You reverse out of a gate, and a scooter is there, and you hit it. The next thing you see is the rider on the ground with a broken wrist, and his bike is bent, and your bumper has a small dent.
Three costs are adding up. Your insurer only covers two of them, and most people aren’t sure which ones they are.
Third-party car insurance is the cover every vehicle must carry, and hardly anyone knows what sits inside it. Here is what gets paid, what has a ceiling, and what you will be funding yourself.
Who Counts as a Third Party?
Three people appear in this arrangement: you as the first party, your insurer as the second, and anyone else affected by your driving as the third.
The scooter rider is a third party here, and so are a pedestrian, a passenger in the other vehicle, and the shopkeeper whose shutter you dented while parking.
You are never your own third party. Your cracked bumper, your medical bill, and your own vehicle sit entirely outside this section, which is why the cover is compulsory yet incomplete.
Knowing whether your car’s own passengers are covered can be complicated. Private car policies generally treat people you carry as third parties, so an injured friend in the passenger seat can claim, while the person driving cannot claim against the very policy they hold.
How Much Can Be Paid for Injury or Death?
There are no such limits on what can be paid for injury or death of the third party. Under the Motor Vehicles Act, 1988, liability for death or bodily injury caused to a third party is unlimited, and the figure is decided by a Motor Accident Claims Tribunal.
The awards are calculated instead of being guessed, and the tribunals are the ones who weigh by looking at the victim’s age, income, family situation, and medical costs. This is why compensation for serious injuries can exceed a crore.
Your car insurance policy covers the complete cost of the claim, as long as you have followed the rules while driving the car, such as not driving drunk or without a valid license. If you break any of these rules, the insurance company will first pay the victim, but ask you to pay them back for every rupee they spent.
Why Is There a Limit on Property Damage?
Damage to somebody else’s property is capped, and the law fixes that ceiling at ₹7.5 lakh. If there’s any damage beyond that, then it should be paid from your own pocket.
Human life was given more priority over property when the law was written, which explains the mismatch between an unlimited head and a limited one. For most accidents, the ₹7.5 lakh limit is more than enough to cover costs like a damaged scooter or a broken shop door.
This limit can become a problem if you accidentally hit an expensive car.
Hitting a building can be just as expensive. If you crash into a shopfront, wall, or several parked bikes, the repair costs can add up quickly. Just remember, your car insurance policy limit applies to the entire accident, not to each item you damage.
The Faster Route Nobody Mentions
As tribunal cases take time, families waiting for an award while medical bills pile up have another option under Section 164 of the Motor Vehicles Act.
Fault does not have to be proved on this route. Compensation is fixed at ₹5 lakh for death and ₹2.5 lakh for grievous hurt and is provided by the owner of the motor vehicle or the authorized insurer, without anyone establishing negligence. The amount is adjusted against any larger award that follows later.
For a family with no savings and a hospital asking questions, this kind of help can speed things up.
Choosing between the routes is not usually necessary. Families can take this payment first and pursue the full tribunal case afterwards, with the earlier amount simply deducted from whatever is finally awarded, which makes it a bridge rather than a settlement.
What This Cover Will Never Do
Damage to your own vehicle is the blind spot, and it is a large one. Third party car insurance pays nothing towards your cracked bumper, nothing if the car is stolen, and nothing if a tree falls on it during a storm.
Compulsory does not mean complete. Hearing a motor accident case in August 2026, the Supreme Court noted that roughly 16.54 crore vehicles, around 56% of everything on Indian roads, run without even this basic cover, which tells you how many victims are chasing individuals rather than insurers.
Buying only the compulsory portion does nothing apart from keeping you legal and protecting the stranger you injure.
Before you decide that buying only basic insurance saves you money, check what it actually covers. Remember, basic insurance doesn’t pay for repairs to your own car, you’ll have to pay for those yourself.