What is Third-Party Car Insurance?

You’re cruising along the busy streets of Mumbai when, in a split second, an unforeseen mishap occurs—a minor collision where a stray car causes injury or property damage to another. Now, imagine the financial and legal uncertainties that follow. This is where Third Party Car Insurance steps in as your essential safety net, ensuring that you are protected against the liabilities arising from accidents involving others. While it may not cover the repair costs to your own vehicle, this insurance ensures the well-being of other road users and keeps you on the right side of the law.

Under the Motor Vehicles Act, 1988, third-party car insurance is a mandatory motor insurance policy that covers the liabilities arising from injury, death, or property damage inflicted on a third party—the person or property other than the insured vehicle. It is also important to note that the Indian Car Insurance Market is anticipated to grow to USD 4.82 billion by 2030 with a CAGR of 6.58% through 2030. A study conducted in 2024 also reported a surge in the demand for personal and vehicle loans covering both two-wheelers and four-wheelers, with a steep rise of 12%.

We have already established that this insurance is a legal mandate under the Motor Vehicles Act. Now, let’s see the reasons behind the need for this mandate:

• Threat of Fines

There can be certain penalties or fines imposed as punishment if you are found driving without this insurance, as required by law.

• Safety Net Against Accidents

This insurance helps pay if you hurt someone or damage their property in an accident.

• Avoids legal problems

Without insurance, you could go to court and lose money or things you own.

• Keeps your licence safe

Driving without insurance can make you lose your driver’s licence.

• Shows Responsibility

It’s important to have insurance to take care of others on the road, too.

Here’s why Third Party Car Insurance is a fundamental aspect of every driver’s protection plan:

• Legal Mandate

Adhering to the Motor Vehicles Act, this policy is not optional—it’s a requirement for all drivers.

• Financial Security

In the event of an accident where the injured party may claim damages, your policy will address compensation costs for bodily injury, death, or property damage of up to ₹7.5 lakhs.

• Affordable Premiums

With a focus solely on third-party liabilities, the premiums remain lower compared to comprehensive coverage, making it a budget-friendly option.

• Personal Accident Cover

Many insurers now offer optional add-on covers such as Personal Accident Cover, which provides compensation in case the driver ends up with disability or death due to an accident, with compulsory protection up to ₹15 lakhs.

• Peace of Mind

Knowing that you can meet your legal obligations confidently allows you to focus on driving safely, without the burden of unpredictable costs if an accident occurs.

Each benefit directly contributes to a balanced mixture of legality, affordability, and safety—a trio that every driver values differently.

1. It’s Cheaper Than Comprehensive Insurance

Third-party car insurance usually costs less than a comprehensive insurance policy. This makes it a good choice if you want to save money on your car insurance premium.

2. Protects You from Sudden Liabilities

If you accidentally damage someone else’s vehicle or property or if you cause injury to another person, third-party car insurance helps cover the costs. This protects you from paying a large amount of money from your pocket.

3. Let's You Drive Without Legal Trouble

In many places, having at least third-party insurance is mandatory by law. If you have this insurance, you can drive your car legally without worrying about fines or penalties.

4. Easy Purchase Process

Buying third-party car insurance is very simple and quick. Since it is a basic and standard policy, you don’t have to worry about many options or complicated choices. All you need to do is select your car’s make and model, provide some basic details, and then buy the policy.

1. Doesn’t Cover Damage to Your Own Car

If your car gets damaged in an accident, third-party insurance won’t pay for the repairs. You will have to pay for fixing your own car.

2. Doesn’t Cover Theft or Loss of Your Car

If your car is stolen or lost due to reasons like fire or natural disasters, third-party insurance will not cover the loss. You won’t get any compensation for your own vehicle.

3. No Customisation Options

In general, third-party insurance car policies are fixed and don’t offer many add-ons or custom options. You will not be able to add extra benefits like roadside assistance, engine protection cover or up to 50% No Claim Bonus.

4. No Help if Your Car Breaks Down

If your car breaks down due to mechanical issues or engine failure, third-party insurance won’t support you with repairs or towing services. You will have to manage these expenses on your own.

Here's what this policy does not cover:

• Own Vehicle Repairs

Any damage to your own car is excluded from coverage; repairs or replacement must be handled separately.

• Natural or Manmade Calamities

Damages arising to your car on account of natural disasters such as tsunamis, floods, earthquakes, etc, or due to manmade events such as war, riots, vandalism, etc., will not be covered under this policy.

• Outside Geographical Limits

If an accident causing damage or injury happens outside the permitted areas mentioned in your policy, your insurance will not pay for those third-party damages or injuries.

• Policy Violations

Incidents involving an invalid driving licence, driving under the influence of alcohol or drugs, or any negligent behaviour may void your claims.

• Unauthorised Driver or Usage of Car

If someone who is not the owner drives and causes damage or injury to a third party, or if the car is used for illegal activities like illegal racing or running an unapproved business, your third-party insurance will not cover the liabilities caused during such use.

• Non-Covered Acts

Damages arising from deliberate misuse or modifications outside the scope of the policy are not covered. Understanding these details ensures that you’re well-informed about where your protection lies—and where it doesn’t.

India has several insurers offering third-party car insurance, ensuring compliance with the Motor Vehicles Act, 1988. Below are some of the leading providers:

The Insurance Regulatory and Development Authority of India (IRDAI) sets third-party insurance premium rates annually. Recently, IRDAI proposed an 18% increase in third-party premiums, with some vehicle categories facing hikes of 20–25%. Here is the Current Premium Rates (FY 2025-26):

Check what is covered in each of these two policies:

In terms of a third-party insurance policy, first, let us understand the three parties involved:

First party: It refers to the person purchasing the insurance

Second party: It refers to the company or business providing the insurance.

Third party: It is the person towards whom damages are owed by the first party in an accident.

When an accident happens with a third party, the insurance company pays for the harm to the person who was hurt. A court settlement decides how much money you get for injuries or losses, if you need one. In the event that the insured vehicle is involved in an accident that results in bodily injuries to a third party or causes property damage, third-party insurance will provide financial support to cover the cost of medical expenses and repairs.

Follow these simple steps to buy or renew Third-Party Car Insurance with Coverfox:

Step 1: Access the Third-Party Insurance section of Coverfox.

Step 2: Provide the specifics of your vehicle and the coverage options that are necessary.

Step 3: Conduct an online comparison of insurers, choose the most suitable plan, and submit payment through secure online methods.

Step 4: Maintain legal protection by receiving immediate policy issuance.

• Trusted by thousands of vehicle owners.

• Transparent comparison of policies from top insurers.

• Dedicated customer support for all your insurance queries.

• Seamless online process with instant policy issuance.

Choose Coverfox for a superior experience, personalized plans, and unbeatable benefits. With Coverfox, buying car insurance is not just a transaction – it's a smart, stress-free decision.

Filing a third-party car insurance claim can feel overwhelming, but it doesn’t have to be. Follow this easy step-by-step guide to ensure your claim is processed smoothly and efficiently.

Step-by-Step Process for Filing a Claim

1. Report the Incident Immediately

• Notify your insurance provider as soon as the accident occurs.
• Provide accurate details about the incident, including the time, location, and extent of damages.

2. File an FIR

• Visit the nearest police station to file a First Information Report (FIR).
• Include all necessary details about the accident, such as third-party damages, injuries, or fatalities.

3. Collect Required Documents

Ensure you have these documents ready for submission

• FIR copy.
• Insurance policy document.
• Vehicle Registration Certificate (RC).
• Driver's license of the policyholder.
• Repair bills (if applicable).

4. Submit the Application

• Fill out the third-party claim application form provided by your insurer.
• Attach all required documents and submit them for verification.

5. Case Registration with the Tribunal

• If disputes arise, the case must be registered with the Motor Accident Claims Tribunal (MACT).
• The tribunal evaluates the claim and decides on compensation.

6. Compensation Process

After approval, the insurance provider compensates the third party directly for property damages or injuries as per the tribunal's verdict.

7. Key Points to Remember

• Maximum Compensation: For property damages, IRDAI mandates a maximum liability coverage of ₹7.5 lakhs under third-party insurance.
• Unlimited Liability for Injuries/Death: There is no cap on compensation for bodily injuries or death caused to third parties.

8. Timely Filing

Delay in reporting the incident or filing a claim can result in rejection.

Documents Required for a Third-Party Insurance Claim

Ensure you have the following documents ready to expedite the process:

• FIR copy.
• Insurance policy document.
• Vehicle Registration Certificate (RC).
• The driver's license of the policyholder.
• Repair bills (if applicable).

Third-party Car Insurance is more than just a legal requirement—it is a commitment to public safety, financial responsibility, and smart driving. With Coverfox, you have the power to compare, choose, and customise your policy to not only meet the statutory mandates but also to provide comprehensive protection for every driver.

Ready to secure your journey? Explore our offerings on Coverfox and drive with confidence, knowing that you’ve taken every precaution to protect both yourself and others on the road.