Why Third-Party Car Insurance is Mandatory in India?

The implementation of the third-party car insurance mandate was done to protect accident victims and manage high accident rates in India. This mandate was brought about through the update of the Motor Vehicle Act of 1939 in 1988.

Road accidents cause significant financial and emotional losses, so the mandate ensures that victims receive fair compensation. This article will provide you with a detailed breakdown of why third-party insurance is mandatory in India, so keep reading!

Primary Reasons for Third-Party Car Insurance Mandate in India

Getting car insurance has become easier with time. Facilities such as car insurance renewal online make vehicle owners compliant with minimal effort while ensuring continuous protection. The primary reasons why getting a third-party car insurance policy is mandatory are as follows:

1.Protection for Accident Victims

In the event of any road accidents, this insurance serves as a safety net for the victims of the accident to rely on. All third-party insurance covers the medical as well as the vehicular damage of the other person, which provides them with mental relief in times of emergency.

The insurer also pays for these damages without the victim having to pursue the at-fault driver in court. Thus, making timely vehicle insurance renewal is essential to ensure uninterrupted protection of yourself as well as others.

2.Encourages Driver Accountability

Most times, when a person is at fault, even if by mistake, they try to escape accountability. If they already have insurance to cover them, the cost of damages is not from their pockets. Then, the chances that the person at fault will take accountability increase. Thus, when the law mandates third-party insurance, it increases accountability among drivers and also makes them financially responsible.

3.Avoids Financial Stress for Driver

If an at-fault driver does not have insurance, then they could face huge financial stress. This could burden them and, in severe cases, leave them with devastating financial losses. The Insurance Regulatory and Development Authority of India (IRDAI) sets no limit on liability for injury or death, but it caps third-party property damage at ₹7.5 lakh. If damages exceed this cap, policyholders must pay the remaining amount themselves.

4.Manages High Accident Rates

The number of road accidents that occur in India is very high and leads to many fatalities and injuries. In 2023, approximately one death occurred in the country every three minutes. The people facing injuries was higher than this. Thus, having insurance is very necessary. The law mandates third-party car insurance as a direct response to the high-risk environment in India to help the victims.

Consequences for not Having Third-Party Car Insurance

Not having third-party car insurance can expose you to certain serious risks in the future, which are as follows:

1.Legal Penalties

According to the Motor Vehicles Act, 1988, if a person is found to be without a valid insurance on the road, they can be penalised. Their first offence can attract a fine of up to ₹2,000. If this is repeated, then they need to pay ₹4,000. This can cause repetitive financial loss for the driver and can lead to other legal implications as well.

2.Possible Court Cases

There is also a possibility that the defaulter can face a court case. This can happen if the at-fault driver does not have insurance, and the third party takes legal action. Court cases can be very stressful, lengthy, and costly, which can be an inconvenience. On top of this, if the court rules in favour of the third party, then the driver would have to pay a much higher compensation accounting for all the pain and suffering, medical bills, and lost income.

3.Effects on Future Insurance and Car Ownership

There is a chance that the driver’s licence can also be revoked upon being found without insurance. This can lead to suspension of driving for many days. Additionally, these situations impact getting insurance in future. Insurers can consider the driver as a high-risk customer and offer increased prices for policies, and in severe cases, also deny them insurance.

4.Possible Imprisonment

In cases of accidents leading to the demise of the other party, imprisonment of the defaulting driver is possible. Punishment like imprisonment can have a significant mental impact on the defaulter as well as their life. Considering these kinds of scenarios, getting a third-party car insurance is a boon.

Bottom Line

Third-party car insurance is more than just a legal requirement in India. It is a social and financial safeguard for the policyholder. Insurance ensures that accident victims receive fair compensation, encourages accountability among drivers, and reduces the financial burden of unexpected mishaps. So, in a country like India with high accident rates, third-party insurance is crucial.

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