The Benefits Of Third Party Liability Insurance For Your Bike
If you own a bike, it is statutory on your part to have third party liability insurance in force. Let us see what we mean by ‘third party liability insurance’ in this article. We will also look at the advantages of having such a policy.
Accidents can happen anywhere and at any time. Any accident involving your bike can cause loss of life or damage to third party property. The third party insurance can take care of such liabilities.
Third Party Insurance – Definition
Third Party Insurance is a mandatory policy to take care of the financial loss you suffer because of the injuries caused to another person, vehicle, or property. The Motor Vehicles Act 1988 makes it mandatory for every vehicle owner to have a third party liability insurance cover. You can read more about this and insurance for two-wheelers in India on our other blog too.
How is it different from the comprehensive insurance policy?
Many people confuse the third party liability policy with the comprehensive insurance policy, but there is a basic difference between the two. The comprehensive insurance policy is a combination of third-party insurance and own damage cover. Hence, it covers damages to both your vehicle as well as the liabilities of any damage to the third party. The third party liability insurance policy covers only the third party liabilities.
Key features of third-party liability insurance:
Though experts usually recommend the comprehensive insurance policy for bikes, the third party liability insurance cover has its benefits.
- This policy provides protection against death or injury to third person in case of an accident involving your bike.
- Buying a third party insurance cover is very easy because it does not require much documentation. The main reason is that this policy does not cover losses (damage or theft) to your insured vehicle.
- In comparison to the comprehensive insurance cover, the premium for an exclusive third party liability cover is very low.
- You get peace of mind when you buy a third party liability policy because the liabilities are uncertain and unlimited when it comes to injuries or death to third parties. Thus you can focus on your ride, and not worry about policemen or the unforeseen chance that you may cause damage to a third party.
What does the third party liability insurance policy cover?
This policy is also known as the ‘Act only’ policy. It covers the following events.
- Death or body injury to a third party – An accident can cause a crippling injury to the victim. It can also result in the death of the third party. This policy covers the medical expenses of the victim. The victim is also eligible to claim expenses due to loss of income as he/she would not be in a position to resume work. The insurance company compensates the claim.
- Damage to third party property – This policy covers damages to a third party vehicle or property. There is a restriction of Rs 1 lakh on the amount payable as third party property damages.
- Death of the owner / driver – The dependants of the owner / driver of the insured vehicle gets compensation in case of his / her death due to the accident involving the two-wheeler if ‘owner-driver PA cover’ was taken (this is a separate but cost-effective insurance policy).
- The compensation formula for the owner-driver PA cover works in the following manner.
- The compensation is 100% of the sum assured in case of death, loss of sight in both eyes, or loss of two limbs.
- In case you lose one limb or sight of one eye, the claim is restricted to 50%.
- This is subject to the owner having a valid and effective driving license and is the registered owner as per the RC.
What does the third party liability insurance policy not cover?
This insurance policy does not cover the following events.
- Damage to your own vehicle
- Any damage or liability caused by activities outside the geographical area of the policy.
- Any claim arising out of a contractual liability
- Loss caused due to war, warlike situation, nuclear weapons, and radioactive contamination.
How much does the third party liability insurance cost?
The premium rates for third-party liability insurance for two wheelers have been changed with effect from 01.04.2018. The premiums depend on the engine capacity of the vehicle.
- Vehicle with engine capacity up to 75 cc – Rs 427
- Engine capacity between 75 and 150 cc – Rs 720
- Engine capacity between 150 and 350 cc – Rs 985
- Above 350 cc – Rs 2323
What are the benefits of having a third party liability insurance cover?
- Covers third-party damage to life and property
- Covers owner / driver disability or death if owner driver PA cover is obtained (separately).
- Low premium as compared to other insurance policies
- Easy documentation because it does not involve insurance of owner vehicle
What are the demerits of the third party liability insurance policy?
- Does not provide monetary compensation for damages or theft to the insured vehicle.
- In case of damage to own vehicle, the owner has to bear the entire cost of repairs to the vehicle.
- There is no scope for having any add-on cover. Hence, the policy is not a flexible one.
How can a third party claim third party insurance?
There are three steps to follow for a victim or the family to claim third party insurance.
- File the police complaint – This is the most important aspect of lodging the claim. The victim or the family should file an FIR at the nearest police station. One should provide details like registration numbers of the vehicles involved in the accident, license details of the perpetrator, name and details of a credible witness.
- File the plaint with the motor accidents claims tribunal – After filing FIR, one should file the claim with the Motor Accidents Claims Tribunal (MACT). This is the legal authority to conduct proceedings and arrive at the quantum of liability. The responsibility of furnishing the documents to authenticate the claim lies with the claimants.
- Settlement – The Tribunal makes its decision after looking at all aspects. The insurance company is bound by the decision of the Tribunal to pay the claim amount unless it opts to appeal.
Which policy is better, Third Party liability insurance or Comprehensive Insurance Policy?
Strictly speaking, the third party liability insurance policy protects you against third-party claims as the insurance company takes care of this liability. The insurance company pays towards the medical expenses, disability of the injured of the injured third party as decided by the MACT. It also takes care of the compensation in case of death of the third party. The policy also provides compensation in case of Third Party Property Damages.
The comprehensive insurance policy takes care of all these liabilities in addition to covering the cost of damages to your own vehicle. This policy takes care of damages to your vehicle because of fire or theft.
Therefore, a comprehensive insurance policy is better than the third party liability insurance cover. The third party liability insurance cover has a very low premium, but you should not mind paying a little more to cover damages to your vehicle as well. This is because the accident can damage your vehicle as well.
When should you buy the third party liability insurance cover?
As the comprehensive insurance cover comes with a third party liability insurance cover, it is always advisable to go for this policy. However, there are occasions when you can go for the third party liability insurance alone.
- In case your bike is an old one, you can opt for the third party liability insurance policy. This can at least take care of the third party damage while not costing you too much. Under such circumstances, you should be managing the repairs of your vehicle with your own money.
- It also gives you peace of mind as you you can ride without the tension of legals hassles or being stopped by the police
When should you opt for the comprehensive insurance policy instead?
Remember, third party insurance is statutory (you cannot legally ride a bike without having a valid policy). You should take either of the policies. When you have a new vehicle, you should always go for a comprehensive insurance policy instead of the third party liability insurance cover. In case you have an old vehicle and do not want to pay from your pocket for your vehicle’s repairs, it is always advisable to go for the comprehensive insurance policy.
An accident can happen anytime without intimation. It is better to have protection in the form of a third party liability insurance cover, particularly when this is a mandatory insurance. Driving without insurance is going to be penalised by Rs. 2000 which is way higher than the premium of the policy. So, it is in your own interest to have this cover.