MOTOR VEHICLE INSURANCE
In India, under the provisions of the Motor Vehicles Act, 1988, it is mandatory that every vehicle
should have a valid Insurance to drive on the road. Any vehicle used for social, domestic and
pleasure purpose and for the insurer's business motor purpose should be insured. Insurance is a
contract whereby one party, the insurer, undertakes in return for a consideration, the premium ,
to pay the other, the insured or assured, a sum of money in the event of the happening of a , or
one of various , specified uncertain events.
Section 140 of the Motor Vehicles Act deals with no fault liability. The term no fault liability'
means when an accident has occurred due to use of a motor vehicle or motor vehicles and has
caused either death or some sort of injury, the owner of the vehicle is still liable to pay
compensation even if it isn't his or her fault. Where death or permanent disablement occurs to
any person as a result of an accident due to the use of a motor vehicle, the owners of the vehicle
shall be liable to pay compensation for such death or disablement in accordance with the
provisions of this section.
Third Party Insurance
Motor third-party insurance or third-party liability cover, which is sometimes also referred to as
the âact only' cover, is a statutory requirement under the Motor Vehicles Act. It is referred to as
a third-party cover since the beneficiary of the policy is someone other than the two parties
involved in the contract i.e. the insured and the insurance company. The policy does not provide
any benefit to the insured; however it covers the insured's legal liability for death/disability of
third party loss or damage to third party property.
There are two quite different kinds of insurance involved in the damages system. One is Third
Party liability insurance, which is just called liability insurance by insurance companies and the
other one is first party insurance.
A third party insurance policy is a policy under which the insurance company agrees to
indemnify the insured person, if he is sued or held legally liable for injuries or damage done to a
third party. The insured is one party, the insurance company is the second party, and the person
you (the insured) injure who claims damages against you is the third party.
Section 145(g) ‘third party' includes the Government. National Insurance Co. Ltd. v. Fakir
Chand , third party should include everyone (other than the contracting parties to the insurance
policy), be it a person traveling in another vehicle, one walking on the road or a passenger in the
vehicle itself which is the subject matter of insurance policy.
Salient Features of Third Party Insurance
1. Third party insurance is compulsory for all motor vehicles. In G. Govindan v. New
India Assurance Co. Ltd.Third party risks insurance is mandatory under the statute
.This provision cannot be overridden by any clause in the insurance policy.
2. Third party insurance does not cover injuries to the insured himself but to the rest of the
world who is injured by the insured.
3. Beneficiary of third party insurance is the injured third party, the insured or the policy
holder is only nominally the beneficiary of the policy. In practice the money is always
paid direct by the insurance company to the third party (or his solicitor) and does not
even pass through the hands of the insured person.
4. In third party policies the premiums do not vary with the value of what is being insured
because what is insured is the legal liability' and it is not possible to know in advance
what that liability will be.
5. Third party insurance is almost entirely fault-based (means you have to prove the fault of
the insured first and also that injury occurred from the fault of the insured to claim
damages from him).
6. The third party insurance is unpopular with insurance companies as compared to first
party insurance, because they never know the maximum amounts they will have to pay
under third party policies.
