INSURANCE

THIRD PARTY INSURANCE

Third party liability coverage or third-party insurance is a type of general insurance that can be avail along with the normal vehicle insurance to protect against any damages made by the insured to the third-party. Before to know in detail about third-party insurance, we have to know about the basics of insurance as follows.

INSURANCE

Insurance is defined as a financial instrument that provide a risk coverage against any loss occurred what one could insure. It is an invisible product and pays out a lump sum of money either on the loss or damage to replace it in a certain period of time.

It is also defined as one of the most effective risk management financial tool that provide protection to the thing one could insured from financial losses. The primary usage of insurance is to provide risk coverage against a contingent risk or any uncertain loss.

Insurance is offered by an insurance company that they collect a certain amount of money from the people and provide an assurance for the coverage of the insured thing with some terms and conditions.

Categories of Insurance

There are two major categories of insurance in the insurance industry. Under that categories there are many types of insurance available to insure all the things that what people having themselves. The categories of insurance are as follows.

  • Life Insurance
  • Non-life or General Insurance

In these two categories of insurance contains many combinations of coverage and benefits that helps people to avail it according to their need.

1) Life Insurance

Life insurance is a contract between the life insurance company and the life insured, where the insurer promises to pay a sum of money or how much the life insured took a coverage himself to the designated beneficiary, upon the death of insured person. It is one of the few investment options that provide financial security to the people along with maturity benefit, including tax benefits. Even though having these much of benefits, the primary objective of life insurance is to provide financial security or income replacement for their family in the event of life insured’s death. Human life is made up of the happening of unexpected and uncertainties. So, it is important to the people, who has a financial dependent would benefit from investing in life insurance.

Life Insurance is not only providing security to the insured life, beyond that for achieving their life goals it plays an important part in their life. For that life insurance is designed in various types to fulfill the different goals in different stages of their life even the life insured is alive or not. The different types of life insurance are as follows.

  • Term Insurance

It provides only life coverage of life insured in the event of death in specified policy term. Now a days the term insurance is available in the form of returning of premium that the life insured will get the paid premium at the end of the policy term.

  • Traditional Insurance

It provides life coverage along with the maturity benefit as lump sum or in a period of time as income. In this type of insurance, the premium paid by the people have invested in various Government bonds and securities, which provide guaranteed returns. Depends on the maturity benefit it is categorized in to various plans as follows.

  • Whole Life Insurance
  • Savings and Investment Insurance
  • Endowment Life Insurance
  • Child Life Insurance
  • Moneyback Insurance

 

  • ULIP Life Insurance

This type of insurance is same as traditional insurance that it guaranteed only the life coverage of the insured and the premium paid by the people are invested in unit liked products, which is not guaranteed. But the maturity benefit depends on the market movements and profit arrived in the share market.

  • Retirement Life Insurance

It is the combination of either traditional or ULIP insurance along with life coverage of insured. Depends up on the age the returns are changed as per the type of policy.

2) Non-Life or General Insurance

As the name itself, other than human life all asset owned by an insured, which may be having the chance of risk for loss or damage can covered under general insurance. In general insurance, almost everything can be insurable as per the acceptability of the insurance companies. The following are the different type of life insurance in India.

  • Health Insurance
  • Motor Insurance
  • Home Insurance
  • Marine Insurance
  • Commercial Insurance

Other than these above type of insurances, general insurance company offers some of the unique insurance policy that provide protection to human life in some uncertain incidents happening in a specified period. The following are the insurance offered under general category for covering the human life in an affordable cost.

  • Accidental Death Insurance
  • Accidental Death and Disability Insurance

The above insurance provide only coverage in the event of death or disability due to accident only.

Motor Insurance

An insurance, which is used to provide a coverage from any financial losses and damages for all types of motor vehicles like motor cycle, car, jeep and commercial vehicles is called motor insurance. It is a type of general insurance but unlike any other insurance, the government has made motor insurance mandatory for the safety of the vehicle owner and others.

In India, as per the motor vehicles Act 1988, it is mandatory to have at least third-party insurance for all vehicles to dive legally. Here we have to see detail about third-party insurance.

About Third-Party Insurance

It is a kind of insurance that only provide coverage against third-party damage or loss made by the owner of the vehicle to any person or property and third-party vehicle. It will not provide any coverage to the owner’s vehicle.

Benefits of Third-Party Insurance

It is a basic type of motor insurance that all vehicles must have it while driving on the road. Some of the benefits of third-party insurance are as follows.

  • Third-Party Liability Coverage

The main purpose of this insurance is to protect the owner of the insured from any damage or losses to third-party by their own vehicle. Example: If a driver damages another car while over tacking then the third-party insurance will cover that loss made by the insured behalf of them to the third-party damage.

  • To Drive Legally on Roads

As per the Indian Government motor vehicle act, every vehicle must have at least third-party insurance and with that only is legal to drive on roads. If anyone don’t have third-party insurance for their vehicle to drive, that could consider as illegal and it may lead to take a legal action against anybody.

  • Protect from Traffic Fines

If a person driving without third-party insurance, it may lead to pay a penalty and if you damage any liabilities of third-party, the insurance will protect the insured from an expense occurred for the damage.

Exclusions of Third-Party Insurance

The following are not covered under third-party insurance,

  • Own Damages

Third-party insurance only covers the damage or loss to the third-party and it will not cover the damage to the owner’s vehicle.

  • Drunk and Driving

If a person damages the third-party liabilities by consuming the alcohol, the owner won’t get a third-party coverage under third-party insurance.

  • Driving without License

While driving, if a person only having Learner’s license and don’t having valid driving license, the damage covered by them could not covered under third-party insurance.

Insurance Companies in India
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