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Demystifying Third-party Car Insurance

Published On Aug 17, 2023

Demystifying Third-party Car Insurance

Insurance is now a crucial component of financial planning in today's environment, when risks and uncertainties are a part of daily life. While most of us are familiar with health, auto, and home insurance, third-party insurance is a form that often needs to be noticed. This article clarifies third-party auto insurance and highlights how helpful it is in protecting vehicle owners from potential liabilities.

Demystifying Third-party Car Insurance

What does third-party car insurance mean?

Third-party insurance protects the insured party from monetary obligations resulting from harm, loss, or damage caused to another person or their property. Circumstances such as vehicle collisions, property damage, bodily injury, negligence, and more are covered by third-party insurance. In addition to covering medical costs, property repair costs, and fees for attorneys, it also compensates the harmed third party for other damages.

How Does It Work?

Let us examine how it works to understand better how third-party car insurance protects your car and finances:

  • Car insurance operates on the principle of "use it, lose it." To obtain car insurance, you need to pay an annual premium. If you do not make any claims during a given year, the premium you paid is not refunded.
  • The worth of your insurance policy is determined by the Insured Declared Value (IDV) of your vehicle. The IDV represents the maximum amount the insurer will pay in the event of a claim and is based on the current market value of your car.
  • The initial car insurance IDV is based on the showroom price. At renewals after a year, the IDV decreases due to vehicle depreciation, reflecting the decrease in value for one to two-year-old vehicles.
  • The formula for calculating IDV is IDV = (Manufacturer's listed price - Depreciation) + (Value of accessories not included in the listed price - Depreciation).
  • Consequently, as the IDV decreases, the premium you have to pay also reduces.

The following list covers the base price for third-party liability car insurance.


Vehicle Type

Rates (Rs)

Private Cars

Not exceeding 1000 cc


Private Cars

Exceeding 1000 cc but not exceeding 1500 cc


Private Cars

Exceeding 1500 cc


What is Covered Under Third-Party Car Insurance?

Under a third-party car insurance policy, the following coverages are typically included:

  1. Third-Party Bodily Injuries: If someone is hurt due to an accident that your car caused, third-party auto insurance will pay for their medical costs. If the accident results in death or disability, it compensates the victim's relatives.
  2. Third-Party Vehicle Damage: 

If your car collides with another car, your insurance will cover the cost of the other car's repairs. This guarantees that you will not be held personally responsible for the costs associated with fixing the harm the accident caused.

  1. Third-Party Property Damages:

If your car damages another person's property, such as a wall or a house, the insurance policy will pay to fix or replace the damaged items. This shields you from having to pay to fix the property of the third party.

  1. Personal Accident Cover for the Owner-Driver:

Some insurers include personal accident coverage for owner-drivers in their third-party auto insurance packages. If the owner-driver of the car suffers an accident-related disability or fatality, this coverage will offer compensation. 

Let us examine these scenarios and the extent of coverage offered:


Type of Loss

Third-Party Coverage

The death of a person in an accident involving your vehicle

Third party's demise

Coverage is offered

You run over someone with your car, and they suffer injuries.

Third-party Physical Injury

Coverage is offered

Your vehicle collides with another car.

Both vehicles are damaged.

The damage to the second automobile is covered by insurance—no coverage for harm to your car.

Your vehicle has been stolen.


Coverage not offered

The Benefits of Third-Party Car Insurance: Protecting Your Vehicle and Finances

Third-party auto insurance comes with several additional benefits that safeguard the vehicle and your finances and provide you peace of mind in various circumstances. Let us explore these benefits in more detail:

  • Compliance with the law: 

In many nations, having third-party auto insurance is required. It ensures that drivers follow the law and avoid trouble for operating a vehicle without insurance.

  • Financial Security: 

Third-party auto insurance provides coverage for harm or damage brought on by your vehicle to the property or vehicle of another individual. 

  • Confidence:

 Driving with confidence is made possible by having third-party auto insurance. Knowing that your insurance will cover the costs and safeguard your funds in the event of an accident for which you are responsible gives you a sense of security.

  • Liability Coverage:

Third-party auto insurance provides liability coverage, shielding you against potential lawsuits or legal claims made by the other party involved in an accident.

Closing Thoughts

Third-party insurance is more than just a mandated financial commitment or a necessary legal requirement. It is an essential tool for shielding people from accidents and incidents because they can happen to anybody, anywhere. Along with financial security, it provides peace of mind, boosts reputation, and develops trust in domestic and business connections. Always remember that prevention is preferable to cure, and purchasing third-party insurance is a proactive move towards a secure and worry-free future.


  1. What is the deadline for filing a third-party liability insurance claim following an accident?

The claim needs to be submitted as soon as possible. But within 60 days of the accident, the Motor Accidents Matter Tribunal must notify the matter.

  1. Can third-party insurance be acquired online?

 Many insurance companies allow you to buy this insurance plan online easily.

  1. Can my third-party liability insurance be transferred to another insurer?

If you submit the portability form and reach an agreement with your existing insurer at least 45 days before the policy renewal date, you may do so.

  1. How long does third-party liability insurance last?

A three-year third-party insurance policy is required for vehicles purchased after September 1, 2018, in all states. 

  1. Can my third-party liability insurance be passed on to the next owner if I sell my car?

Yes, it can be given to the next owner. Within 14 days of receiving ownership of the vehicle in his name and after paying the endorsement premium for the remaining term of the policy, the new owner must file an application to the insurer for the


This article is issued in the 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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