Motor insurance, be for vehicle of any category like private car, two wheeler or commercial vehicle has basically two sections providing the insurance coverage, first the own damage section and second is the third party (TP) liability section. In a comprehensive motor insurance policy both of these two sections will be covered along with some covers of personal accident and others.
The own damage section covers the damage to the vehicle due to accident, natural perils like flood, earthquake, storm etc. man-made perils like theft, burglary and malicious damage and a few others. Third party liability covers the legal liability arising out of bodily injury or property damage to other person by an accident involving the insured vehicle.
Considering the increasing number of road accidents in our country this is quite an important insurance coverage and which is mandated by law to have in place. As per motor vehicles act 1988, for every vehicle of any category plying on roads of the territory of India an in force motor third party liability insurance is mandatory.
Whether you purchase an own damage policy or not is your choice but third party insurance is mandated by law. If one doesn’t want to buy a comprehensive motor insurance policy for any reason he can purchase a standalone third party liability insurance and comply with the leagal provisions.
Coverage of Motor TP Policy:
Subject to limits mentioned in the schedule and for the purpose of complying with the motor vehicles act, the insurance company will indemnify for an accident, with its prior written consent, involving the use of the vehicle insured which becomes legal liability for:
- Death or bodily injury to any person including the occupants carried (except for hire or in course of employment)
- Property damage (other than belonging to the insured and held in its trust or custody)
As per the TP Liability policy the insurer will not be responsible for death or liability arising from loading or unloading of the vehicle. This is more relevant to commercial class of vehicles. But any driver using the vehicle with insured’s permission will be indemnified by the policy as far as he is adhering to limitations as to use and other terms and conditions of a motor insurance policy.
Also in case of death of the person to be indemnified his personal representatives are considered by the insurer. The insurer may at its own option undertake the defense of any proceeding in court of any alleged offense which may be subject matter of indemnification under the policy.
Avoidance of certain terms and right of recovery is very relevant to TP liability policy and it suggests that no terms and condition in the motor insurance will affect the right of any person indemnified by the TP policy by virtue of provisions of the motor vehicles act. But the insured is obligated to pay the insurer back if any payment is made which is not eligible as per terms and conditions of motor insurance policy.
The third party premium rates are regulated by IRDA and it does not differ across insurers and products. In other words from any insurer you purchase the TP policy it will cost you the same. The TP premium rates are increased by the regulator from time to time to time to revise the rate with increasing claim costs, last time the rates was revised by the IRDA came into effect from first April 2018. Below we show the table including TP premium rates for private cars and two wheelers
|Description of vehicle class||Premium|
|Not exceeding 1000 CC||1,850|
|Exceeding 1000 CC but not exceeding 1500 CC||2,863|
|Exceeding 1500 CC||7,890|
|Not exceeding 75 CC||427|
|Exceeding 75 CC but not exceeding 150 CC||720|
|Exceeding 150 CC but not exceeding 350 CC||985|
|Exceeding 350 CC||2,323|
The basic purpose of having a mandatory motor TP policy in place is that, it was largely seen that in many cases of accidents involving vehicles and which are increasing in number with quite a rapid pace, the injured or aggrieved party was unable to receive any compensation on account of various reasons like inability to pay the high compensation amount.
There may be other cases like hit and run where any sort of compensation becomes more difficult to arrange. The government by setting up various laws and institutions like motor accident claims tribunal and (MACT) and formulating the structured compensation has taken a step forward to ensure that there is speedy disposal of motor accident related cases and there is adequate compensation available to the aggrieved party.
A mandatory TP liability policy for everyone is a good way to ensure that a facility of paying compensation is available. Currently there is a good amount to penalty for the people violating the norms and riding their vehicle without a motor TP policy.
In view of the increasing living costs and as per the amendment made in motor vehicles act 1988 through a notification dated May 22 2018 the amount of compensation payable in case of death is increased to 500k. Also minimum compensation for permanent disability will be 50k and for accident resulting is minor injuries will be 25k. Also the compensation payable is set to increase 5% annually with effect from January 1 2019.