Difference between First Party and Third Party Motor Insurance

Whether you own a two-wheeler or a four-wheeler, you should know that having a Motor Insurance policy is as important as having a valid driving license. However, before buying vehicle insurance, you should know the different types available, the features and benefits for each, and how to choose one, depending on your needs.There are primarily two types of Motor Insurance policies – First Party or Comprehensive Insurance and Third-Party Insurance. Third-Party Insurance is a mandatory requirement for vehicle owners in India. Additionally, the Insurance Regulatory and Development Authority of India (IRDAI)issued guidelines for car owners to have a ₹ 15-lakh Personal Accident cover.Here's a detailed look at both types of Motor Insurance to understand the key differences between First Party and Third Party Insurance.

First Party Insurance

When you buy a vehicle and get a Motor Insurance policy to secure it, you are considered the first party in that insurance policy, while the insurer is the second party.

Third Party Insurance

Imagine you accidentally bump into another vehicle, person or property while driving and cause damage to the other party. In this case, the individual or owner of the other vehicle or property is considered the third party.So, what are the key differences between First Party and Third Party Insurance plans?

First Party Insurance coverage

First Party Insurance or Comprehensive Insurance provides financial protection for you and your vehicle in events like an accident. It also covers damages to other vehicles, property, or people who may have been affected in an accident involving you and your vehicle.As it is a comprehensive plan, it provides financial cover if any other human-made or natural disaster, such as fire, theft, earthquake, flood, etc., damages your car. In effect, this type of insurance covers both First Party and Third Party liabilities, which is why it is known as Comprehensive Insurance.In addition, you can include specific add-ons, such as Zero Depreciation, engine protection, etc., to your Motor Insurance policy if you want extra coverage. Of course, bear in mind that these add-ons come at an extra cost.Generally, Comprehensive Insurance comes at higher premiums than Third Party Insurance as it offers greater coverage and protection.

Benefits of First Party Insurance

• Should you meet with an accident, your insurance policy will cover damages to your vehicle and any other vehicles, property, or people involved in the incident.
• You are also financially protected if your car gets stolen or damaged by fire. A comprehensive cover is essential if you live in areas where your car may be prone to such risks.
• First Party Insurance can offer additional benefits, such as Roadside Assistance, along with standard accident coverage.

Disadvantages of First Party Insurance

• In terms of costs, premiums are higher, making it a more expensive option.
• Some policies may include deductibles, which means you will have to pay some amount from your pocket when raising a claim. This is usually a percentage of the total claim value, and it could impact the coverage you receive in the event of an accident.

A step-by-step guide to claiming First Party Insurance in India

1. Intimate the insurance company immediately after the accident or damage occurs.
2. File an FIR with the local police and obtain a copy.
3. Collect and submit all relevant documents to your insurance company. The documents typically include the insurance policy, registration certificate, driving license, and a copy of the FIR.
4. If your vehicle needs repairs, get an estimate from a garage or authorised dealer.
5. Your insurer may provide a surveyor or an authorised dealer to survey your vehicle.
6. You can then wait for the insurer to approve and settle your claim.

Now that you understand how Comprehensive Insurance works let us look at Third Party Insurance in more detail.

As mentioned above, Third Party Insurance comes into play when you cause damage to another vehicle, person or property. But remember, this policy does not cover any damage to your vehicle or injuries to you or your passengers in an accident.Third Party Motor Insurance is relatively less expensive, which is why it does not provide the same level of protection as First Party Insurance, leaving you vulnerable to financial trouble when faced with mishaps or accidents.It is also important to understand that driving under the below-listed circumstances will make you ineligible for making claims:

• Driving without a valid license
• Driving under the influence of alcohol and/or drugs
• Driving outside the boundaries of India
• Participating in criminal acts or acts of hazardous nature.

Benefits of Third Party Insurance

• Third Party Insurance is more affordable than First Party cover. This is because it offers limited coverage.
• It saves you from legal hassles if the accident caused by you leads to a lot of damage to another vehicle.

Disadvantages of Third Party Insurance

• As it does not cover damage to your vehicle, you might have to deal with expensive repair bills if you were in an accident or your vehicle breaks down unexpectedly.
• Some policies may have restrictions or limits on the coverage you receive. This can impact your ability to recover financially from serious situations.

Steps to claim Third Party Insurance in India

1. Intimate the insurance company immediately after the accident or damage occurs.
2. File an FIR with the local police. Keep a copy of the FIR handy.
3. Submit all relevant documents to your insurance company. Most insurers require a driving license, insurance policy, registration certificate, and FIR copy.
4. You also need to obtain the contact details of the third party. Assess the extent of damage to their vehicle or property, and collect evidence to support your claim.
5. Wait for the insurer to approve and settle your claim.

Choosing between Third Party Insurance and First Party Insurance depends on your needs and circumstances. Here are some factors to consider: Budget: Third Party Insurance may be the more affordable option if you have a budget. But if you can pay for higher premiums, First Party Insurance may be better as it provides extra protection in the long run. Location: First Party Insurance is better if you live in areas where, for instance, the risk of theft, floods, earthquakes, etc., is higher. A Comprehensive plan offers protection from all these and more Driving experience: If you are a new driver or have a history of accidents, it is better to have First Party Insurance. Vehicle value: A third party policy works well for older vehicles with lower values as you do not spend unnecessarily on them. On the other hand, if you have a new or higher-end, more expensive vehicle, it is advisable to have a first party policy.Remember that the primary claimant in the two policy types is different. In the case of a First Party claim, you, as the policyholder, are the primary claimant, whereas, in Third Party claims, the claimant is the Third Party. However, in the latter's case, the insurer reserves the right to contest any claims made.Make sure to read and understand the minute details, especially what is and is not covered by each policy. And look for any restrictions, exclusions, or deductibles that could impact the coverage you receive in the event of any untoward incident. Also Read : https://www.adityabirlacapital.com/abc-of-money/all-about-motor-insurance-coverage

• First Party Insurance, or Comprehensive Insurance, covers damage to the policyholder's vehicle, other vehicles, property, and people involved in an accident. It also protects against theft, fire and other natural and man-made disasters.
• Third Party Insurance covers damages and injuries the policyholder may cause to another party while driving. This includes other vehicles, property, and people but does not cover damage to the policyholder.
• Third Party Insurance is a legal requirement in India.
• Choosing between Third Party Insurance and First Party Insurance depends on several factors. These include budget, location, driving experience, age and condition of the vehicle, and level of risk one is comfortable with. Careful consideration of individual needs and circumstances is necessary while making a choice.