third-party insurance of motor vehicles in india


What is third-party insurance?

We’ve often heard the term, “third-party insurance”, or “act only insurance”. As per the Motor Vehicle Act, it is a legal requirement for all vehicle owners to obtain third-party insurance for their vehicles. But, what does it mean? Basically what happens is that the insurer protects the policyholder against damages to a third party's vehicle in third-party insurance. It solely works for the benefit of a policyholder, and there is no coverage for the insurer. The parties involved in third-party insurance are: -

First party: The party who is the policyholder or the insured.

Second-party: The insurance company that is required for settling the claims.

Third-party: The person who claims the damages caused by the first party.

How does third-party insurance work?

In simple words, when the insured person meets with an accident, it becomes the duty of the insurance company to pay for the damages incurred to the third party. Thus, it acts as a burden reliever for the policyholder. Before filing for a claim, the insured must inform the insurance company about the same in case of an accident. After the insured has filed for the claim, the insurance company appoints a survey team to assess the damages incurred by the third-party vehicle and estimated costs of repair for the same. And once the verification is complete, the insurance company will settle the insured's claim.

Importance or need of third-party insurance

In India, third-party insurance is a mandatory requirement by law. Therefore, it is the legal obligation of all vehicle owners to have legit third-party insurance for their vehicles, as per the Motor Vehicles Act, 1988. As per Section 146 of the said Act, all vehicle owners must possess insurance against third-party risks.

Apart from being a legal requirement, having third-party insurance provides the policyholder with a sense of security and peace of mind that in case a situation arises, they won't have to worry about the expenses and all.

In case of an accident, the insurance company, in the wake of the insurance policy, pays up the damages claimed by the third party, thus relieving the insured of the heavy financial burden they would have to bear otherwise.

Because of its legal mandate insuring vehicles against third-party risks is easily accessible and easy to buy or renew. In India, third-party insurance can be acquired right at the time of purchase of vehicles, in addition to the registration of vehicles.

How to file a third-party insurance claim?

Firstly, an FIR needs to be lodged at the local police station either by the third party or the insured and obtain a charge sheet.

After doing so, the insurance company needs to be informed about the same, and the form needs to be filled for claiming the compensation and submitting the requisite documents.

Following the claim file, the insurance company will assess the damages and the estimated damages.

All third-party claims are settled in a Motor Accident Claims Tribunal (MACT), and the third party must file a claim at the local tribunal who will finalize the amount.

What can be included/excluded in third-party insurance?

Third-party insurance covers damages to the third party in the following cases:

Ø Physical damage to the third party.

Ø Damage to the third-party vehicle.

Ø Damage to the property.

Ø Death of a third party

However, an insurer is not liable to pay in the following cases:

Ø Theft of the vehicle

Ø If a vehicle is being used for commercial purposes or illegal activities.

Ø If the accident was caused by drunken driving.

Ø If the accident was caused deliberately.

Ø If the driver is driving without a valid driving license.

Published on 15th January, 2022


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