What is First Party Insurance Vs Third Party Insurance: Coverage

If you are a car owner then you need to have a car insurance policy, and if you are confused between what is First Party Insurance? and what is Third Party Insurance? What are the coverage they provide? which car insurance is better?

Car insurance in India is compulsory as per the Motor Vehicle Act, of 1988 as this is for the safety and protection of car owner as well as the person or vehicle on the road. To start with let’s go through what is the need of a car insurance policy.

What Is The Need Of A Car Insurance?

Why do we even need a car Insurance? every time you take your car on the road even if you are an expert driver you are surrounded by risks like what if someone damages your car by mistake, or your car gets stolen or you accidentally hit someone with your car, or if you accidentally you damage someone’s private property while driving my car.

In that case, you become liable to pay for the damages you made to that third person and to cover for the third person’s car damage/Property damage/physical damage. You would have to pay for any possible loss so here is the need for car insurance.

Insurance is basically a contract between you and the insurance Company. And as per the contract, you will have to pay a fixed premium every year to the company and in return, even if you hit someone’s property, the car insurance company will pay that loss caused by you.

What Is A First Party Insurance?

So first let’s talk about what is a first party insurance? The First Party is the person in whose name the insurance policy is issued. Suppose there is your car and you have insured the car. So you will be the “First Party” in this case. Second Party is the insurance company to whom you will be paying the premium. And in return for that premium, the insurance company covers your risk.

First Party Insurance is an add on to the Third Party Insurance. This includes all the benefits & risks of Thirds Party insurance that will be covered plus some “Additional Benefits” in this Your own vehicle damage which was not covered in 3rd Party insurance, will be covered under 1st Party Insurance.

1st Party Insurance is also called “Comprehensive Package Policy” Even if you met with an accident but have a first party insurance you can get your car repaired on insurance and whatever amount you spend on repair of the vehicle on the whole sometimes insurance companies do not give you back the whole amount.

That difference is because of “Depreciation Factor” Depreciation is the loss of value due to wear and tear over the time in different parts of the car with time.

So insurance company reduces the value of spare parts due to depreciation and then the company pays the rest of the value to you generally, most of the plastic parts in your car are considered under 50% depreciation fiber parts are considered under 30% depreciation. that means the company won’t pay the depreciation value of the component.

So due to this suppose your expenditure came out to be 100 Rs the insurance company will pay you around 70 Rs. And rest 30 Rs go into depreciation loss itself.

To cover this gap many type of “Add-Ons” were launched by insurance companies “Add Ons” means you get extra benefits on your policy by paying extra. Most popular of these “Add-ons” was “Zero Depreciation” Which is also called as “Zero Dep” or “Nil Dep” Zero Depreciation.

Check Out: What Is Zero Depreciation Car Insurance: Coverage & Benefits It Provide

What Is Third Party Insurance?

In the third party insurance policy, the third refers to the person whose property/car got damaged because of your car accident or that person got injured or died in the accident because of the accident.

So that person becomes the “Third Party” in the accident. As per Motor Vehicle Act,146 all car must have third party insurance at least. Third Party Insurance is a compulsion and not a choice, and with time you have to renew third-party insurance.

Third Party Insurance Coverage

What are the things that are covered under Third Party Insurance Policy? 3rd Party Insurance is mandatory.

IRDAI Insurance Regulatory

Over the time there has been revised IRDAI regulating the Insurance sector in India and it keeps amending the rules/norms/premiums of insurance. As per the latest amendment, a PA Cover component of 300 Rs has been added and you will get 15 Lacs PA cover. In case of Permanent Disablement / Death of the First Party.

In the case of the 2 wheeler the premium of the 3rd Party Insurance is very low as the damage you can cause by bike to a third person is much less so lesser chances of damage and less premium.

Similarly cars below 1000 CC engine size have a small premium which gets increased in cars with engine sizes 1000-1500 CC in vehicles above 1500 CC this component gets doubled because with engine size, the size of the vehicle gets increased, and ultimately the damage you can cause to third person gets increased.

Terms And Conditions of Third Party Insurance

Third party insurance has some terms and conditions according to which if you damage third person’s property/Vehicle, in that case, Insurance Company will give a fixed amount to the third person but if that person got some injury or that person lost his life, in that case, it is not fixed and its “unlimited amount” and it depends on the Courts.

If these 2 conditions are met, so in Court Rulings, you will be liable to pay this amount and not the insurance company.