Third-Party Insurance: The Extent Of The Coverage And What It Excludes

When a boy, the son of a builder, crashed into and killed two people in Pune a few days back, he was let off on bail after being asked to write a 300-word essay. The entire nation was aghast as this incident again brought to the fore that the law is not the same for the rich and the poor. The father was later taken into custody and more details are awaited. This brings us to the question, what happens if you injure someone when driving a car or in the worst of circumstances, the other person is killed?

Also Read: Top Car Insurance Add-Ons You Must Buy To Save Your Vehicle During Rains

“Third-party insurance covers the death of a third party in a car crash. However, it does not cover the death of a person in one’s own car under third-party insurance. It is always recommended to go for a comprehensive motor insurance policy as it covers damages to your own vehicle too,” Nitin Kumar, head - motor insurance, Policybazaar.com said.

To drive a car, third-person insurance is compulsory. This means that if you do not have third-party insurance, and the police nabs you, you would be required to pay a heavy fine or face imprisonment of up to three months.

“Third-party liability covers damage caused by your vehicle to someone else's property, such as another vehicle, building, or any other property. It also provides financial compensation for injury or death of a third party caused by an accident involving your vehicle,” Mayank Gupta, Vice President, auto, ACKO, a general insurance company said.

What Does Third-Party Insurance Cover?

Let us look into a bit more detail at what third-party insurance covers.

Bodily Injury Liability: Third-party insurance covers medical expenses, lost wages, and other costs associated with injuries that the policyholder causes to another person in an accident. “This can include pedestrians, other drivers, and passengers. It also covers legal fees if the policyholder is sued for damages,” Narendra Kumar Bharindwal, VP, Insurance Brokers Association of India (IBAI) said.

Property Damage Liability: Covers the cost of repairing or replacing the property of others damaged by the policyholder. This includes vehicles, buildings, fences, and other structures.

How Third-Party Insurance Works

“When the policyholder is involved in an accident and is deemed at fault, the third-party insurance comes into play. The injured party (third party) files a claim against the policyholder's insurance,” Bharindwal said.

The insurance company investigates the claim to determine the damages' fault and extent. All Motor Third Party Liability claims are adjudicated by the Motor Accidents Claims Tribunal(MACT) and paid as per court order.

Extent Of Coverage

As per the Motor Vehicle Act, Third-Party insurance is mandatory for every vehicle in India. This type of policy covers damage caused to the third-party involved in the accident with the insured vehicle. It does not cover any damage to one’s own car. The premium for such policies is pre-decided by IRDAI based on your car’s engine cubic capacity.

The cover is unlimited for death and bodily injury, however, property damage is capped at Rs 7.5 lakh. “Insurers may be issuing policies with a limit of Rs 7.5 lakh but as per Act, there are no limits. If there is repugnancy between law and the insurance policy, the former shall prevail,” Bharindwal said.

Third-party insurance doesn't cover the death of the driver who purchased the insurance and is at fault. “To have that covered, the insured needs to have a personal accident cover that is generally sold as an add-on alongside third-party cover. In India, such cover of at least Rs 15 lakh sum insured for the owner-driver of the car is legally mandatory,” Gupta said.

Things To Note

It is important to note that damages or injuries caused intentionally by the policyholder are not covered. Also, if the policyholder is not in compliance with the terms of the insurance policy (e.g., driving without a valid license), coverage may be denied. For example, in the case of the Pune car crash, the vehicle’s registration had expired, so insurance coverage may not be provided.