Some general insurance policies have two distinct parts: 'own damage' part and 'third party' part.
Third party insurance is associated with general insurance, especially motor insurance.
It is mandatory as per law for certain policies like auto insurance, but many consumers who are taking it are not aware of its coverage, benefits and claim process.
As the name suggests, when the beneficiary of any insurance policy is someone other than the two parties involved in the contract (the insurer and the insurance provider), the cover is known as a third party insurance cover.
Here is a look at how third party insurance covers function and how third party liabilities are settled in general insurance claims.
Understanding Third Party Insurance Cover
Some general insurance policies have two distinct parts: ‘own damage’ part and ‘third party’ part.
Under the third party cover, anyone other than the insured is covered.
For example, in an auto insurance, any damage caused to the vehicle is covered by the own damage part of the insurance policy.
The driver of the vehicle and the passengers in it, or any pedestrians or third party property, which are likely to get affected by the vehicle are covered by the third party cover.
Third party covers in other policies like a machinery policy or an office policy covers any death or damage to people or staff who are likely to get affected by any work-related incident.
For example, any bodily harm or injuries that is likely to happen to people commuting in an installed lift in any building like hospitals or shopping malls is covered by a public liability policy, which is a third party policy.
Claims for Third Party insurance
Many people have a misconception that it is the insurance companies who are taking care of third party claims.
But third party claims are adjudicated by the constituted tribunals and not the insurance companies.
For example, in case of motor insurance, the Motor Accident Claim Tribunal is the final authority to accept or reject any claim.
Here is a look at some cases of claims involving third party insurance.
Claim in case of a road accident
As per the motor Vehicles Act, 1988, a motor third party claim must be filed by the affected person in a tribunal at the place of accident.
If you or your family member are a victim: If you are a victim of an accident, you must obtain the insurance details of that vehicle.
Make sure a police complaint is filed for the accident and the first information report clearly states the facts of the case as to who was in the wrong.
Based on these, a complaint must be filed at an MACT court at the place of the accident or at a place where the injured resides.
In most cases, the driver or owner of the car will try to make an out-of-the-court settlement.
But, if the accident involves death of any person, any legal heir of the deceased can apply for claim under the third party insurance to get sufficient compensation.
The court will summon the owner or driver of the reported vehicle as well as representatives of both insurance companies before taking a final decision in the case.
Claim in case of property damage
If your property is damaged by a third party, for example by a vehicle hitting your building and damaging it, you can go for either an out-of-the-court settlement or a settlement through MACT.
In some cases, the inflictor will try for an out-of the-court-settlement, but the amount will be often less.
If you feel that the damage caused and the expenses incurred thereby are more than what is offered by the inflictor, a proceeding through MACT can be initiated.
But for this, you may require the details of the vehicle and their insurance.
If the vehicle is not insured, chances of getting claim settlement through third party pool are nil.
What if your property (including machinery) causes damage to someone: Imagine a situation where an employee in your factory get injured while performing his duties with machinery.
In this situation, he gets coverage under two provisions.
First, he can claim it from the group insurance cover offered by your company for all employees.
The compensation he gets depends on the type of cover offered to him.
Secondly, he gets coverage if the machinery is insured and it includes a third party cover.
In many cases, employees are not aware of this, and are satisfied with whatever the employer offers by way of compensation.
Third party laws
As per the Motor Vehicle Act, 1988, a third party claim can be made under two categories: ‘no fault liability claims’ or ‘fault liability claims’.
In the first case, the accident or injury happens by chance and not due to anyone’s fault.
In such cases, the compensation for the claimant will be as per rules of the Motor Vehicles Act, 1988.
However, if the claim is under fault liability, the claimant needs to prove the negligence on the part of the inflictor.
In such events, when it is proved, the compensation can be higher, and depends upon the court judgment based on factors like residual human asset value or loss of earnings for the person or his family out of the incident or damage.
Options in third party insurance
Though the basic coverage is compulsory for certain policies, there are many options in a third party cover to choose from.
For example, apart from insuring driver and co-passenger, you have the option of insuring additional passengers in a car insurance.
There is also a provision to opt for a higher sum assured for the passengers or third parties.
The premium varies accordingly.
Third party insurance is a low premium insurance cover that is mandatory as per law in certain cases like a motor insurance.
Third party insurance covers people other than the insured against accident, loss of life, bodily harm, and damage to property amid others.
The third party fund pooled is not administered by the insurance company, but mandated by law.
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