Will making a Third-Party Insurance Claim affect your Motor Insurance?

We all make mistakes, don’t we? So, it’s okay that sometimes your vehicle might be involved in an accident. You may be broken-hearted about your vehicle, but this is exactly why you have a motor insurance policy, isn’t it? Your insurance will have your back in such situations and protect you against any losses.

Whether you were the one causing the damage or someone else damaged your vehicle, this is when your third-party insurance will come into play. Also called a liability insurance, this is an insurance cover that protects you against any liabilities that may happen due to any loss or damage you may cause to a third-party vehicle, person or property.

According to the Motor Vehicles Act, it is mandatory to have this third-party insurance in India. Without it, you might end up paying a heavy fine! 🙁

However, since you need to have this coverage, you might be wondering what exactly happens when you end up in a bad situation and you have to make a claim. Well, first of all, we hope that doesn’t happen to you, but if you still want to stay informed, read on to find out more.

What’s covered under third party motor insurance?

So, when we’re talking about third-party insurance, you’re probably wondering who this “third-party” actually is.

Well, in insurance, the first party is you (i.e., the insured person or the policyholder) and the second party is the insurance company who is covering you. The third-party is any other person who becomes involved; for example, when you accidentally damage someone’s property with your vehicle they can use your third-party insurance details to file a claim.

Basically, the target of your third-party insurance is this injured third party, and you benefit by not having to face the financial losses of their claim.

Here are some situations that you can claim for in your Third-Party Insurance:

Damage to a Third-Party Vehicle – If while driving, you accidentally bump into someone else’s vehicle, a third-party insurance will help cover you for any losses due to this.

Damage to Third-Party Property – In case someone's house or property gets damaged because of your vehicle, your third-party insurance will help compensate for this loss.
Personal damage to a Third-Party – If your vehicle might cause any physical injuries (or in the very worst case death) to a third-party person, your insurance will help you compensate for their expenses.
Personal Accident Cover for you – having a personal accident cover is very important, as it will help you if you (the owner-driver) get injured in an accident. If you don’t already have one, it can be included in your third-party policy.

*At Digit we also have a special package policy, that will give you a third-party policy with the added benefit of fire cover for your own vehicle.

What is not covered by a third-party policy?

While you can see that a lot of important situations are covered by a third-party policy, there are many cases where this insurance will not cover you. Some of those are:

For any damages to your own vehicle – A third-party policy will not cover any own damages, that is any damages that might happen to your own vehicle such as accidental damages or fires
If you don’t follow road safety rules – You won’t be covered if you get into an accident while you are doing something against the law, like driving drunk or without a valid license.
When the vehicle is being wrongly used – If you use your vehicle for a purpose that isn’t covered, for example, driving outside the geographical limit or using a personal vehicle for commercial purposes.
Having an expired policy – This one probably seems pretty obvious. But, just so you know, if you have forgotten to renew your policy and it has expired, you won’t be covered.

How can making a third-party claim affect your insurance?

Okay, so now you know what is covered by your insurance policy, you’re probably wondering if actually making a claim will affect you in any way (apart from the damage to your beloved vehicle of course!). The answer to this is, yes. When you make a third-party insurance claim, it will have an impact on your insurance going forward:

Premium – When you make a motor insurance claim, it can cause an increase to your insurance premium at the time of renewal. Basically, getting into an accident and making a claim might label you as “risky”, and the higher the risk, the higher is the premium you will need to pay.
NCB – a No Claims Bonus (or NCB) is a kind of discount ranging between 20-50% that your insurer will give you on your premium for not making a single claim in the previous year. Obviously, if you DO make a claim, this discount will have to be withdrawn.

How can you avoid the impact of Third-Party Insurance Claims?

Knowing all these details about third party insurance claims, you might be wondering if there is any way to reduce the big impact it can have on your insurance.

Avoid making small claims – If the damage to your vehicle is not that bad, like for example a dent or a broken light, and the cost of repairing it is not that high, you can consider paying for the repairs yourself to keep your NCB intact. Repeated claims can also lead to an increase in your premium, so you might want to avoid this.
Getting a Comprehensive Insurance – A comprehensive insurance policy covers both third-party liabilities and own damages to your vehicle. When you choose to get this kind of policy, you can also get a number of special add-ons like zero dep, engine protection, etc., which are not available in third-party insurance, for more protection.

How to make a claim?

Now that you know exactly what can happen if you choose to make a claim, you’re probably wondering what the third-party insurance claim procedure actually is.

In case there is an accident, and your vehicle has caused some damage to someone third-party or their property, this is what you will need to do:

Step 1: The third-party needs to file an FIR with the police station.
Step 2: You will have to share a copy of your motor insurance policy with them so that they can use it to make the claim.
Step 3: Notify your insurance company as soon as possible about the situation.*

*You might be asked to submit documents like pictures of the damages, the FIR lodged with the police, your claims form, your policy document, your Driving License, the vehicle’s RC, and the bill for any replacement and repairs.

Step 4: Since third-party claims are settled in a Motor Accident Claims Tribunal (MACT), the third-party must file a case with them to receive a finalized claim amount.
Step 5: If there is any compensation to be made, your insurer will take care of it.

However, in any situation where your vehicle is the one damaged by someone else you will become the third party. Then, you can get compensation under that person’s third-party policy.

We hope that all of this has given you a better understanding of how making a third-party insurance claim affect your motor insurance.

As this type of insurance is mandatory in India, it’s pretty important (not to mention useful) for you to know exactly how it all works, especially if you find yourself in the unfortunate situation of being in an accident.

Hopefully, now you know that having insurance will help make everything a whole lot more bearable as it will have your back, and you won't have to cover the expenses all on your own!