Third party insurance is a major segment of motor insurance. It covers the policyholder both legally and financially if he or she gets tangled in any accident that hurts, damages, or otherwise affects any third party. Third party would mean anybody except the policyholder and the insurance company. This is compulsory in most of the countries like India. It enables the vehicle owners to compensate for the damage and injury caused to others by their vehicles.
We are going to take a ride through all the details regarding what third-party insurance is, how it works, the meaning of third-party damages, benefits, and other key aspects you should know before buying a third-party insurance policy.
What is Third-Party Insurance?
Basically, third party insurance is a liability insurance policy; it pays for any damages or injuries the policyholder’s vehicle may cause to another person or their property. Unlike comprehensive insurance bought and protecting the policyholder’s own vehicle, third party insurance only exists to pay liabilities incurred toward others.
Third Party Insurance Policy
Legal Definition
In legal parlance, the third party insurance policy involves three entities:
The First Party: The person holding or owning the policy or is owner of the vehicle.
The Second Party: The one providing the insurance cover.
The Third Party: Who, due to the wrongdoing of the first party’s vehicle, faces injuries or damages.
This is also known as “liability-only” insurance that is only required to pay for damages or injuries caused to third parties. In case the vehicle covered by the policy meets an accident, then all the costs of repairing or replacing the vehicle should be borne by the policyholder unless he has a comprehensive insurance cover.
How Third Party Insurance Works
Third-party insurance meets all the expenses related to a policyholder’s vehicle in case it ultimately leads to harming or damaging someone or their property. In this case, the third party recovers the losses by taking that amount from the insurance company within the limit of coverage of the policy.
Here’s how it works.
Accident Takes Place: Accident damages someone else’s vehicle, person, or property.
Report the Accident: The policyholder should inform the insurance company and forward all relevant material documents regarding the accident, like a report of the accident, claim form, photographs, or even a witness’s statement.
Research done by the Insurer: This research is mainly towards confirming the information related to the accident, the extent of damage done to the vehicle, and who should bear the liability.
Settlement: After the findings of the investigation, the amounts lost by the aggrieved third party are covered by the insurer; the losses may be on either medical treatment, the damages to the property, or repair to a car.
But then one should note here that third party insurance covers liabilities towards others but not those against oneself. The costs for his vehicle are to be borne by the policyholder himself, be it that of repairing his car or paying for medical treatment. It is only if you want to protect your own vehicle that you must have the coverage of a comprehensive insurance policy.
Definition of Third Party Insurance
Third-party insurance simply referred to the amount of money to meet the cost of legal liabilities or compensation in case the insured motor vehicle directly caused injury, death, or damage to another person or property. The insurance covers none of their damages or losses.
A great many countries have made such insurance a legally obligatory form of insurance so that any people harmed by road accidents can have recourse for compensation. Third-party insurance is much cheaper because it involves lesser coverage than comprehensive insurance.
Basic idea of Third-Party Insurance?
The basic meaning behind third-party insurance revolves around all kinds of financial and legal protection in the case of liabilities arising due to harming a person. In short, compensation from the other party for losses they might have incurred in case there is an accident from the vehicle that you are driving.
This is quite basic, very especially so when one would be held responsible for a cost that might turn too hefty if one accidentally injures another person. Just think of hitting a foreign expensive car or injuring a pedestrian; third-party insurance will come in handy to cushion the cost of repairing damages, medical costs, or even having to face legal suits.
3rd Party Damage Meaning
Third party damage includes the damage caused by the owner’s vehicle to any other person’s property or to his vehicle, or to bodily injuries suffered by others due to the accident. Third party damage in motor insurance includes property damage.
Property Damage refers to structural damage, a vehicle, and any personal property of the third party.
Bodily Injury: It covers the medical expenses plus compensation to the third party. Examples include hospitalizations, surgeries, rehabilitation, and loss of wages.
Death: When death results from an accident, third-party insurance also ensures that compensation is sought for the family of the victim.
For instance, if your car runs into another car and chases off some parts of its bumper, windshield or engine. In such a situation, all these damages will be covered by third-party insurance. And in case that leads to an injury, then the medical expenses too shall be covered by insurance.
Other Benefits from Third-Party Insurance
And that is not all. Third-party insurance has more benefits to the client. It is not just a tool of fulfilling the legal liability. Here are some of the most significant advantages:
Legal Compliance: The Motor Vehicles Act in India has made third-party insurance compulsory. Without such an insurance cover, punitive fines or court action awaits a failure to keep the above legal requirements in mind.
Financial Protection: Third party insurance covers your financial liability in case there is a need to compensate the third party for their losses. The insurance does indeed cover property damage and even medical costs that may incur as well as provide compensation for death.
Cost-Effective: Third-party insurance premiums often tend to be lesser than comprehensive. Thereby making the individual seek basic legal protection without raising the cost of covering his or her vehicle.
Peace of Mind: It lets him know that if a mishap does befall, his liabilities in terms of the legal matter are taken care of and he’s given peace of mind while driving that reduces anxiety in case of accidents.
While third party insurance offers limited cover, it is a must have protection for whoever owns or drives a vehicle. In most cases, the damages that seek repair or compensations in terms of injuries may run into lakhs of rupees. Thus, third party insurance is surely worth the money.
Third Party Vehicle Insurance Coverage
Normally, third party vehicle insurance comprises of coverage for:
Damage to third party property: If your car damages someone else’s property such as other cars, motorcycles, homes or shops, the insurance will pay for the repair or replacement.
Injury or death of a third party: Third Party Insurance looks after his medical bills, loss of wages or income and compensation for his death if any person suffers from an injury or death due to the use of your vehicle.
Legal Framework of Third-Party Insurance
India Third Party Insurance Charges The third party insurance cost in India is well regulated and govern by the Insurance Regulatory and Development Authority of India, or IRDAI. The third party insurance charges are decide base on the car’s engine capacity and are review every year. According to law, no motor vehicles shall be allow to run on roads without third-party insurance fit. Failure to comply with this may invite penalties or fine or even imprisonment.
Comparison Between First Party and Third Party Insurance:
In order to understand better what first-party and third-party insurance entails:
First-Party Insurance: This is a kind of insurance cover that pays for damages or injuries inflicted on the policyholder. Example take comprehensive insurance. It covers your vehicle from accidents, theft, fire, and acts of nature. That’s first-party coverage.
Third Party Insurance: It is an insurance which will cover damages or injuries to other people or their property but not the vehicle or health of the policyholder.
How to Choose Third Party Insurance?
To choose the right third party insurance, there are a few considerations to be made:
Premium Cost: The third-party insurance is cheaper than comprehensive insurance; however, make sure the coverage limits meet your requirements.
Claim Process: Find an insurance company which has a claim settlement process that is quicker and less painful.
Policy Exclusions: Read the terms and conditions of your policy carefully to know what is not cover under it.
How to File Third Party Insurance Claim
It is structured with the process under third-party insurance and legal. Thereby working towards seeing to it that the third party affect receives compensation for his losses. This is exactly how the process of claims goes step by step:
Report the Accident :
As a preliminary step to the claim, it is to be report both to the police and to the insurance company. It has to be done at the time of occurrence of the accident. The FIR is compulsorily sent along with third-party damages and injuries at the time of lodging the FIR with the police. FIR constitutes an essential constituent element of proof in raising a claim.
Report to the Insurance Company Report your accident immediately to the insurance company. Most of these insurance companies have a time bracket within which the accident should be report (usually between 24-48 hours). Make all efforts to do this within that time. Failure to file the complaint within that time shall amount to a rejection of your claims.
Documentation and Filing of Claim:
He needs to file the claim form along with all details pertaining to the accident. Damages caused as well as injuries suffered by the third party. He is supposed to submit the photostat copy of driving license, vehicle’s RC, and photocopy of the insurance policy document. Copies of FIR also need to be submit by him.
Appointment of Surveyor:
Immediately after the submission of the claim, the insurance company appoints a surveyor or claims adjuster to investigate the incidence. He examines the effect of the accident, reviews the damages done, and verifies whether the claimant is genuine or not. The compensation will be decide through the report filed by the surveyor.
Third-Party Claim in Motor Tribunal:
The third-party claim is provided through a tribunal, whereas the first-party claim is not. Evidence and papers of the third party who might have been the victim. Or that of the family of the victim can be submitted before the tribunal for claiming compensation by them. Then, the tribunal decides on compensation about the type of injury or damage that has occurred.
Settlement:
The tribunal will deliver its judgment, after which the insurance company settles the claim by making a release of the payment to the third party according to the agreed amount upon terms of compensation. If the policyholder is prove to be wrong, the third party will be directly paid by the insurance company based on the coverage provision of the policy.
Important point to be note:
Third party claims generally take more time to settle than first party claims because of the involvement of the tribunal and procedures of detailed verification.
Inclusions and Exclusions of Third Party Insurance Plan
Knowledge about what is cover (inclusions) and what is exclude under the third-party policy will enable the assessment of the coverage and whether further cover is require or not.
Inclusions
Third-Party Property Damage:
The third party policy deal includes damage to any other person’s property or vehicle due to the insured vehicle’s accident. The cost for repairs or replacement is claimable.
Bodily Injuries of Third Party:
This type of insurance protects both medical as well as legal liabilities created by the policyholder’s vehicle that inflicts an injury to anyone else.
Death of a Third Party:
If a third person dies due to an accident, the insurance company provides the amount of compensation to the family members of that deceased. The compensations are made by the Motor Accident Claims Tribunal on their feasibility.
Legal Expenses:
This pays costs against legal disputes caused by death or injury of the third party. And litigation expenses in the court to defend the policyholder.
Exclusions
Damage to Policyholder’s Vehicle:
Third party insurance does not provide coverage for the vehicle of the policyholder if the mishap has happened due to negligence from the third party. In this case, comprehensive insurance has been taken for such damage.
Accidental Injuries to Self or Driver:
Third party insurance does not cover accidental injuries to the policyholder or the driver. In case the policyholder or the driver suffers any accidental injury, additional personal accident cover has to be purchase.
Riding Without Licence and Other Offenses:
The insurer will not accept claims in a case where the driver rides without a valid license and some accident occurs.
Driving under Intoxication:
The insurer will reject such a claim if the accident occurs when he was drunk or intoxicate with drugs.
Unauthorized operation:
The claims shall not be paid unless the third party carries a valid driving license or the third-party vehicle is use lawfully.
Previous losses:
No loss that occurred prior to the incident on the third-party property or person shall be compensate by the third-party insurer.
In a nutshell, third-party insurance is the most basic form of motor insurance that protects you from legal and monetary risks related to an accident. It does not cover your vehicle but provides a cheaply affordable way to comply with the law and ensure one is compensate in case of any damage or injury to another person. In view of the statutory need for such an arrangement and its benevolent advantages. Third party insurance needs to be consider as an indispensable ingredient of responsible driving for every owner of a car.