Why you should have third party insurance?

Third party insurance is associated with general insurance, especially motor insurance. According to the Indian Motor Traffic law it is mandatory to have third party insurance for those who hold motors. However, many consumers who are taking it are not aware of its coverage, benefits and claim process. As the name suggests, when the beneficiary of any insurance policy is someone other than the two parties involved in the contract (the insurer and the insurance provider), the cover is known as a third party insurance cover.

The article will guide you on third party coverage, it functioning and how the liabilities are settled in general insurance claims.

Third Party Insurance Cover

Some general insurance policies cover two distinct parts in their insurance policy i.e. ‘own damage’ part and ‘third party’ part. A third party cover represents any other form of damage caused other than the insured person’s motor. The driver of the vehicle and the passengers in it, or any pedestrians or third party property, which are likely to get affected by the vehicle are covered by the third party cover.

Claims

Many people in India who are not fully aware of the insurance policy structure have a misconception that it is the insurance companies who are taking care of third party claims. However, it is not like this. This cover has to be taken by the insured person and not the insurance companies who look after it.

Some cases of claims involving third party insurance:

Road accident

As per the motor Vehicles Act, 1988, a motor third party claim must be filed by the affected person in a tribunal at the place of accident.

You’re a Victim

If you’re a victim of an accident, you must obtain the insurance details of that vehicle. Make sure a police complaint is filed for the accident and the first information report clearly states the facts of the case as to who was in the wrong. Based on these, a complaint must be filed at an MACT court at the place of the accident or at a place where the injured resides.

In most cases, the driver or owner of the car will try to settle the matter out of the court procedures. But, if the accident involves death of any person then any legal heir of the deceased can apply for claim under the third party insurance to get sufficient compensation. The court will summon the owner or driver of the reported vehicle as well as representatives of both insurance companies before taking a final decision in the case.

Property damage

This is very usual scenario. Whenever there is an accident there is a high chance of property getting damaged on the road such as building, stalls, etc. So if your property is damaged by a third party while driving you can either go for an out-of-the-court settlement or a settlement through MACT. If you feel that the damage caused and the expenses incurred thereby are more, a proceeding through MACT can be initiated. Get the details of the vehicle and their insurance.

Third party laws

As per the Motor Vehicle Act, 1988, a third party claim can be made under two categories: ‘no fault liability claims’ or ‘fault liability claims’. In the first case, the accident or injury happens by chance and not due to anyone’s fault.  In such cases, the compensation for the person who claims will be as per rules of the Motor Vehicles Act, 1988. However, if the claim is under fault liability, the claimant needs to prove the negligence on the part of the inflictor i.e. the car on the drive. In such events, when it is proved, the compensation can be higher, and depends upon the court judgment based on factors like human asset value or loss of earnings for the person or his or her family out of the incident or damage.

Options

Although, the basic coverage is compulsory for certain policies, there are many other options in a third party cover to choose from. Apart from insuring driver and co-passenger, you have the option of insuring additional passengers in insurance policy. There is also a provision to opt for a higher sum assured for the passengers or third parties. Third party insurance is the minimum insurance coverage that is mandatory as per law in certain cases like a motor insurance. Third party fund pooled is not administered by the insurance company, but mandated by law.