First Party Vs Third Party Car Insurance: Know the Key Differences
When looking for car insurance, you should know the differences between first-party Read more
Different Parties Involved in Car Insurance
A car insurance policy involves three parties. Take a look at them below:
- First Party - In an insurance contract, the first party refers to the person who buys the insurance, which is the car owner. It is the first party who pays an insurance premium and makes a claim to receive benefits or compensation under the motor insurance policy.
- Second Party - The second party in car insurance is the insurance company from which the first party purchases the policy. The insurer agrees to help the first-party by providing financial protection in case of loss or damage. In exchange, the first party pays a premium amount to the second party.
- Third Party - Any person besides the first and second parties is considered a third party under four-wheeler insurance. It refers to any person who gets affected by the actions of the first party while driving the insured car. A third party can be anyone and does not have to be an acquaintance of the first or second party.
For example, it could be a pedestrian walking on the street or the owner of a car moving in front of you. Under a motor insurance policy, the second party is liable to pay for any injuries, loss or damages caused to the third party on behalf of the first party.
Remember that it is the first party who initiates a contract with the second party in a bid to buy the right car insurance policy for his/her vehicle.
What is First Party Car Insurance?
First-party or own-damage car insurance is a type of car insurance that provides coverage for damages to your own vehicle. It makes the second party, i.e. the insurer, liable for covering any loss or damages caused to the first party's car due to unfortunate events. These events include natural disasters (earthquakes, storms, etc.), man-made disasters (strikes, vandalism, etc.), accidents, fire or theft.
Apart from the basic coverage, first party car insurance can also be enhanced with a host of add-on covers. These are the additional benefits that can be added to the first party car insurance by paying an extra amount. Zero Depreciation, Engine Protection, NCB Protect, Roadside Assistance, Return to Invoice, etc., are some add-on covers commonly available under motor insurance.
It is important to note that you can purchase first-party car insurance only when you have a valid third party insurance policy.
You May Also Read: List of Top Car Insurance Add-On Covers
What is Third-Party Car Insurance?
Third party insurance refers to the type of motor insurance where the coverage benefits are provided to a third party. It enables the second party i.e. the insurance company, to compensate for any third-party legal liabilities of the first party to the third person. The legal liabilities of the first party include bodily injuries, death or property damages to the third party with the insured car. In India, it is mandatory for every car to have at least a 3rd party cover to legally ply on public roads as per the Motor Vehicles Act, 1988.
Difference Between First Party and Third Party Car Insurance
Here are the major differences between first party and third party car insurance to help you make an informed decision when buying a policy:
| Categories |
First Party Car Insurance |
Third Party Car Insurance |
| Meaning |
Compensates for the damages to the insured car |
Compensates for the third-party damage caused due to the first party's vehicle. |
| Legal Mandate |
Not mandatory |
Mandatory as per the motor laws. |
| Coverage |
Covers damages sustained by the insured car due to accidents, theft, fire, etc. |
Covers third party death, disability and property damage only. |
| Personal Accident Cover |
The first party must opt for the compulsory personal accident (CPA) coverage of up to Rs. 15 lakh from the insurer |
The third party will get compensation from the insurer up to an amount decided by the Motor Accident Claims Tribunal. |
| Property Damage Cover |
Property damage of the first party is not covered. Only damages to the insured car will be covered. |
In case of third-party property damages, the insurer will cover the damages up to Rs 7.5 lakh on behalf of the first party. |
So, Which is Better: First-Party Insurance or Third Party Insurance?
The best car insurance for your four-wheeler depends on the type of coverage you are looking for and your budget. Both first-party and third-party car insurance serve different purposes. If you just want to meet the legal requirements, third-party insurance is sufficient. But, if you want coverage for damages to your own car, a first-party (own damage) policy is the better choice. However, for complete protection, you should consider comprehensive car insurance, as it includes both first-party and third-party coverage.
