What is Compulsory Third Party Liability Insurance?

If you own your car, you probably already know a little about compulsory third party liability (CTPL) insurance.  But, do you truly understand why it is needed, who are covered, and what are its coverage.

In the Philippines, vehicle owners are required by law to secure a compulsory third party liability (CTPL) insurance as a prerequisite to the registration of a motor vehicle with the Land Transportation Office (LTO).

CTPL is a mandatory insurance for a possible liability to a third party.  Section 373(c), Chapter VI of the Insurance Code of the Philippines defines third party as follows:

Who are the third parties?
"THIRD PARTY shall refer to any person other than a PASSENGER as defined in the law and shall also exclude a member of the household, or a member of the family within the second degree of consanguinity or affinity of the vehicle owner, or his employee in respect to death, bodily injury, or damage to property arising out of and in the course of employment."

Your friends and other persons, who are not your relatives, riding in your car are considered as third parties and not passengers.  The third party may either be inside or outside your car.

Passenger, on the other hand, is any fare paying person being transported and conveyed in and by a motor vehicle for transportation of passengers for compensation, including persons expressly authorized by law or by the vehicle's operator or his agent to ride without fare.  In other words, they are paying a fare and on board a public utility vehicle.  However, once the passenger arrived in his destination and got off the public utility vehicle, he became a third party.  Please note that a person on board a private vehicle is not a passenger.

What liability is covered?
It covers the liability of the insured in respect of the bodily injury and/or death of any THIRD PARTY in an accident caused or arising out of the use or operation of the insured vehicle.  

Subject to the limits of liability stated in the policy, the insurer will pay all sums necessary to discharge the insured from liability, assuring the victim and/or his dependents of immediate financial assistance, regardless of the financial capacity of the motor vehicle owner.

Liability for loss or damage to property is not covered.

How much is the insurance coverage?
The current CTPL coverage is Php100,000.00.

How to make sure that your CTPL policy is genuine?
In the past, there have been reports of fake CTPL policies being sold by questionable parties at LTO branches and insurance policies being reproduced many times and sold to unsuspected motorists.

To once and for all address this issue, The Philippine Insurers and Reinsurers Association (PIRA) has rolled out a system labeled as "Certificate of Cover Authenticating Facility 2.0" (COCAF 2,0).  The system is an upgraded version of the insurance industry's answer to the problem of spurious CTPL policies generated by non-industry players.  It is meant to ensure that all CTPL policies issued to motor vehicle owners are genuine and generated tax revenues for the country.

PIRA chairman Michael F. Rellosa said, "This system is beneficial to all parties.  Motorists are assured that the CTPL policies they're buying are authentic, insurance companies get their premiums fast, and the government gets to collect correct taxes pronto."

Insurance companies and their agents are required to enroll into the system and open electronic wallets (eWallets) that must contain an initial cash deposit equivalent to the cost of a single CTPL policy to be able to use the system.

If the agent sells a policy, the system automatically deducts from his eWallet corresponding premium and credits it to the insurance company, separates the taxes and credits them to the government, and leaves behind the agent's commission.

The Insurance Commission will soon have a gateway to the system for real-time monitoring.