What is Third Party Insurance or TPI

Buying a car is not a big deal nowadays unlike earlier times when it was a matter of esteemed social status and respect. Yes, it is true that what matters today is the brand of the car you’re driving in and how costly it is. Given that mindset of the society, it is not easy to drive the car of your choice all the time. The ones you desire may not be affordable and the one you got is extremely high maintenance. But whatever brand you have purchased, with a loan and great amount of efforts, it becomes really dear to you. Ensuring its safety and security becomes one of the priorities for you and four wheeler insurance helps you in doing just that!

The whole idea of having insurance for your vehicle is to keep yourself insulated from any financial risks related to the car. It is not enough for you to be a good driver and follow all traffic rules and regulations. While driving on the road, there would be others who may not be as smart an cautious as you’re or there might be some unavoidable circumstances leading to the accidents.

Having an insurance policy to cover your car helps you in a big way from incurring expenses owing to an accident. In this context third party car insurance comes really handy.  Let’s explain this with the help of an example:

Consider yourself driving in your car and you meet with an accident with another car and that car is badly damaged. Since you’re responsible for the accident, due to whatever reasons, the liability to get the other car repaired or pay for its damages comes to you. And we are not yet talking about the damages to your car. Makes you shudder to imagine the financial liability fallen upon you?

This is where third party car insurance will come to your rescue! It will help you to pay off the liabilities owing to the accident at no extra cost to you. Are you wondering why is it called the third party?

The contract is usually made between two parties: the insured (car owner) and the insurance provider (insurance company). However, in the case of an accident a third party is involved and that party needs to be paid for damages. Hence, it is considered as a third party. As per government regulations, it is mandatory to have a four wheeler insurance and have a third party cover.

The catch here is that this kind of insurance cover will not envelop you for damages to your car. For that, you may have to buy a comprehensive insurance cover that covers third party claims as well as pays for damages to your vehicle. In this regard, there is a perception that third party insurance cover is equivalent to cheap car insurance, but it’s far from the truth. It is a valuable insurance cover if there is an accident. Obviously the premium is less than a comprehensive policy, but it does provide you with a safety net against third party claims.

The third party car insurance is made mandatory under the Motor Vehicles Act and it covers legal and financial liabilities of the insured against damages to the property as well as the death of the third party. This is also sometimes referred to as the “act only” cover. However, most car dealers offer a comprehensive insurance cover in addition to the compulsory third party four wheeler insurance so that the policyholder is  safe from all risks.

It is advisable to go for comprehensive insurance even if the premium is a bit higher. When it comes to financial safety, looking for cheap car insurance doesn’t make sense. No matter what, the government regulation will anyways ensure that you buy a third party car insurance, so why not add a comprehensive cover to it as well?

Better safe than sorry, right?

Harjot Singh Narula

Harjot Narula is founder and CEO of ComparePolicy.com, an IRDAI approved insurance web aggregator focussed on selling online insurance for companies. Harjot has more than a decade of experience in software development and has also spent 5 years in US working for the mortgage and risk management industry.

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