What is compulsory third-party insurance?

AT A GLANCE

Under Section 387 of the Insurance Code, it shall be unlawful for any land transportation operator or owner of a motor vehicle to operate the same in the public highways unless there is in force in relation thereto a policy of insurance or guaranty in cash or surety bond issued in accordance with the provisions on Compulsory Motor Vehicle Liability Insurance, to indemnify the death, bodily injury, and/or damage to property of a third-party or passenger, as the case may be, arising from the use thereof.

“Movement is the universal language of personal freedom.” – Louis Chevrolet

Motor vehicle ownership provides individuals with greater freedom of movement,. However, owning a motor vehicle is not as simple as purchasing a product for everyday use.

This is because the Land Transportation Office (LTO) requires strict compliance with legal prerequisites before a motor vehicle may be registered or its registration renewed. In particular, the LTO does not allow the registration or renewal of any motor vehicle without requiring the owner or operator to present proof of compliance with the law mandating that such vehicle be insured.

In the Philippines, the most basic form of motor vehicle insurance is the Compulsory Third Party Liability Insurance (CTPLI). CTPLI covers expenses arising from bodily injury or death suffered by a third party as a result of an accident involving the use of the insured motor vehicle. It constitutes the minimum insurance coverage required for motor vehicle registration with the LTO.

The law governing CTPLI is Republic Act No. 10607, otherwise known as the Insurance Code.

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