Act Only Policy: Meaning, Example and How It Works in India

What does Act Only Policy mean?

An Act Only Policy, also called Third-Party Only or Liability Only Policy, covers only the legal liability towards third parties for bodily injury, death and property damage caused by your vehicle. It does not pay anything for damage to your own car.

For most Indian car owners, knowing Act Only Policy matters at the moment of buying a policy or filing a claim. The term shows up on the policy schedule, on the claim form and on the renewal proposal, often in fine print that first-time buyers do not notice until something goes wrong.

HiZuno publishes this glossary so that customers and small-business owners can decode the language of motor insurance in plain English. As of 2026, every entry reflects current IRDAI and MoRTH rules and the prevailing practice across providers in India.

How Act Only Policy applies in India

Section 146 of the Motor Vehicles Act 1988 makes a Third-Party liability policy mandatory for every motor vehicle plying on Indian public roads. IRDAI sets the Third-Party premium each year by engine cubic capacity, and the cover for third-party property damage is capped at Rs 7.5 lakh.

A real-world example

If a Delhi car owner rear-ends another vehicle, an Act Only Policy will pay the third-party victim for medical and vehicle-repair claims but the owner pays out of pocket for damage to their own car.

Common misconceptions

Why Act Only Policy matters for the consumer

It is the cheapest entry point to legal compliance, often chosen for older cars in tier-2 cities where market value is too low to justify Own Damage premium.

How to handle Act Only Policy in practice

A simple, repeatable approach helps you stay in control whenever Act Only Policy shows up in your policy paperwork or claim conversation.

• Confirm the basics: verify that Act Only Policy is reflected correctly on the policy schedule before you pay premium.
• Cross-check with IRDAI norms: the regulator publishes the framework that governs Act Only Policy, so compare what your provider has filed.
• Read the policy wording: the binding contract spells out limits, exclusions and conditions in detail beyond the marketing summary.
• Document everything: keep digital copies of the policy, RC, driving licence and KYC, since most disputes turn on documentation.
• Ask before you assume: a 60-second call to the provider clarifies whether Act Only Policy applies to your specific situation.

Related glossary terms

Frequently asked questions about Act Only Policy