What is Third Party Insurance for Car and Bike: How it Works

First of all we have to understand what is First Party, Second Party, and Third Party term stands for in insurance sector.

First party: A person who has purchased an insurance policy or Policyholder.

Second party: Insurer or insurance company.

Third party: A person who raises a claim for damages caused by the first party or claimant.

In this article we will understand that What is Third Party Insurance for Car and Bike and How it Works.

What is Third Party Insurance for Car and Bike?

Third party insurance, often referred to as ‘act-only’ insurance, is a mandatory requirement for all vehicle owners under the Motor Vehicle Act. This type of insurance provides protection against damages to a third party vehicle, personal property, and physical injuries. It’s important to note that the policy does not cover any damage to the insured’s own vehicle.

How Does Third Party Insurance for Car and Bike Work?

When a policyholder is involved in an accident, the insurer provides financial assistance to cover the cost of repairs to the third party’s property, thereby reducing the financial burden on the policyholder. In such an event, the insured must promptly inform the insurance company before filing a claim.

Upon filing a claim, the insurer appoints a surveyor to assess the damages and verify the estimated repair costs. Once the assessment is complete, the insurer settles the claim.

Importance of Third Party Insurance for Car and Bike

Third party insurance is legally mandatory, ensuring that policyholders comply with legal obligations. Despite being a basic coverage option, it offers peace of mind by providing financial protection against damages caused to others in an accident.

This insurance secures the policyholder’s finances against accidental risks. Understanding the terminologies used in third party insurance is crucial:

First party: The policyholder who has purchased the insurance.
Second party: The insurer or insurance company.
Third party: The claimant or person who raises a claim for damages caused by the first party.

If the policyholder is involved in an accident, they are liable for any damages or injuries caused. It’s essential to inform the insurance company immediately and provide detailed information about the accident, including:

Description of the accident with date and time.
Details of all insurance policies and policyholders involved.
Injuries sustained by drivers, passengers, and damages to property or vehicles.
Witnesses’ details.
Weather and visibility conditions at the time of the accident.
Photographic evidence from the accident site.

If the police are involved, provide details of the insurance company and note the First Information Report (FIR) number, if applicable. If the accident was not the policyholder’s fault, the claimant can seek compensation for vehicle hire costs, repair expenses, and injury compensation as per the insurance policy.

Features of Third Party Insurance for Car and Bike

Third party insurance offers a fundamental level of protection, often referred to as liability-only or act-only policy. Key features include:

Protection against legal liabilities to third parties arising from accidents involving the policyholder’s vehicle.
Compensation for personal injuries, loss of life, and property damage to third parties.
Affordable premiums.
No coverage for the insured vehicle itself.

The Process to Claim Third Party Insurance for Car and Bike

To receive compensation, the policyholder must follow the claim process:

Inform the Insurance Company: Notify the insurer about the accident within the time specified in the policy document.
File an FIR: Lodge an FIR at the nearest police station and obtain a copy.
Submit a Claim: Fill out the claim form and provide the necessary documents.
Assessment: The insurer sends a surveyor to assess the damage and verify the repair costs. The surveyor files a report post-assessment.
Claim Settlement: Based on the surveyor’s report, the insurer settles the claim.

Inclusions and Exclusions of Third Party Insurance for Car and Bike

Inclusions

Third party insurance covers:

Damages to the third party vehicle caused by the insured vehicle.
Physical injuries to third parties.
Damage to third-party property.
Death resulting from an accident involving the insured vehicle.

Exclusions

Third party insurance does not provide compensation if:

The accident was caused by drunken driving.
The driver was underaged or did not possess a valid driving license.
The accident was a deliberate act.
The vehicle was used for commercial purposes or illegal activities.
The vehicle was stolen.

Understanding what is third party insurance for car and bike and how it works is essential for every vehicle owner. It not only ensures legal compliance but also provides significant financial protection against unforeseen accidents and liabilities.

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