When you set out to buy a motor insurance cover for your vehicle, you would be asked to choose between a comprehensive and a liability-only insurance policy.
While comprehensive insurance coverage provides wider coverage, a liability-only policy offers limited but necessary protection against third-party liabilities.
In this blog, we will understand what is a liability-only insurance cover along with its features, coverage, and exclusions.
What is the Liability-only Cover in Motor Insurance?
A Liability-Only Insurance Cover is a basic motor insurance policy for Indian vehicle owners. It protects the vehicle owner from legal liabilities due to damage or injury caused to a third party or their property in an accident. This includes compensation for third-party injuries, death, or property damage. Having at least liability-only insurance coverage is mandatory in India.
This insurance policy does not cover the damages caused to the insured vehicle or the injuries of the policyholders.
Features of Liability-only Cover in Motor Insurance
Here are some important features of liability-only insurance cover that would help you understand how this policy works.
1. Mandatory by Law
The Motor Vehicles Act, of 1988 specifies that vehicle owners should get at least a liability-only insurance cover for their vehicles. This ensures that all vehicle owners have the minimum financial cover to compensate third parties for damages caused by accidents. Driving without at least this insurance is a legal violation, and offenders can face fines or other penalties. This provision is included to protect the public from financial losses caused by uninsured drivers.
2. Protection from Third Party Liabilities
This policy is designed to cover the legal liability of the vehicle owner towards third parties. If an accident is caused by the insured vehicle, due to which a third party suffers injury, death, or property damage, this policy provides financial compensation. The insurer covers the cost of medical treatment for injured third parties and any compensation required in case of a fatal accident. It also compensates for damages to third-party property, like a damaged vehicle or any structure involved in the accident.
Also Read: Third-Party Car Insurance
3. Affordable Premium
Due to its limited coverage, the premium of a liability-only insurance policy is lower than a comprehensive policy. This makes liability-only insurance an affordable option for vehicle owners who are primarily concerned with fulfilling the legal requirement and protecting against third-party risks.
4. No Coverage for Own Damage
An "own damage" cover is not included in a liability-only insurance cover. If the insured vehicle is damaged in an accident, a natural calamity, or any other incident, the liability-only policy will not pay for repairs or replacement. The vehicle owner will have to bear these costs. To get this coverage, vehicle owners must purchase it separately.
Coverage under Liability-Only Cover
A liability-only insurance policy provides limited coverage against damages caused by the insured vehicle to a third party. Here's a summary of what a liability-only insurance policy covers.
1. Third-Party Property Damage
If the insured vehicle causes damage to a third party’s property, such as another vehicle, a building, or other assets, the policy provides compensation for the repair or replacement costs. However, there is usually a limit to how much the insurance will cover for property damage, with the rest of the costs potentially falling on the policyholder.
2. Third-Party Bodily Injury or Death
If an accident caused by the insured vehicle causes injury or death to a third party, the liability-only cover will compensate the affected third party or their family. This can include hospitalization expenses, medical bills, and in the case of death, compensation to the deceased’s family. The compensation amount is determined by the severity of the injury or the impact on the person's life.
3. Legal Compensation and Fees
In cases of severe injury or death, the amount of compensation is typically decided by a court of law. The insurance company pays the compensation as ruled by the court to ensure that the third party receives fair compensation for their loss. The policy also covers the lawyer's fees, court fees, and other legal expenses related to the lawsuit.
General Exclusions of a Liability-Only Cover
Before buying a liability-only insurance cover, you must understand the risks that it does not cover. In case of an unfortunate event, you will not get financial help through insurance for these events.
1. Damages to the Insured Vehicle
Liability-only insurance does not cover any damages to the insured vehicle. Whether it’s due to an accident, fire, natural calamities, or vandalism, the cost of repairing or replacing the insured vehicle must be borne by the vehicle owner.
2. Physical Injuries of the Vehicle Owner
In the event of an accident, if the owner or driver of the insured vehicle suffers injuries or even death, the liability-only policy does not offer any financial compensation. If you wish to cover these risks, you need to purchase an additional personal accident cover.
3. Accidents Caused by a Driver Without a License
If the driver of the insured vehicle does not hold a valid driving license at the time of the accident, the insurance company will not cover any liabilities. Driving without a license is illegal and automatically disqualifies any claims under the policy.
4. Driving Under the Influence of Alcohol or Other Substances
Any accident or damage caused while driving under the influence of alcohol or drugs is excluded from coverage. The insurer will reject claims if the driver was under the influence at the time of the incident because this is a violation of traffic laws.
Conclusion
The Motor Vehicles Act of 1988 has mandated the liability-only insurance policy. This policy provides financial protection from accidental damages caused to a third party or their property. However, the insurance policy excludes many essential risks like vehicle damages and injuries caused to the insured vehicle owner. Vehicle owners can cover these risks by buying insurance separately or getting a comprehensive insurance policy.
FAQs on Liability only Insurance Cover
What is a liability-only insurance policy under motor insurance?
A liability-only insurance policy is a basic motor insurance cover that provides financial protection against accidental damages caused to third parties or their property.
What is covered by liability cover for cars?
Liability insurance covers the property damages, physical injuries, or death of a third party during an accident caused by the insured vehicle.
What is liability cover in two-wheeler insurance?
The liability cover in two-wheeler insurance protects scooters and bike owners from accidental damages caused to a third party or their property.
What is the limitation of liability insurance?
The major limitation of liability insurance is the limited coverage. It does not cover the damages caused to the insured vehicle or its owner during road accidents.
