suffered by the insured vehicle. The policy protects only third-party liabilities, including collateral harm, personal injury, and the death of a third party.
A road accident might also result in the owner of the car getting injured, or in the worst-case scenario, he may even die. In such an unfortunate case, the third-party liability insurance is incapable of providing financial support to the owner or his family.
No scope for add-ons
The policyholder can tailor a car insurance policy in accordance with his/her requirements by making use of acceptable add-ons. For example, a policyholder can opt for an Engine Safety Cover or a Passenger Cover to insure fellow passengers by expanding the coverage of the policy with the aid of an appropriate add-on.
However, in the case of a third-party scheme, these add-ons cannot be used to gain additional coverage. It is because these add-ons are only available for comprehensive insurance policies and stand-alone car insurance plans.
What Should You Opt for Instead?
It is understood that, according to the Indian Motor Tariff Act, having a third-party liability policy is only binding on the car owner in India. However, the drawbacks mentioned above explain why your car does not have ample insurance coverage by only opting for third-party liability insurance.
These coverage gaps may be resolved either by buying a comprehensive car insurance package or by supplementing a third-party insurance policy with a stand-alone own damage insurance plan.
Comprehensive Insurance Policy
As the name suggests, a comprehensive car insurance plan is a complete package for all of your car insurance needs. It not only offers compensation to third-party liabilities and but also covers damages caused to the insured vehicle and injuries to the policyholder.
This policy extends to all tragic incidents, including road accidents, natural disasters (floods, hurricanes, earthquakes, etc.), arson, burglary, explosion, terrorist activity, riots, strikes, self-ignition or lightning, and damage caused by road, train, water ingression and so on.
Standalone Car Insurance Policy
A stand-alone auto insurance policy offers protection only for personal losses caused to the insured car and injuries sustained by the policyholder. It does not have compensation for third-party liabilities. As a result, it can be bought along with third-party insurance to cover all third-party liability and personal losses.
What is the Right Way to Buy a Comprehensive Insurance Policy?
Buying comprehensive insurance may seem like a tricky task. Here is a brief on how to buy a comprehensive auto insurance policy in an easy way. Nowadays, purchasing car insurance online has become extremely simple.
- Visit your chosen auto insurer's website,
- Select your policy,
- Understand the terms and conditions,
- Make the payment,
- Receive the policy in your account
Note: Make sure you go through the inclusions and exclusions of the policy to make an educated decision.
Remember to renew your auto insurance in a timely manner and keep a copy of the policy text in your car along with your car's Certificate of Registration.
Conclusion with key takeaways
Third-party liability insurance policy is mandated by law in India. A third-party car insurance contract offers insurance against any civil responsibility resulting from damage to a third party where the policyholder is at fault.
Even though third-party liability insurance is one of the cheapest forms of insurance, it is not the most suitable coverage for your car. Third-party liability insurance will not cover damages to the vehicle insured. A third-party insurance policy does not cover theft of the insured vehicle.