What does a car insurance policy cover when an accident takes place?
Coverage depends on whether the policy includes first-party or only third-party protection. So, it is essential to know the differences between first-party and third-party car insurance.
Third-party insurance is mandatory in India, whereas first-party car insurance is optional and offers damage cover to your own vehicle. Go through the differences between these two policies and choose the most suitable coverage that aligns with your needs and preferences.
Understanding First Party and Third Party Insurance Coverage
What is First Party Insurance?
First party insurance safeguards the insured vehicle and policyholder against any major loss or damage. It typically means own damage coverage in a comprehensive or standalone own damage policy. It can protect you from losses resulting from accidents, theft, fire, natural disasters and other events covered under your policy.
Protection, however, might vary depending on the policy and add-ons. First-party coverage reduces your out-of-pocket expenses by covering the repair and replacement costs of the insured vehicle after an accident.
What Does it Cover?
The first-party car insurance covers:
- Car theft
- Damage to the car due to an accident
- Car damage due to fire and explosion
- Damage to the car due to natural calamities such as landslides, earthquakes, floods and more
- Damage from man-made disasters like terrorism, riots and vandalism
First party insurance also includes a personal accident cover that compensates in case of sudden death or disability due to an accident. This policy is designed primarily to safeguard the policyholder.
What is Third Party Insurance?
Third party insurance protects policyholders against financial liabilities arising from damage caused to another individual or their property due to the insured vehicle. Third party insurance is compulsory for all car owners in India as per the Motor Vehicle Act, 1988.
This policy covers death, injury to third parties, and damage to their property, subject to the policy terms. But it does not cover damages to the policyholder’s car.
What Does it Cover?
The third party insurance covers:
- Medical expenses in case the third party is injured
- Compensation for the death of another person due to the insured vehicle
- Repair expenses if the insured car damages another person’s property
- Legal liabilities arising out of third-party damages
What is the Difference Between First Party and Third Party Car Insurance?
|
Parameters |
First Party Car Insurance |
Third Party Car Insurance |
|
Coverage |
Offers coverage to the insured car in case of loss or damage. Protection generally includes accidents, loss, fire, natural disasters or other events as per the policy. |
Covers legal liability of policyholder for an injury, death or property damage to a third party (subject to terms and limits). |
|
Legal Requirement |
First party or own damage cover is usually optional. Policyholders can purchase this with third party insurance as comprehensive cover. |
According to the Motor Vehicles Act, third party motor insurance is compulsory for vehicles. |
|
Add-on Covers |
Add-on covers vary with the insurer. It includes zero depreciation, roadside assistance, engine protection and return to invoice. |
Availability of add-ons is generally limited, because this cover mainly focuses on third-party liabilities. |
|
Premium |
Car value, model, location, age, claim history and selected add-ons impact the premium amount. |
Premium is determined considering factors such as the engine size and is decided by the IRDAI. |
|
NCB Discount |
When policyholders do not make a claim during the policy term, the No Claim Bonus (NCB) is offered on the own damage part of policies where applicable. |
An NCB is not available as third party insurance offers coverage for legal liabilities rather than own damage claim. |
|
Best Suited for |
Car owners looking for their own car coverage. |
Those who only need the mandatory legal cover for third-party risks. |
Conclusion
Understanding first party and third party insurance helps car owners make the right insurance decisions. Third party insurance provides coverage in the event of an injury, death or damage to people or property of a third party.
First party or own damage cover safeguards the policyholder’s vehicle against accidents. With leading insurers like TATA AIG, own damage and third party liability protection are included under a comprehensive policy. Choosing the right policy depends on usage, car age, and coverage requirements.
