3 Reasons Why A Third Party Car Insurance Is Not Enough?

Published On 31 Oct 2019 By InsuranceDekho

A third party insurance cover is mandatory but not recommended, here's why.

The purpose of availing a car insurance policy is to get insured against sudden/unexpected financial loss due to unfortunate events like road accidents involving your car. On the basis of coverage, there are 3 types of car insurance policies - third party/liability only car insurance policy, comprehensive car insurance policy and standalone own-damage car insurance policy. Driving a car without at least a third party policy is a punishable offence in India as per the Indian Motor Tariff, 2002.

What is A Third Party Car Insurance Policy?

A third party car insurance policy also known as liability only car insurance policy is the most basic type of car insurance plan which provides coverage for third party liabilities caused by the insured’s car. Third party liability include the following damages incurred by a third party:

  1. Bodily injuries including temporary and permanent disability
  2. Death
  3. Property damage up to Rs. 7.5 lakh.

Since a third party policy provides coverage only for third party liabilities and nothing car damages sustained by the insured’s car, it is not considered an ideal car insurance cover.

Why a Third Party Car Insurance Policy is Not Enough?

Although, a third party car insurance policy helps one fulfill the legal requirement of having a car insurance policy, it is not enough car insurance plan due to the following reasons:

  • No Coverage for Damages Suffered By Insured’s Car

A third party policy does not provide coverage for damage incurred by the insured’s car. The policy provides coverage only for third party liabilities including property damage, bodily injury and death of a third party. However, if the insured’s car hits a tree, the policy would not provide a cover for the financial loss such as repairing cost and towing cost. Moreover, a third party cover does not insure the car against damages suffered by it due to natural calamities like floods, storms, earthquakes, or man-made calamities like riots, fire, explosion, etc.

  • No Availability of Add-ons

In a car insurance policy, the term ‘add-on’ means the extra coverages which a car owner can opt to get an insurance coverage for some specific loss or damages. A policy can be modified by the policyholder according to his/her requirements by availing suitable add-ons. For instance, a policyholder can opt for an Engine Protection Cover for the engine or a Passenger Cover to insure the fellow passengers by extending the policy’s coverages. But in the case of third party policy, one cannot avail these add-ons to earn extra facilities. These add-ons are available with only comprehensive car insurance plans and standalone own-damage car insurance plans.

  • No Coverage Against Theft of Car

A third party liability policy does not offer coverage against the theft of the insured’s car. The coverage can be availed only with the options of comprehensive or standalone own-damage car insurance plans.

So, What is the Solution?

It is known that having a third party liability only policy is mandatory for a car owner in India according to Indian Motor Tariff, 2002. But there are these above-mentioned disadvantages the policyholder has to face related to this policy. However, the shortcomings can be fulfilled by either purchasing a comprehensive plan or a standalone own-damage car insurance plan.

  • What is a Comprehensive Car Insurance Plan?

Under a comprehensive car insurance plan, an insurance company is obligated to pay against the damages occurred to third party vehicle and life by the insured’s vehicle along with the damages incurred by the insured’s car. The policy insures the policyholder against financial loss in the events like road accidents, natural calamities (floods, storm, earthquake, etc.), fire, theft, explosion, terrorist activity, self-ignition or lightning and damage done in transit by road, rail, waterways, lift, elevator and air.

  • What is a Standalone Own-Damage Car Insurance Plan?

A standalone own-damage car insurance policy provides coverage only for own damages incurred by the insured’s car. There is no coverage for third party liabilities in this policy. Thus to meet the legal liabilities, a standalone own-damage car insurance policyholder has to purchase a third party policy separately.

Thus, a comprehensive car insurance policy is a recommended cover as it is the only single plan which provides complete insurance coverage for a car. However, said that all car owners must choose the type of plan based on their requirements and convenience.

Disclaimer: This article is issued in general public interest and meant for general information purposes only. Readers are advised not to rely on the contents of the article as conclusive in nature and should research further or consult an expert in this regard.

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