What Is Third-Party Car Insurance in Pakistan?

Introduction (Real Problem Based)

For many car owners in Pakistan, purchasing motor insurance is often seen as a formality rather than a financial safeguard. A large number of drivers opt for third-party car insurance because it is generally more affordable than comprehensive coverage. However, the actual purpose and scope of third-party insurance is frequently misunderstood.

In real-world driving conditions—where traffic congestion, road accidents, and unpredictable hazards are common—vehicle owners may unintentionally cause damage to another person’s vehicle or property. In such situations, the financial responsibility for repairs, medical expenses, or legal liabilities may fall on the driver at fault.

Without appropriate liability coverage, these expenses can become a significant financial burden. Third-party car insurance is specifically designed to address such risks by offering financial protection against damages caused to other individuals, their vehicles, or their property.

This article explains how third-party car insurance works in Pakistan, who may benefit from it, what limitations to consider, and how premium costs are typically calculated.

---

How Comprehensive Car Insurance Works

To understand third-party insurance more clearly, it is helpful to compare it with comprehensive car insurance.

Comprehensive car insurance provides broader coverage that may include:

• Accidental damage to the insured vehicle
• Theft or total loss
• Fire-related damage
• Natural disasters such as floods
• Vandalism
• Third-party liability

Third-party insurance, on the other hand, is more limited in scope. It typically covers:

• Damage caused to another person’s vehicle
• Injury or loss to third parties
• Property damage resulting from an accident

It does not provide coverage for the insured vehicle’s own repair costs.

When an accident occurs, and the insured driver is found to be responsible for damage or injury to another party, the insurance provider may compensate the affected individual based on policy terms.

---

Who Should Buy It?

Third-party car insurance may be suitable for:

• Owners of older vehicles with lower market value
• Drivers seeking basic liability protection
• Individuals who drive occasionally
• Vehicle owners operating in low-risk environments
• Budget-conscious policyholders

For vehicles with significant depreciation, the cost of comprehensive insurance may outweigh the benefits. In such cases, third-party coverage may provide essential financial protection against liability claims.

---

Benefits

Third-party car insurance offers several practical benefits:

• Coverage for damage caused to another vehicle
• Financial protection against legal liability
• Compensation for third-party injury claims
• Property damage coverage
• Lower premium compared to comprehensive policies

This type of insurance may help vehicle owners manage financial risk in the event of accidental damage to others.

---

Limitations

Despite its advantages, third-party insurance has certain limitations:

• No coverage for own vehicle damage
• Theft protection is not included
• Natural disasters are not covered
• Fire-related damage to the insured vehicle is excluded
• Limited scope of coverage

Vehicle owners should assess whether this level of protection aligns with their financial risk tolerance.

---

Estimated Cost in Pakistan

Third-party insurance is generally more affordable than comprehensive coverage.

Approximate annual premium ranges in Pakistan:

• Small vehicles (800cc – 1000cc): PKR 5,000 – 10,000
• Mid-size vehicles (1300cc – 1800cc): PKR 10,000 – 15,000
• Larger vehicles (2000cc+): PKR 15,000 – 25,000

Premium rates may vary depending on insurer policies and risk factors.

---

Factors That Affect Premium

Insurance providers typically consider the following factors when calculating third-party insurance premiums:

• Vehicle engine capacity
• Registration year
• Vehicle usage
• Geographic location
• Claim history
• Driver profile

Higher-risk environments or previous claims may influence premium costs.

---

Real Example Scenario

Consider a vehicle owner who drives a 2015 model hatchback. The owner purchases a third-party insurance policy with an annual premium of PKR 8,000.

During a minor traffic accident, the insured driver accidentally damages another vehicle’s rear bumper. The repair cost for the third party’s vehicle is estimated at PKR 45,000.

According to the policy terms, the insurance provider compensates the affected party for repair expenses, reducing the financial burden on the insured driver.

---

Tips Before Buying

Before purchasing a third-party car insurance policy:

• Compare coverage limits
• Understand liability terms
• Review claim procedures
• Verify policy exclusions
• Confirm premium rates
• Evaluate personal risk exposure

---

FAQs

Q1: Does third-party insurance cover own vehicle damage?
No, it only covers damage caused to others.

Q2: Is third-party insurance mandatory in Pakistan?
It may be required in certain situations depending on regulatory guidelines.

Q3: Can premium rates vary between insurers?
Yes, rates may differ based on risk assessment.

---

Conclusion

Third-party car insurance in Pakistan offers a basic level of financial protection against liability claims resulting from accidents. While it does not cover damage to the insured vehicle, it may help mitigate financial responsibility for injury or property damage caused to others.

Vehicle owners should carefully evaluate their coverage needs and risk exposure before selecting an insurance policy.

---

Author Bio

Written by: Ahmed Raza
Auto Insurance Research Analyst
5+ Years Experience in Vehicle Protection Planning
Email: ahmed@insuranceblog.website

---

Sources / References

Investopedia – https://www.investopedia.com

Securities and Exchange Commission of Pakistan (SECP) – https://www.secp.gov.pk

State Bank of Pakistan (SBP) – https://www.sbp.org.pk

Ministry of Finance, Government of Pakistan – https://www.finance.gov.pk