What is a third party risk policy?

While you are shopping around to get the best possible quotes for your motor insurance, there are certain questions which are likely to creep in your minds. Unleashed here are the answers of some of the commonly asked questions about auto-insurance, answers of which every aspiring policy holder wants to seek.

What exactly is 3rd party risk policy?

It is a mandatory insurance policy which covers the vehicle owners against any damage done to the property of the 3rd parties, their death or bodily injuries. It does not cover the damage of the vehicle that you possess. It is mandatory under Motor Vehicle Act 1988.

Should I avoid making small claims?

If you are motor is met with an accident on the very first year of your buying and the cost of the repair comes out to be petty like 2000 Rs. then it is better not to make claims and take care of the expense from your pocket as it lesser than the No Claim Bonus or NCB that you would get in the corresponding year.

For how long is the policy valid?

Normally, motor insurance remains valid for one year (12 months) from the date of its commencement. But, they are long term also. You can check your policy schedule.

If at the time of accident someone else is driving the vehicle then?

Since your vehicle is covered under insurance and hence even when someone else is driving at the time of accident, insurance on the vehicle apply. But, if the amount of the damage done exhausts the limit of the policy, you will have to pay.

What if the vehicle is changed in the middle of the policy tenure?

If you buy a new vehicle during the policy tenure then a new vehicle of the same model will be substituted for the remaining period. You need to inform your insurance company and ask them how your premiums will be affected.
When selling the vehicle, is it possible to transfer the policy to the name of new owner?

Yes, your insurance policy can be transferred in the name of the new buyer. The buyer needs to apply for the insurance transfer (can be done online also) within 14 days from the date of the transfer of vehicle in his name. He has to pay endorsement premium for the balanced period of the insurance policy.

What is NCB? Under what circumstances will it be applicable and how it would benefits the owner of vehicle?
No Claim Bonus or NCB is rewarded to those policy holders who have not made any claims in the previous policy. It gets accumulated. The customers who have NCB can avail the discounts ranging between 20-50% on the damage premium that they pay. NCB can be utilized in three years. Its recovery can be done in the case of name transfer.

Motor insurance which is also known as auto insurance or vehicle insurance is a contract by which insurer bears the risk of any damage done to the property of the owner.

Author's Bio: 

Hema is an independent consultant, an avid traveler, fitness freak and writes about business, finance & Insurance