What is third-party liability in Motor Insurance?

In life, we are always liable for all the damages we cause to another person, be it physical or emotional! We do not have the right to hurt another person or their properties intentionally or unintentionally. The same holds true in the case of motor insurance too! If our vehicle causes damage to another person or to their properties, then we are liable for the damages caused! We will have to pay compensation for all the losses caused by us. This liability is called third-party liability.

As per the Motor Vehicles Act in India, every motor vehicle owner is bound to take third-party liability insurance. It will cover all your legal liabilities if you cause any damage to a person or property. The damage can include bodily injuries, death of people involved in the accident, and also damages caused to the third party’s properties. The third-party liability cover will not include the damages caused to your vehicle or injuries caused to you. In case you need coverage for you and your vehicle, then you will have to enquire about it with your insurance provider and get comprehensive coverage along with third-party coverage. Hence, make sure you understand your insurance coverage in detail before you choose one.


But, whatever coverage you decide to take or not to take, third-party liability is compulsory before the law. Hence, as soon as you buy a new vehicle, you will need third-party liability coverage before the vehicle strikes on the road.

Know More About the First and Second Party

Since we are talking about third-party liabilities here, it is only obvious that you might be wondering who will be the first and second parties. In insurance policy coverage, the insurance company is the first party. You or the person who has taken the insurance is the second party. Any person who has suffered damages to life or property due to the second party’s vehicle is the third party.

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As Per Law, Who Is the Third Party?

Under section 145(g) of the Motor Vehicle Act 1988, the term “third party” will include the Government of the state too. In short, the “third party” includes every other person other than the first and second parties of the insurance policy. It can include a person traveling in another vehicle, a person walking nearby, or even a passenger inside the vehicle which caused the accident. When you take a vehicle outside, you are liable for any injuries you cause to any person outside and inside the vehicle.

‘Act Only’ Cover and Its Particularities

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The Third-Party cover or Act the Only cover will only offer insurance coverage for any damage caused to the third party by your vehicle. It will not offer coverage to you or your vehicle.

The Act Only Cover Can Include “PA” Risk Coverage!

Yes! The Third-Party coverage or Act Only cover can offer coverage to the second party in cases of death or permanent disabilities to the person driving the vehicle. Usually, it offers compensation of one lakh in case of two-wheelers and two lakhs in case of four-wheelers for the driver cum owner of the vehicle. The amount can vary from one insurance provider to another. This coverage includes accidents caused while traveling, dismounting, or mounting into the vehicle. In case of coverages for the co-passengers in the vehicle, it is optional and you will have to inquire about it to your insurance provider.

Beneficiaries of The Third-Party Coverage


The beneficiaries of the third-party coverage are any person who has been injured or has incurred damages to their property. The victim of the accident caused by you has the scope to file compensation under the grounds of ‘fault liability’ or ‘no-fault liability’ as per the Motor Vehicles Act 1988. Unlimited compensation will only be available for those who had suffered the loss of life or body injuries.

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The Premiums

Unlike other insurance coverages, a third-party insurance coverage premium is not decided on basis of what is covered. It is because the third-party coverage is more of a legal necessity. We cannot possibly predict beforehand what all liabilities might arise in case an accident occurs. The compensation to be paid to the victim of the accident is usually decided by the Court. But, nowadays, the rules have undergone changes and the compensation amount is decided by the IRDAI.

liability in Motor Insurance

As per law, the third-party coverage offers protection against all the legal liabilities that arise from an accident. Any damages caused to the public or private properties surrounding the place of accident is also covered by the insurance. Third-party liability is made compulsory as it makes things easier for people getting injured due to accidents caused by some other person’s mistake. The insurance companies also make sure that the compensation is paid as soon as possible.


Vivek Baghel is a Professional Blogger, Writer and likes to write on various niches as well as all about the latest news. He's also Admin of Oshup.com a tech blog and shares Tech, News, SEO articles, and the Latest News.

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