In India, the Motor Vehicles Act has mandated the purchase of third party liability cover when you buy a car. Unlike a comprehensive car insurance policy, it does not insure your car against damages or pay your medical expenses in the event of an accident. It is also called an ‘act only’ cover.
Who is a third party?
A car insurance policy is a legal agreement between two parties- the insurer (insurance provider) and the insured (the policyholder). Any other person is the third party. Here, the third party refers to a pedestrian, driver, or passengers of other cars or public transport.
What is third party insurance cover?
Automobile dealers arrange for this cover when you purchase and register your car. The beneficiary here is a party other than the insurer. The premium you pay is determined by rates set by IRDA (Insurance Regulatory and Development Authority of India).
Importance of third party liability cover-
- Third party liability car insurance policy cover’s the policyholder's legal liability. If your car or two-wheeler damages someone’s property or injures or kills a third party, legal entanglements arise. Then your third party insurance policy pays all your legal costs. The two kinds of coverage provided by your third party car insurance policy are - bodily injury liability cover and property damage cover. It can extend to include fare-paying passenger travelling in public transport, or passengers of other cars or two-wheelers. In the event of an accident, if the third party sues you, your third party benefits kick in.
- It brings you peace of mind because it saves you from forking out large chunks of money that could severely deplete your savings. You do not have to lose sleep worrying over how to tide over the crisis and if you can ever recover from it financially.
- There are no red tapes involved when it comes to a third party liability cover. These policies are easy to purchase and renew. Claim settlement ratio (number of times claims are honoured as opposed to how many times they are rejected) is also quite high.
- Many third party liability car insurance covers allow you to add on personal covers that pay for your medical needs if you’ve been in an accident.
You should purchase third party liability cover not just because it is mandatory but also because it can prove to be a godsend when you find yourself in a legal bind.