Third-party Insurance Is A Must For You To Drive

Raj, a 23-year-old college student, loved his sleek new Royal Enfield. He impulsively bought basic bike insurance without paying attention to details, as the low premium lured him. Fast forward a few months, he lost control and collided with a parked car. While no one was injured, both car and bike were damaged and needed repair. The car owner claimed that he needed ₹75,000 for the damage, while Raj was unsure how much it would cost to repair his bike.

Raj wondered whether his insurance was sufficient to cover the accident’s losses and liabilities. Or will it add to his financial burden?

In this article, we will tell you everything you need to know about third-party insurance, India’s most fundamental and essential form of vehicle insurance and how it helped Raj in this scenario.

What is Third-party Insurance?

Third-party insurance, often known as liability-only insurance, is a type of automobile insurance that covers the insured person’s liability if they are sued or held legally accountable for death, injuries or property damage caused to a third party. A third party can be anyone other than the insured, including a pedestrian, vehicle owner, property owner, etc.

For example, if you get into an accident that injures or damages another person’s property, you must compensate them if the case is taken to court and the court of law finds you guilty. This is where third-party insurance comes into play.

What all gets covered in Third party Liability:

In Raj’s case, since he has third-party insurance, his insurance policy will cover ₹75,000, which is the repair cost of the third-party car. However, it will not cover any damage to his bike or pay for any injuries to Raj.

Why is Third-party Insurance Compulsory ?

Third-party insurance is required for all automobiles in India under the Motor Automobiles Act of 1988. The main reason is to protect third parties from accidents caused by the insured person and to empower vehicle owners to deal with the legalities with peace of mind, knowing that their finances are secure. 

According to the latest Ministry of Road Transport and Highways data, India recorded over 4.37 lakh road accidents in 2019, resulting in 1.54 lakh deaths and 4.39 lakh injuries.^[1] These numbers are alarming and highlight the importance of adequate insurance coverage for all vehicle owners. 

Historical Cases and Court’s Judgement for Learning:

The courts can decide the claims and compensation in third-party insurance cases. These case laws explain how third-party insurance benefits the insured, the third party, and society by providing legal protection, financial assistance, and fair compensation in case of vehicle accidents. Here are some case studies that show the benefits of third-party insurance.

• The 2004 case of National Insurance Co. Ltd. versus Swaran Singh shows the benefits of third-party insurance in terms of legal coverage and financial help. The Supreme Court ruled that the insurance company must compensate the third party even if the driver has no valid license unless the owner knew about it and was involved in the accident. The insurance company cannot avoid liability by claiming technical concerns or violating the law. This protects the insured from the legal and financial burden of paying for third-party damages.

• The case of United India Insurance Co. Ltd. versus Sunil Kumar (2017) shows the advantage of flexible and clear coverage that third-party insurance offers. The Supreme Court ruled that the insurance company has to pay the third party even if the vehicle is used for a different purpose than the one it is insured for unless the use is so different that it breaks the policy. The insurance company cannot deny liability by relying on unclear or vague terms in the policy. This ensures that the insured is not left in the dark due to confusing language or conditions in the policy.

Premium Rate of Third-Party Bike Insurance

The 3rd party bike insurance premium is decided by the Insurance Regulatory and Development Authority of India (IRDAI) based on the Cubic Capacity (cc) or Kilowatt capacity (KW) of the petrol and EV bikes, respectively. The premium rates set by IRDAI are subject to changes. Here’s a table showcasing third-party car insurance premium rates:

For petrol bikes:

For EV bikes:

Key Takeaways

Third-party insurance is a must-have for every vehicle owner in India. It protects you from the legal and financial liabilities that may arise from an accident involving a third party. However, it does not compensate you in any way for your bike’s damage or loss and your injuries. So, explore extensive coverage through comprehensive insurance for maximum safety when you drive your bike.