An insurance policy is a legal contract between an insurance company and an insured. The contract states that the insurance company will provide financial protection against the risk subject to the premiums that the policyholder pays.

As per the Motor Vehicles Act 1988, every vehicle must be insured under a third-party insurance; it is mandatory for all the cars to insure under third party to drive a vehicle legally on the Indian roads.

It is important to understand all the terminologies related to your car insurance. Thus, you must know the different types of car policies.

There are two types of motor insurance policies:

  • Third Party Insurance
  • Comprehensive Insurance

Third Party Car Insurance

As per an insurance policy, an insurance company and the policyholder are the two parties that are involved.

Whenever you buy a new vehicle, your vehicle is insured under a third-party policy.

A third party represents any of these:

  • Pedestrians
  • Passengers/people in another car
  • Damage to third person’s property

A third-party policy is mandatory. You will end up paying hefty penalties if you do not insure your car with a third-party policy, as declared by the Insurance Regulatory Development Authority of India (IRDAI).Having insurance does not prevent you from any unfavorable incidents, but makes sure you stay financially protected in case of such eventualities.

However, whether or not it is mandatory, it is advisable to have an insurance for its own good reasons.

What a third-party policy covers:

  1. It covers any bodily injury and/or death of the third-party and/or any damage to the vehicle
  2. Property damage to the third-party up to Rs.7.5 lakh
  3. The policy provides personal accident cover for the owner-driver and optional passenger cover.

Personal Accident Cover:

For an owner-driver: When someone insures a car under a third-party policy, an owner-driver gets personal accident coverage of Rs.2 lakh on a premium of Rs.100. This coverage provides financial protection in case of an accidental permanent total disability or an accidental death of the owner-driver.

Optional Covers:

  1. a) Passenger Personal Accident cover: This cover can be availed atRs.100/ occupantsfor a coverage of Rs.2 lakh for each of the occupants.
  2. b) Legal liability for Paid driver: This cover provides a liability cover for the paid driver on paying a premium of Rs.50/year.

Third-party premium: 

The premium for third party policy is decided by the Insurance Regulatory Development Authority of India (IRDA) based on the engine capacity of the vehicle.

Motor Insurance Third Party Rates (2017):

If you just buy a third party car insurance policy, the basic premium you have to pay based on engine cc is given below.

Based on Engine CC:

Condition Relating to Engine Capacity Applicable/ Fixed Premium Rate
Not exceeding 1000cc Rs.2055
Above 1000cc but less than 1500cc Rs.2863
Exceeding 1500cc Rs.7890

*Note: Motor Third-Party Insurance Premium with effect from 01st April 2017

This article gives you an overview of the third party policy right from what it covers to the premium amount that you pay to insure your car.

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