Third-Party Insurance - Inclusions And Exclusions

Third-Party Insurance - Inclusions And Exclusions

Whenever you visit a furniture or home decor store, you must have seen signs that say, “You break it, you buy it!” These are usually placed around glassware, electronics, or expensive products so that the store doesn’t face a loss because of your negligence. For instance, if you drop a bluetooth speaker accidentally while examining it and it gets broken, now you will have to pay for it.

Similarly, if you are driving and accidentally cause any damage to another person’s vehicle, they may ask you to pay the cost for the same. Say you bumped into another car and broke its tail lights because you didn’t hit the brakes on time. You will be liable to pay for the repair or replacement of the same.

Paying for the damages which you’ve caused to another person’s vehicle might prove to be expensive. This is where motor insurance helps you. You will be protected from any costs that arise from such a situation. It is a kind of safety net that provides security and peace of mind and covers you financially. It also ensures that the affected party doesn’t have to go through any hassles for the compensation they need.

What is third-party insurance? What is the scope of its coverage? Are there any situations that aren’t covered under third-party insurance?

Let’s have a look.


What is Third-Party Insurance?

Third-party insurance is a type of motor insurance that covers any loss or damage caused to another person or their property because of your vehicle. It covers the financial costs of repairing property or the compensation, as decided by the court that needs to be paid in case you have injured a person.

It is important to note that the Motor Vehicles Act has made third-party insurance a mandatory requirement for every vehicle owner. You will be liable for legal repercussions if you don’t possess a valid third-party cover.

Why Do You Need Third Party Insurance?

Third-party insurance covers the damages caused to a third party or their property. Having third-party insurance is mandatory as per the law and hence, driving your vehicle without third-party insurance will be illegal. And, in case you happen to injure a third party or damage their property, your third-party insurance will cover the same.

How Does Third-Party Insurance Work?

If your driving causes any kind of harm to a person or their vehicle, a third-party policy will cover the financial obligations which you will incur.

A third-party insurance policy covers physical injury, death, and property damage.

For instance -

Maneesh holds third-party insurance for his car. He was on his way to work when his car unexpectedly collided with another car. As a result, the driver of the other car died on the spot, and his car faced severe damage too. The third-party insurance will cover the cost of compensating the family members of the deceased person and the repair cost of the car. The amount of compensation shall be decided by the court.

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Coverage Under Third-Party Insurance

  • Third-Party Liabilities

    A third-party liability arises when you are responsible for causing damages to another person or their property because of your vehicle.

    The following types of damages are covered -

  • Property Damages

    In the event of an accident; third-party insurance covers the damage done to the property of another person. It has a compensation limit of Rs. 7.5 lakhs.

    Let's see how the property damage is covered under different scenarios:

    Example 1:While parking your car, you hit and damage a food stall. You need to pay the owner Rs. 30,000 as compensation. The policy will cover the costs of the same.

    Example 2:Your car bumps into another car on the road, causing severe damage to the other person's car. In this instance, the insurance company will cover the repair costs of the other person's vehicle.

  • Accidental Bodily Injuries

    The policy also covers the costs arising from causing permanent disability to another person.

    For instance, while reversing your car, you accidentally hit a person waiting to catch a bus. The rear-end collision caused severe damage to the victim’s spine resulting in a permanent disability. Your third-party coverage will compensate that person based on the amount declared by the court.

  • Accidental Death

    Similarly, in case of accidental death, there is no limit on coverage. When your vehicle hits someone, and they die on the spot due to the impact, your third-party insurance will cover the cost of compensating the family members of the deceased person based on the compensation awarded by the court.

  • Personal Accident Cover

    A personal accident insurance policy is mandatory by law, and you should buy it along with your third-party insurance policy.

    This policy will cover the costs related to the vehicle owner-driver in the event of accidental death or permanent disability.

    This add-on cover can be added to thecomprehensive car insurance policies and third-party policies by paying an additional amount of the premium.

    For instance,

    Sohail has bought a third-party insurance policy along with a Personal accidental cover add-on of Rs. 15 lakhs for his car. While driving, Sohail meets with an accident. This accident caused several injuries to Sohail and left him permanently disabled. The insurance company will compensate Sohail as per the limit stated in the policy. The other person’s car also faced severe damages and the repair costs amount to Rs. 3 lakh. These damage costs shall be taken care by the third-party insurance cover.

Exclusion Of Third-Party Insurance

Imagine you get into an accident and damage a third party's car. The owner asks you to pay Rs. 1 Lakh for the damages. You, however, are not worried about the expenses because you have a third-party insurance policy. You think the policy will pay for the damages caused by you. Now, when you apply for the claim, the insurance company tells you…

“This isn’t covered by your policy. You will have to bear the expenses yourself.”

When you hear something like this, you feel betrayed- especially after you have invested in the policy for years. To ensure there are no such surprises at the time of a claim settlement, it is extremely crucial to understand what is not covered under a third-party insurance policy.

Exclusions are situations that your third-party insurance policy doesn't cover and won't pay for the expenses.

Now that you've understood what 'exclusions' are, let's take a look at the below situations that are excluded under a third-party insurance policy-

  • Drink And Drive

    Any loss caused because the person who is driving the vehicle is under the influence of alcohol is excluded.

  • Own Damage

    If the insured’s vehicle or the insured himself/ herself has suffered some bodily injury- the policy won’t cover this.

    For instance, while Rajat is driving his car, he meets with a small accident that damages his car. Since the policy doesn’t cover ‘own damages’, Rajat has to incur the repairing cost for his car himself.

  • Out-Of-Warranty Driving Licence

    Damages will not be covered if the person driving the insured vehicle doesn’t have a valid driving license.

  • Driving Outside The Geographical Area

    If the loss occurred outside the geographical area that is specified in the policy, it will not be covered.

  • War And Nuclear Weapons

    Any damage caused to the third-party property or individual due to nuclear weapons or war is not covered.

  • Consequential Loss

    Claims arising out of consequential damage to the vehicle will not be covered.

    For instance, your car meets with an accident and requires to be towed to a garage. While towing, the hood of the car gets damaged. The damage to the hood will be considered consequential damage and hence, will not be covered by the policy.

  • Unauthorised Usage

    Damage caused when the vehicle is being used for illegal activities, racing, etc. is not covered.

  • Contractual Liability

    Claims arising out of contractual liability, i.e., because the policyholder enters into a contract with someone, are not covered.

    For instance, Suraj has taken a loan from his relative, Akash. He has pledged his car for a specific time period against this loan. Now, Suraj’s car is damaged while being driven by Akash. Since contractual liability is excluded from third-party insurance, the damages caused to Suraj’s car will not be covered by the policy.

  • Undesignated Driver

    If an accident takes place but the person driving the vehicle is not the designated driver or owner of the vehicle, then the policy won’t cover the expenses.

Please note, the above list is not exhaustive, there could be additional exclusions in the policy. So, ensure you check the policy wording before you go ahead and make the purchase.

Comprehensive Policy Vs Third-party Only Policy

Parameters Comprehensive Policy Third-party Only Policy
Definition Comprehensive policy provides protection against own as well as third-party damages. A third-party-only policy provides protection against any third-party liabilities only.
Coverage The policy covers any damages caused to the policyholder’s vehicle as well as any damages caused to the third party or their property. This policy covers damages caused to the third-party individual or their property only.
Legally mandated It is not mandatory to have a comprehensive policy. It is mandatory to have a third-party insurance policy.
Add-ons You can choose a variety of add-ons with a comprehensive policy. There are no add-ons available with a third-party-only policy.
Premium Premium is higher as it provides wider coverage. Premium is lower as it provides a limited cover.
Discounts Discounts are available in the form of no-claim bonuses, voluntary deductibles, anti-theft devices, etc. No discounts are available.

How To Buy A Third Party Policy?

To purchase a third-party policy you can visit the website of any insurance company, web aggregator, or broker. These are the steps you will need to follow

  • Enter the details of your vehicle such as make and model, registration number, registration date, fuel type, etc.
  • Once all the details are entered by you, you will be diverted to the quote page where you can select the type of coverage you are looking for.
  • Once you select the third-party option, the premium will be shown.
  • After you make the payment, you will receive the policy on your email id.

Third-Party Premium Rates


Engine Capacity Third-party premium rates
Not Exceeding 1000 CC ₹2,094
Exceeding 1000 CC but not exceeding 1500 CC ₹3,416
Exceeding 1500 CC ₹7,897

For Electric Cars

Car Battery Capacity Third-party premium rates
Less than 30 kW ₹1,780
More than 30 kW and less than 65 kW ₹2,904
More than 65 kW ₹6,712

For Bikes

Engine Capacity Third-party premium rates
Not Exceeding 75 CC ₹538
Exceeding 75 CC but not exceeding 150 CC ₹714
Exceeding 150cc but not exceeding 350 CC ₹1,366
Exceeding 350 CC ₹2,804

For Electric Bikes

Bike Battery Capacity Third-party premium rates
Not exceeding 3 kW ₹457
Exceeding 3 kW but not exceeding 7 kW ₹607
Exceeding 7 kW but not exceeding 16 kW ₹1,161
Exceeding 16 kW ₹2,383

How To Raise A Claim Under Third-Party Policy?

Raising a comprehensive claim is easy. All you have to do is call your insurer, inform them of the details, and the rest is taken care of by them.

But, it is not the same for third-party insurance as it also involves a legal process. While the steps may vary from insurer to insurer here is a general process that is followed

  • Claiming For Property Damage

  1. Register the claim with the Motor Accident Claims Tribunal office which is situated in the jurisdiction of the place of the accident.
  2. File a police FIR explaining the details of the accident. (FIR is filed normally by the third party whose property is damaged)
  3. According to the above filing, compensation will be given to the victim. The maximum compensation is Rs 7,50,000.
  • Claiming For Accidental Death/Injury

  1. Register the claim with the Motor Accident Claims Tribunal office which is situated in the jurisdiction of the place of the accident.
  2. File a police FIR with the insurance papers of the vehicle. (FIR is filed normally by the third party who is whose property is damaged/who is injured or by their family in case of death)
  3. According to the above filing, compensation will be given to the victim. The amount will be decided by the Motor Accident claims tribunal.
  4. The entire closing of the case does not have a time limit

Generally claims that are filed for large property damages, injury, and death can take at least 1 or 2 years to settle. This can be fast-tracked if you have all the documents in place including a proper explanation of the incident recorded in the FIR, original records of expenses, etc.

We are sure that you are now aware of why it is crucial to invest in third-party Insurance. Apart from being a mandatory requirement as per the law, it is also the best way to safeguard yourself financially from unanticipated expenses arising due to third-party liabilities in the event of an accident.

Frequently Asked Questions

The Third Party premium is set by IRDAI based on the cubic capacity of the vehicle. Different models of the vehicle will have different cubic capacities and hence, the premium may vary.

No, the No Claim Bonus discount is offered on its own damage premium. In a third-party-only policy, there is no cover available for own damage and so, the discount won't be applicable.

Yes, you can always convert your comprehensive policy to a third-party policy. You can do this while you renew your policy by selecting the Third Party only cover and proceeding with the payment. But, if you need extended coverage then a comprehensive policy will be a better option.

Yes, if you own a vehicle, it is a must to have at least a third-party policy. Driving your vehicle without a policy is illegal.

No, you cannot. A third-party policy will only cover the damages caused to the third party or their property. Any damages caused to your vehicle will not be covered under such policy.

While there is no limit to the compensation that will be paid due to injury/death, there is a capping of Rs 7.5 Lakhs for property damage.

Yes, it is necessary to file an FIR before filing a third-party claim.

All third-party-related claims are dealt with by the Motor Accident Claims Tribunal.

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