What is a Third Party Car Insurance Policy?

What Are The Consequences of Not Having Third Party Car Insurance?

If you meet with an accident caused by a car and your property is damaged, or you suffer from injuries, then the Motor Vehicles Act in India allows you to file a claim for reimbursement from the vehicle owner. To ensure that car owners can pay compensation for such damages, the IRDAI made it mandatory for every car owner to have a third party car insurance policy that covers losses due to any damage to a third party. Therefore, this answers the question of why is it illegal to drive without car insurance.

There are two broad categories of four-wheeler insurance policies available – third-party liability-only policy and own-damage insurance policy. While the premium for third-party policies is based on the make and model of the car, many insurers like Tata AIG offer cheap car insurance in India for own-damage protection.

What is a Third Party Four-Wheeler Insurance Policy?

If your car causes an accident that results in damage to the property of a third party or causes injuries to third persons, then you are required by law to compensate for the cost of repairs of the property or treatment of the injuries. The coverage offered by a third-party policy can be divided into two parts:

  • Property damage: If your car causes an accident and results in any damage to a third-party vehicle or property, then the third party can claim compensation from you. The claim should cover the cost of repair or replacement of the property.
  • Injury, disability, or death: In the event of a physical injury, disability, or death of a third-party caused by your car, the court decides the compensation amount. The insurer will cover the amount as per the policy document, and the rest will have to be borne by you.

What Happens If You Don’t Have Third Party Car Insurance?

If you are wondering, is car insurance mandatory in India? In India, it is mandatory for car owners to have a minimum third-party liability insurance policy. If you are found driving your car with one, then the consequences can be one or all of the following:

  • You might have to surrender your driving license and not be allowed to drive again
  • The car’s registration can get suspended
  • The fine for not having car insurance in India can amount to ₹10,000 and/or be sentenced to around three months in jail.

When you purchase a new car, the car dealer offers you a basic third party car insurance policy. Usually, this policy has a term of around one year. Unfortunately, while most car owners buy car insurance, many tend to forget car policy renewal. This can have financial and legal implications. Hence, it is important to ensure that you have an active car insurance policy that offers third-party coverage every time you drive your vehicle.

How are Third-Party Claims Processed if You Cause an Accident?

If your car causes an accident, then the third-party insurance claim happens as follows:

  • The victim files a First Information Report (FIR) with the local police station detailing who was at fault.
  • A copy of the FIR is taken to the Motor Accident Claims Tribunal.
  • You are required to attend the hearing with your lawyer and fight the case to establish the cause of the accident.
  • If the court finds you guilty, then it decides the compensation amount that you need to pay to the victim.
  • Usually, the car owner and the victim reach an out-of-court settlement, and the compensation amount is decided mutually.
  • If the accident is caused due to no negligence by either party, then the Motor Vehicles Act has predetermined compensation amounts.
Summing Up

Driving a car is a huge responsibility. However, even the best drivers can cause accidents due to an error in judgment and damage a third-party property or persons. In such cases, a third-party insurance policy can ensure that the compensation for the damages caused does not burn a hole in your pocket. Also, with the government making it compulsory for car owners to have a third-party policy, if you drive your car without one, then you can face legal and financial consequences. Also, do not forget to renew the car insurance policy so that you are protected while you drive on the road.

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