A Beginner’s Guide to Third-Party Car Insurance

Car insurance policy with red car toy and blur image of man hand for vehicle insurance policy concept.

If we leave a house purchase aside, a car is probably the most expensive thing you will buy in your life. It’s a dream for most of us, especially since we spend months researching the car that we want to buy and saving up for our prized vehicle. Most of us never forget the first day we hit the ignition and roll the wheels of our new car on the road. It’s a moment of pride and achievement. We spend a lot of time and effort to maintain our car and keep it looking good and performing efficiently. However, one day, the car meets with an accident or a mishap.

While it is devastating to see our beloved four-wheeled friend damaged, the financial burden it brings can be overwhelming. Also, if you end up damaging a third-person property or person(s), the financial strain can mount to a huge sum. Hence, an insurance policy is a must.

Today, we are going to talk about car insurance in India and offer a beginner’s guide to third-party car insurance.

Let’s start with the basics:

What is car insurance?

Car insurance is an insurance product that offers financial protection to your vehicle against a pre-specified set of risks. It offers cover against losses arising from accidents and all subsequent liabilities.

Types of car insurance

There are different types of car insurance products available:

  • Third-party liability policy
  • Own-damage policy
  • Comprehensive policy

What is a Third-Party Liability Policy?

When you drive your car on the road, there is a possibility of getting into an accident or a collision even if you are extremely careful. If you crash into a third-party property or person and cause damage, then you are liable to pay for the said damages or loss. This can be a huge financial strain on you. A third-party insurance policy for your vehicle compensates these damages.

When it comes to car insurance, there are three parties involved:

  • You (or the insured vehicle) is the FIRST PARTY
  • The insurance company is the SECOND PARTY
  • The person who raises a claim against the damages caused by the first party is the THIRD PARTY

As per the Motor Vehicles Act, 1988/89, it is mandatory for all cars to at least have a third-party liability policy before they can be driven on public roads or parked in a public place. This is done to ensure that drivers, passengers, and pedestrians are compensated in the event of an accident or a mishap. Remember, it is illegal to drive an uninsured vehicle in India.

What is covered under a third-party liability cover?

A third-party liability insurance policy offers the following cover:

  • Third-Party property damage
  • Third-party physical injury or death

What is not covered under a third-party liability cover?

Since a third-party liability policy offers compensation to damages/losses caused to third-part only, any damage to the policyholder’s vehicle or any physical injury to the policyholder himself is not covered under the policy. Also, it will not cover losses if your belongings are stolen or destroyed.

What is the premium of third-party car insurance policy?

The premium for third-party car insurance is fixed on an annual basis by the IRDAI. The existing premium rates for third-party car insurance are as follows:

The engine capacity of the car Premium Rates
Less than 1000cc 2072
Between 1000cc and 1500cc 3221
More than 1500cc 7890

Can I buy add-on covers with a third-party car insurance policy?

Add-on covers like zero depreciation, engine protect, and roadside assistance, etc. are NOT available with a third-party car insurance policy. This is because the policy offers compensation only for damages to third-party property or person(s), and the add-ons are focused on own-damage coverage.

Is a third-party car insurance policy enough or should I opt for a comprehensive policy?

While a comprehensive policy offers protection against own-damage and third-party liability, there is a marked difference between the premium rates of a third-party and comprehensive car insurance policy. Hence, if you have an old car and an inexpensive model, it is advisable to purchase a third-party liability cover only as the cost of repairs is not high.

Summing Up

A third-party four-wheeler insurance policy is mandatory and offers protection against third-party liability if your car gets into an accident or mishap. While these policies are standard across insurers since the IRDAI mandates the premium rates, you can choose the provider based on the quality of services offered. Also, it is important to ensure that you assess your insurance needs and choose between a third-party and comprehensive policy carefully. Remember, accidents cannot be predicted. Even if you are careful while driving your car, accidents can happen. Hence, while the government has made a third-party policy mandatory, it helps you avoid undue financial strain in the event of an accident. Research 3rd party car insurance online and choose the best provider. Good Luck!