If Third-Party Insurance Expires Before a Standalone OD Car Insurance Policy, Can the Latter Still Be Used?

It is a matter of common knowledge that all cars on Indian roads must have four-wheeler insurance. If any person, at any point in time, is seen driving their cars without car insurance or with expired car insurance, they will have to face severe penalties and fines. The fine for being caught without valid insurance in the first instance is ₹2000, which will increase for subsequent offences. Moreover, if a person is found driving their car with four-wheeler insurance repeatedly, they could lose their licence and even face imprisonment. Thus, it becomes extremely important to have a 3rd party car insurance, at the very least,  to stay on the right side of the law.

Commencement of Own Damage Car Insurance

Earlier all car owners had the option to buy either third-party or comprehensive car insurance. A 3rd-party insurance policy for a car implied that the insured car was protected against third-party liability and comprehensive insurance provided a person with all-around protection for their cars. However, in 2018, the Insurance Regulatory and Development Authority in India (IRDAI) introduced an addition to the plans that car insurance companies in India could offer. This new plan was the Own Damage Car Insurance to protect a car from fires and/or theft.

All cars, including both new and used four-wheelers, can avail of OD insurance. In addition, the industry standard includes third-party (TP) insurance in OD insurance packages. If the insured is found to be legally responsible for any harm caused to a third party, TP liability coverage will pay for the damages.

Car insurance companies in India will now have more options to offer their customers thanks to this decision of the IRDAI. First, they can choose to get an OD policy later, and second, they can do it from a separate insurer. However, you must still have TP insurance to use a vehicle on public roads.

Can Own-Damage Insurance be Used Singularly if TP Insurance has Lapsed?

Standalone third-party insurance or a comprehensive insurance plan valid for a period of one year were the only options available to vehicle owners in the past. Now that the laws have changed, insurers can provide long-term car insurance plans that must include third-party insurance coverage.

Owners of new vehicles are required to acquire third-party coverage for a minimum of three years for cars. The modification was made to circumvent the requirement for yearly policy renewals and avoid claims being denied due to drivers’ failure to renew their insurance coverage timely.

This left car owners with three possible options when it came to OD insurance. They could either buy long-term comprehensive insurance with OD insurance, a long-term third-party cover with a one-year OD cover that would need to be renewed each year, or a policy without OD insurance.

Suppose a person is choosing online car insurance and wishes to opt for a 3rd-party insurance policy for a car with OD insurance that needs to be renewed every year. In that case, they could possibly face a situation where their third-party insurance has lapsed, but their OD insurance is still functional. What happens, then?

As per IRDAI regulations, the insurers must mention the commencement and expiration dates in the insurance documentation. A reputable insurer won’t extend an OD cover past the third-party policy expiration. If you are buying your OD insurance after your third-party insurance and the third-party insurance is going to expire in a few months, the OD insurance might be provided to you on a pro-rata premise where you will only be asked to pay a premium for the months you will be using the cover and not for an entire year. In these policies, the expiration of the own damage coverage will not be longer than the third-party insurance, so you will not have to face this confusion.

Summing Up

The bottom line is that a person should have third-party insurance to have OD insurance. You should always be careful to have your insurance policy renewed and updated, even if you have OD insurance that will stay valid after your third-party insurance lapses. It thus becomes very important for a person to read the fine print and be aware of what the law demands before purchasing online car insurance.

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