A Guide to Third Party Car Insurance in India

In India, it's required for all drivers to have at least a third party car insurance policy. Third party car insurance only covers injuries to third parties and their property, and you typically cannot enhance a third party policy with optional add-on features. Because pricing for third party policies is regulated by the government, they cost the same at every car insurer: the only factors that affect your rates are the make and model of your vehicle.

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Third Party Car Insurance Coverage Benefits

The Indian Motor Tariff Act of 2002 made it mandatory for all drivers to have a minimum of third party car insurance coverage. Third party insurance policies cover injuries to third parties and damages to third party property, but does not protect against damages to the insured driver, owner or car, like a fully comprehensive policy would.

InjuryLevel of Compensation
Death100%
Loss of multiple limbs and eyesight100%
Loss of one limb or sight in one eye50%
Permanent disablement100%

The coverage period is one year, and there is no limit on the compensation amount for bodily injuries or death of a third party individual, but the maximum compensation for third party property damage is Rs. 7.5 lakh.

Some insurers allow their policyholders to include personal accident coverage for the owner or driver of the insured car, but the majority of companies do not allow additional coverage options to be included in third party plans. Here's what else is excluded from the scope of coverage for third party car insurance policies in India:

  • Damages to the insured car, owner or driver
  • Damages outside of India
  • Damages outside contractual liability and limits of use (speeding, motor trade, racing, etc.)
  • Driving under the influence of drugs or alcohol
  • Driving without a valid license
  • Damages from the car being driven by anyone but the driver
  • Consequential damages
  • Depreciation, wear and tear, mechanical failures, electrical failures, tyre & tube damages
  • Commercial activity
  • Staged accidents

In comparison, comprehensive plans not only provide all third party coverages, but also provide coverage for the insured vehicle, owner and driver, and provide policyholders the option to include add-on benefits to increase their level of coverage. Standalone own damage only plans are the exact opposite of third party plans, as they only cover damages to the owner, driver and insured vehicle and do not cover any third party losses.


Third Party Car Insurance Prices

The Indian government regulates third party coverage pricing, so annual premiums for third party plans from all insurers will cost the same annually, depending on the car you drive. Less powerful cars with a lower cylinder capacity are cheaper to insure, while more powerful and luxury cars are more expensive to insure.

Engine Capacity (cc)Annual Premium
< 1,000cc₹2,072
1,000cc - 1,500cc₹3,221
1,500cc+₹7,890

Each year on April 1, the Insurance Regulatory and Development Authority of India (IRDAI) determines and implements a new pricing structure for third party insurance. But due to COVID-19, no pricing changes were made this year as the IRDAI attempts to provide financial relief amidst the global pandemic. The IRDAI also decided not to pass a new mandate which would require all third party insurance plans to be three- or five-year plans, and instead will continue to allow single-year policies.

The original annual pricing proposal for third party insurance included a substantial annual increase of 5% for all cars below 1,500cc. There was no proposed cost increase for cars above 1,500cc.

Engine Capacity (cc)Current Annual PremiumProposed New Annual Premium
< 1,000cc₹2,072₹2,182
1,000cc - 1,500cc₹3,221₹3,383
1,500cc+₹7,890₹7,890

Claims Process

Under third party insurance, claims may only be submitted for damages to third party property, cars or individuals. You cannot submit a claim for damages to yourself as the owner or driver of the car, or for damages to your car itself under a third party policy; you must have a comprehensive policy to do so.

Car insurers in India are continually making it more convenient for policyholders to submit claims instantly on their smartphones. Companies like Reliance, HDFC Ergo and Bajaj Allianz have integrated a claim submission tool into their mobile apps, so policyholders can record a video of the damage and submit a claim within a few minutes.

Other insurers, like Oriental and Bharti Axa, have a dedicated online portal on their website with a step-by-step claim submission process.

In addition to fast and easy claim submission, these insurers also provide their policyholders with the ability to track the status of their claim online. If your insurer does not offer either of these submission methods, you can still file a claim via email or phone through your dedicated car insurance agent. Each insurer we've studied provides an online help section with all the documents and information you'll need to enter a claim.

Most insurance companies will survey and review the damage within 24 hours of the claim, and strongly recommend that all claims are filed within 48 hours of the accident. You can expect your claim to be settled within a week for many insurers, but some companies, like HDFC Ergo aim to settle all claims on the same day they're submitted, sometimes within 20 minutes. Other insurers can take up to 30 days to settle a claim.

There are two methods of claims submission for most third party insurance plans. The first is a cashless method, which is preferred by the majority of consumers. Using this option, your insurer will handle all costs associated with repairs directly with the in-network cashless garage, and you will not be liable to pay any of the invoices. A less popular alternative is the reimbursement method, where you directly pay all invoices to the repair garage. Once all payments are made, you'll then have to submit all bills and invoices to your insurer, and they'll pay you back for all charges that your third party plan covers.

How to Choose the Best Third Party Insurance Policy

Since pricing is regulated by the government and does not vary by insurance company, and since all third party plans come with a standard set of included and excluded benefits, it can be a difficult and stressful process to pick which third party insurer is best suited to your needs. The best way to separate the strong insurance companies from the weaker ones is to consider factors such as: customer reviews, cashless garage networks, incurred claim ratios, claim settlement rates and online buying platforms.

Insurance CompanyPolicyBazaar RatingCashless GaragesClaim Settlement RateIncurred Claims RateMarket ShareOnline Third Party Purchase
Market Average4.23,87094.3%90%3.57%Yes
AckoN/A3,00098.8%129%0.31%Yes
Bajaj Allianz4.24,00097.9%62%6.74%Yes
Bharti Axa4.45,20093.1%75%1.73%Yes
Chola MS4.47,10088.4%84%4.70%Yes
CocoN/A5,00099.4%29%0.06%Yes
Digit4.71,40097.8%76%2.75%Yes
Edelweiss4.51,50086.9%145%0.14%Yes
Future Generali4.52,50086.9%69%1.95%No
HDFC Ergo4.46,80098.8%82%4.68%Yes
Kotak4.81,30097.7%74%0.42%Yes
Liberty4.64,30097.0%70%1.32%Yes
Magma HDI4.41,00092.2%65%1.38%No
New India4.31,50089.1%104%14.08%Yes
Oriental4.91,00089.6%113%5.78%Yes
Reliance4.94,60098.1%85%5.14%Yes
SBI General4.35,40097.0%87%1.94%No

Customer Reviews

Many online review sites like PolicyBazaar and InsuranceDekho allow policyholders to leave detailed reviews and choose a rating between one and five stars. It's important to read not just the positive but also some of the critical reviews, so you can properly evaluate each insurer. It's also important to consider reviews from multiple sources, as well as expert reviews from websites like ValueChampion.

The average star-rating for a car insurer on PolicyBazaar is 4.2 stars, while the average on InsuranceDekho is 4.9 stars.

Cashless Garage Networks

Cashless garage networks are extremely important when choosing your next third party insurance policy. It's important to not only ensure your insurance company has a cashless garage in your area, but also a wide network of cashless garages, in case an accident takes place in an inconvenient location.

Car insurance companies like Reliance and New India provide a cashless network garage locator right on their website. It allows you to search countless locations in India, and provides a list of in-network cashless garages in the area. Most insurer websites also provide the number of cashless garages in their coverage network. You can compare this number with the market average of 3,870 network cashless garages per company.

In addition to cashless garages, it's also important to use the office branch locator that companies like Bharti Axa provide online. Using this tool, you can ensure a dedicated car insurance agent is in your area.

Claim Settlement and Incurred Claim Rates

Claim settlement rates and incurred claim rates measure two different aspects of a car insurer, but both are of equal importance.

Claim settlement rates show how many claims submitted by policyholders are settled successfully. The market average in India, among the companies we studied, is 94.3%, with 100% being the best possible achievable rate. Purchasing a third party policy from a company with a claim settlement rate under 90% runs the risk of your potential claim not being settled in a timely manner and with obstacles along the way.

Incurred claim rates (ICR) indicate how strongly an insurer settles claims against annual premium collection. The optimal range for an Indian car insurer is between 75-90%. Companies falling within this range have a healthy balance between the annual premiums they collect and the settlements they distribute, and tend to have the most convenient settlement process with the fewest amount of obstacles.

An ICR that falls above this threshold, even if it approaches or exceeds 100%, is not a positive indicator and means that a sizable amount of the company's annual premiums are used to cover risk transfer. An ICR that falls below the threshold is also a negative indicator, as it shows that the insurer does not distribute high claim settlement payments to its policyholders.

Online Buying Platforms

Most car insurance companies in India provide a third party policy option, but some do not allow you to easily purchase a new plan online. Buying a new plan online is the fastest and most convenient way to obtain a new third party policy, so you'll want to ensure your new insurance company allows you to bypass working with an agent so you can quickly and easily purchase one online.

Some online purchasing platforms are better than others, and the experts at ValueChampion have compiled a list of the top websites so you don't have to collect quotes from dozens of insurers. Be sure to select an insurer with a smooth quoting and purchasing process, one that will send you a copy of your third party car insurance quote via email, SMS or even WhatsApp, and one with a live chat feature in case you need assistance along the way.

Methodology

To complete our guide to third party insurance policies in India, we analysed and explored 16 insurer websites and collected pricing, benefits and inclusions data from over 300 car insurance quotes. We gathered quotes for both a new and used Honda Amaze, the Maruti Vitara Brezza and the Mercedes-Benz E-350 to analyse annual costs for new and used sedans, SUVs and luxury cars. To further study, we gathered quotes for these car models across three cities: Mumbai, New Delhi and Bengaluru. We also conducted research from the IRDAI to analyse the rules and laws involving third party car insurance in India.

Acko General InsuranceBajaj AllianzBharti AXACholamandalam MSCoco by Navi General Insurance
Edelweiss Car InsuranceFuture GeneraliDigit InsuranceHDFC ErgoICICI Lombard General Insurance
IFFCO Tokio InsuranceKotak General InsuranceLiberty InsuranceMagma HDINational Insurance
New India AssuranceOriental InsuranceRaheja QBE InsuranceReliance InsuranceRoyal Sundaram Insurance
SBI General InsuranceShriram General InsuranceTata AIG InsuranceUnited India InsuranceUniversal Sompo Insurance


Mike Wagenman

Mike is a Senior Research Analyst at ValueChampion India, specializing in insurance. He holds a Bachelor of Arts degree from Rider University, and his prior work experience includes data and revenue analysis in the international travel market.