The Motor Vehicle Act is the one that governs the use of automobiles in India. While it is typically laden with legalese, breaking it down for purpose of simplicity reveals several key aspects about it. One such aspect being car insurance in India. The law states that one cannot drive a vehicle on public roads without being covered by motor insurance. So let’s understand Third Party Insurance.
What is Third Party Insurance?
A third party insurance policy is a policy under which the insurance company agrees to indemnify the insured person, if he is sued or held legally liable for injuries or damage done to a third party. The insured is one party, the insurance company is the second party, and the person you (the insured) injure who claims damages against you is the third party.
Section 145(g) “third party” includes the Government. National Insurance Co. Ltd. v. Fakir Chand[1], “third party” should include everyone (other than the contracting parties to the insurance policy), be it a person traveling in another vehicle, one walking on the road or a passenger in the vehicle itself which is the subject matter of insurance policy.
Salient Features of Third Party Insurance
- Third party insurance is compulsory for all motor vehicles. In G. Govindan v. New India Assurance Co. Ltd. [2], Third party risks insurance is mandatory under the statute .This provision cannot be overridden by any clause in the insurance policy.
- Third party insurance does not cover injuries to the insured himself but to the rest of the world who is injured by the insured.
- Beneficiary of third party insurance is the injured third party, the insured or the policy holder is only nominally the beneficiary of the policy. In practice the money is always paid direct by the insurance company to the third party (or his solicitor) and does not even pass through the hands of the insured person.
- In third party policies the premiums do not vary with the value of what is being insured because what is insured is the ‘legal liability’ and it is not possible to know in advance what that liability will be.
- Third party insurance is almost entirely fault-based.(means you have to prove the fault of the insured first and also that injury occurred from the fault of the insured to claim damages from him)
- Third party insurance involves lawyers aid
- The third party insurance is unpopular with insurance companies as compared to first party insurance, because they never know the maximum amounts they will have to pay under third party policies.
Let’s understand third party car insurance in India via the following scenario: You’re turning into a lane and enter it a little quicker than usual. But there’s a hold-up at the other end of the corner, and you only realize it when it is too late, thereby crashing into the rear of the car in front of you. Both cars are damaged in the process and a heated argument typically ensues. Much time gets wasted as responsibility is sought & details of the payment for the damages caused are sorted out.
Ideally speaking, in the above scenario, the third-party car insurance cover should be useful in making right the wrong. It is meant for just this purpose – that of making good the damages caused to the car of the opposite person. Thus, it is not meant for the driver or their own car, but for others – the fellow motorists on the road.
The sad reality is that most motorists continue to be ignorant (sometimes, even by choice) of this vital documentary-legal compliance. For the sake of a few hundred/thousand rupees, they risk legal complications in the face of an incident. In doing so, they fail to realize that third-party insurance is meant to be a critical safety net to protect others from the implications of your actions. The scenario is changing slowly though, especially in major cities and towns, as law enforcement improves. With punitive fines being levied for offenders who drive on the streets without third-party insurance coverage, motorists are slowly starting to get the point.
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