Claiming third-party motor insurance? How it works after an accident

Injury, damage, liability: what really gets paid under third-party insurance

Third-party motor insurance is the most basic and legally mandatory cover for vehicles in India. However, it remains widely misunderstood by motorists. Experts say many vehicle owners only realise its limitations after an accident.

 

What does third-party motor insurance cover?

At its core, third-party motor insurance protects other people on the road, not the vehicle owner. It pays compensation if the insured vehicle causes injury, death, or property damage to a third party.

 

“Third-party motor insurance provides financial protection for injuries or death caused to another person, damage to someone else’s property within the statutory limit, and any legal liabilities arising from an accident,” says Paras Pasricha, head of motor insurance at Policybazaar.

 

 

Sumit Bajaj, director at Choice Insurance Broking India, explains that while compensation for death or bodily injury has no upper limit, property damage claims are capped at Rs 7.5 lakh. The final payout is decided by the Motor Accident Claims Tribunal (MACT), based on medical expenses, loss of income, age, and the severity of injuries.

 

What it does not cover

A common misconception is that third-party insurance pays for the policyholder’s own losses. It does not.

 

“The biggest misunderstanding is that third-party insurance covers the owner’s vehicle repairs or the driver’s medical expenses. It does not,” says Akash Parwal, chief executive officer and co-founder at Square Insurance.

 

Damage to the insured vehicle, losses due to theft, fire, floods, or injuries to the owner are excluded unless separate covers are purchased.   

 

Claims can also be rejected if the driver lacks a valid licence or was driving under the influence, Pasricha adds.

 

How claims work in real life

 

In a typical accident, the affected third party files a police complaint and then approaches MACT.

 

“For example, if a car hits a two-wheeler causing serious injury, the insurer represents the car owner in court and pays compensation as directed,” Parwal explains.

 

Property damage claims may settle in one to three months, but injury or death cases often take one to three years. Recent court awards have ranged from Rs 10 lakh to over Rs 1 crore.

 

How much does third-party insurance cost?

Third-party premiums are fixed by the Insurance Regulatory and Development Authority of India (IRDAI) and are not market-driven.

 

“A small car below 1,000 cc pays around Rs 2,094 annually, while cars above 1,500 cc pay over Rs 7,897,” says Parwal. Larger vehicles and commercial vehicles attract higher premiums due to greater liability risk, Bajaj adds.

 

Who should buy only third-party cover?

 

Third-party-only insurance makes sense for older vehicles with low market value or owners seeking minimum legal compliance.

 

However, relying solely on it can be risky.

 

“Over 70per cent of motor insurance claims are own-damage claims, which third-party policies do not cover,” Parwal notes. For newer or financed vehicles, experts recommend comprehensive insurance to protect both legal liability and personal financial exposure.