Difference Between Own Damage and Third-Party Car Insurance

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Before purchasing car insurance for your prized possession, it is imperative to understand the types of motor insurance policies offered in India. In this article, we will tell you about two types of car policies, own damage and third-party car insurance and how they are different from each other.

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      What is Third Party Insurance?

      A third party car insurance policy is a mandatory cover that every car owner must have as per the motor laws of India. The Motor Vehicles Act of 1988 has made this policy compulsory for every car owner to drive legally in India. This motor insurance policy covers the policyholder against accidental damages sustained by third parties due to the insured vehicle.

      It covers third party liabilities like third-party property damages, death or bodily injuries to the third person caused due to an accident with the insured car.

      Under third party car insurance, the compensation amount is unlimited in case of death. On the other hand, the compensation is limited to Rs. 7.5 lakh for property damages. The premium of a 3rd party car insurance is decided by the IRDAI based on the cubic capacity of a four-wheeler.

      Thus, to sum up, a third party liability insurance policy offers coverage against:

      • Third-party property damages
      • Death of the third party
      • Bodily injuries of the third party

      However, this policy does not cover damages sustained by the insured car due to any uncertain event. For this, a car owner is required to purchase a standalone own-damage or a comprehensive car insurance policy.

      You May Also Read: Importance and Benefits of Comprehensive Car Insurance Policy

      What is Own Damage Insurance?

      Standalone own-damage car insurance is another major type of motor insurance policy offered by insurance companies in India. Own damage car insurance provides compensation against any damages sustained by the insured car due to an unforeseen event like an accident, earthquake, theft, riot, fire, etc. This policy can only be purchased if you have an existing 3rd party car insurance.

      If a car owner wants to cover both third-party liabilities and own damages under one policy, he/she can consider buying a comprehensive motor insurance policy.

      Moreover, the IRDAI has also made it mandatory for insurers to offer a bundled car insurance policy that comes with 1-year OD (own damage) + 3-year TP (third-party) cover to brand-new car owners. Under this policy, the policyholder can renew own damage cover yearly as per his/her requirements.

      The coverage of an own damage insurance policy can also be enhanced by purchasing additional covers at an extra premium. Some of these add-ons are nil depreciation cover, NCB protect cover, roadside assistance cover, tyre protect cover, etc.

      Own Damage vs Third Party Insurance: Points of Differences

      Let us now understand the differences between own damage and third-party insurance with the help of the following table:

      Point of Difference Own Damage Car Insurance Third Party Car Insurance
      Coverage Covers a four-wheeler against own damages arising out of road accidents, theft, natural and manmade calamities, etc. Offers coverage against any third-party liabilities arising out of the insured car
      Compulsion Not a mandatory cover as per the Indian motor laws. Mandatory to legally ply on the roads of India.
      Exclusions It excludes covering third-party liabilities. Does not cover own damages sustained by the insured vehicle.
      Standalone Purchase Can be purchased as an additional policy with third party insurance to also cover the car’s own damages. Being a mandatory cover, it can be purchased separately by a car owner.
      Customization Can be customised by purchasing additional covers. Cannot be customised with add-ons as it only covers third-party damages.
      Validity The validity is usually 1 year, after which it has to be renewed. For new cars, purchasing a 3-year bundled third party car insurance is mandatory.

      Otherwise, you can also go with a one-year 3rd party car - policy.

      Wrapping Up!

      Third party and own damages insurance are different from each other in many aspects. While the first one is a compulsory cover, the latter can be purchased to extend the policy coverage as per the requirements of the car owner. You must be well aware of the differences between the two plans so that you can make a wise purchasing decision. Besides, you can also compare plans of multiple car insurers on Policybazaar.com to choose the right car insurance policy for your four-wheeler.

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