Third-Party vs Comprehensive Commercial Vehicle Insurance

What is the Difference Between Third-Party and Comprehensive Commercial Vehicle Insurance?

Insurers mainly offer two types of motor insurance policies for commercial vehicle owners. Check out the table below to know the difference and choose the right commercial vehicle insurance:

What Does Third-Party Commercial Vehicle Insurance Cover?

A third-party commercial vehicle insurance is mandatory as per the Motor Vehicles Act, 1988. It provides financial protection against the following damages:

1. Third-Party Injury or Death

   This type of commercial vehicle insurance covers injury or death of a third party due to an accident due to the insured commercial vehicle. The claim must be submitted to the Motor Accidents Claims Tribunal (MACT), and compensation for death, bodily injury, and third-party property damage will be determined by it.

2. Third-Party Property Damage

   If the insured commercial vehicle damages a third party's property or vehicle, the insurance policy covers the policyholder's legal liability for the damage. Usually, the third-party property damage compensation is up to ₹7.5 lakh.

3. Legal Liability

   Third-party insurance helps protect the commercial vehicle owner from the cost of legal liabilities arising from covered third-party claims.

4. Personal Accident

   Insurers also offer the mandatory personal accident cover for commercial vehicles with third-party policies. It ensures coverage in case of any injury, death or disability due to an accident for the owner-driver of the insured vehicle. It offers up to ₹15 lakhs of sum assured, and the compensation is decided based on the following:

   Type of Injury	Compensation (% of Sum Insured)
   Death	100%
   Permanent Disability	100%
   Loss of Two Limbs OR Eyesight of Two Eyes	100%
   Loss of One Limb and Eyesight of One Eye	100%
   Loss of One Limb OR Eyesight of One Eye	50%

What Does Third-Party Commercial Vehicle Insurance Not Cover?

Third-party insurance does not provide coverage for damage or loss suffered by the insured commercial vehicle. If a commercial vehicle with only third-party insurance is damaged in an accident, the cost of repairing the vehicle generally has to be paid by the owner/policyholder. Some common exclusions include:

• Accidental damages
• Theft or fire
• Damage caused by natural/man-made disasters

What Does Comprehensive Commercial Vehicle Insurance Cover?

Comprehensive commercial vehicle insurance combines third-party liability protection with damages caused to the insured vehicle. Here are several risks that are generally covered under a comprehensive policy:

1. Third-Party Liabilities

   Comprehensive insurance includes the mandatory coverage for third-party liabilities, such as death, disabilities, and property damage arising from an accident involving the insured commercial vehicle.

2. Accidental Damage

   Comprehensive policies cover damages caused to the insured commercial vehicle due to accidents. It even covers damages caused due to fire, explosion or ignition.

3. Theft

   If the insured commercial vehicle is stolen, insurers offer the insured declared value (IDV) of the commercial vehicle. The IDV is the depreciated value of the insured vehicle based on its age. Since the IDV is offered in case of theft and total loss, it also directly impacts the premium of the policy.

4. Natural and Man-made Disasters

   Comprehensive insurance generally covers damage caused by specified natural calamities, such as floods, storms, cyclones, earthquakes, etc. It also covers damages arising from man-made events, such as riots, strikes and malicious acts.

What Does Comprehensive Commercial Vehicle Insurance Not Cover?

Comprehensive insurance offers wider protection, but it does not cover every possible loss. Common exclusions may include:

• Normal wear and tear of the commercial vehicle
• Mechanical or electrical breakdowns not resulting from an insured event
• Damage caused while driving without a valid licence or when under the influence of alcohol or drugs
• Consequential losses

The exact exclusions can vary between commercial vehicle insurance companies and policies. The policy wording should always be checked before purchasing or raising a claim.

Which Commercial Vehicle Insurance Policy is Better?

The choice between third-party and comprehensive commercial vehicle insurance depends on the coverage required, the budget, and the vehicle.

Third-party commercial vehicle insurance may be suitable when the primary requirement is mandatory third-party liability coverage at a comparatively lower premium. If you do not need coverage for damages caused to the insured vehicle, you can opt for the third-party policy.

Comprehensive commercial vehicle insurance is a better choice for owners who want broader protection against both third-party liabilities and damage to their own commercial vehicle. This can be particularly useful when the vehicle has a high value or when its repair costs can be very high. You can also buy add-ons for commercial vehicles with a comprehensive insurance to increase the coverage.

You must also consider the following factors while choosing a commercial vehicle insurance:

• Vehicle make and model: Higher-value commercial vehicle owners can opt for a comprehensive policy for wider own-damage protection.
• Vehicle usage: Vehicles operating frequently or over long distances may face greater exposure to accidents and other risks. Hence, a comprehensive insurance will be better for such vehicles. If you just use your vehicle for very short distances and in a no-risk zone, you can opt for a liability-only cover.
• Budget: Third-party insurance generally costs less, while comprehensive insurance offers broader coverage at an additional premium. Consider your budget and choose the policy that gives maximum coverage in that amount.