How Are Third-Party Car Insurance Premiums Decided?
How Are Third-Party Car Insurance Premiums Decided?

A car insurance policy helps to avoid the financial burden of repairs when required for your car. It can either be due to an accident or injury or even for general repairs. A car insurance is not only essential from the financial standpoint, but also considering the safety of other on the roads. Thus, it is mandatory in India to have a car insurance policy for all car owners. 

Car insurance in the country is available in two types – third-party and comprehensive cover. A third-party insurance is the one that safeguards you from liabilities which might be due to other because of accident or damages. 

Comprehensive policy is an alternative option that can be bought to a third-party cover. Here, the insurance company includes for damages caused to the insured’s vehicle along with third-party liabilities. Usage based policy is another type of car insurance policy that is gaining traction in the Indian car insurance market. 

This article further elaborates on third-party coverage. Let’s have a look – 

What is third-party cover in car insurance?

A third-party car insurance is the minimum requirement as per the Motor Vehicles Act of 1988. All cars registered in the nation are required to have this basic third-party cover as bare minimum requirement. Apart from the safety objective, it is a legal requirement to stay afloat from hefty traffic penalties for necessary compliance of vehicle documents. With a third-party policy, any mishaps that end up causing damage to a third person can be covered. Moreover, injury to persons are also covered along damage to property. This way, you need not bear the liability that might become payable to such other person. Thus, it is also known as a liability only cover.

What are the highlights of a third-party cover?

A third-party policy has the following benefits – 

  1. Since this policy is the minimum requirement as per the Motor Vehicles Act, the premiums are extremely affordable. You need not worry about spending large amount of premium to purchase this coverage. 
  2. Third-party policies cover injuries without any limit whereas the liability for property damage is capped at ₹7,50,000. 
  3. The legal costs, if any, in settlement of a third-party claim are also covered under the policy’s scope. 
  4. If you wish to sell your car without having to purchase a comprehensive policy, a third party car insurance is sufficient mandate. 

How are the premiums of third-party policy determined?

Since the third-party coverage is mandatory in India, the premiums are determined by the regulatory authority, the Insurance Regulatory & Development Authority of India (IRDAI). Due to the varied car manufacturers and models of cars, the premiums are decided based on the cubic capacity of the engine. These premiums are revised periodically and are required to be adhered by the insurance companies. The table below mentions the premium for the different engine capacity of your car. 

Premiums for private vehicles with engine capacity  Premium amount (₹)
Not more than 1000 cc 2,072
More than 1000 cc but less not exceeding 1500 cc 3,221
More than 1500 cc 7,890

These premiums are applicable at purchase as well as car insurance renewal. Further, along with third-party coverage, personal accident cover is also mandatory and is required to be purchased. A car insurance calculator is nifty tool that help in selecting the right insurance coverage with a personal accident cover. Make sure you select a policy with the right features to benefit you during its entire policy tenure. Insurance is the subject matter of solicitation. For more details on benefits, exclusions, limitations, terms and conditions, please read sales brochure/policy wording carefully before concluding a sale.