As per the Motor Vehicles Act of 1988, it is mandatory for you to have at least a basic valid motor insurance policy before you take your vehicle out on the roads in India. There are typically two types of motor insurance policies available in the market today: first party and third–party motor insurance policies. However, which of the two insurance policies is the best option for you? To find an answer to that, you first need to understand the difference between first party and third–party insurance policies.Difference between first party insurance and third–party insurance
|Criterion||First party motor insurance policies||Third–party motor insurance policies|
|Meaning||A first party or comprehensive motor insurance policy covers the damages that are incurred to your car and the third–party in an accident.||A third–party motor insurance policy only covers you against the damages that you cause to a third–party in an accident.|
|Availability of riders||You can choose multiple add–ons with your comprehensive motor insurance policy.||Since a third–party motor insurance policy does not offer an own damage cover, you can not include riders with this insurance policy.|
|Affordability||Comprehensive motor insurance policies are a little expensive as they offer wider coverage.||Third–party insurance is the most basic forms of motor insurance policies. Hence, these are the cheapest to get.|
|Legal Mandate||The law does not make it compulsory for you to buy a first–person motor insurance policy.||If you do not have a comprehensive motor insurance policy, you are legally required to at least buy a third–party insurance policy.|
|Compensation for natural and man–made calamities||If your vehicle is deemed total loss due to man–made or natural disasters, a comprehensive motor insurance policy will help you receive compensation that is equal to the IDV of your vehicle.||A third–party motor insurance policy, does not offer any compensation for the damages that are incurred to your vehicle.|
|Availability of the No Claim Bonus||A first–party insurance policy helps you enjoy discounts on the premium you pay for the own damage component of your motor insurance policy. These discounts are only offered if you do not raise a claim during the insured year.||The concept of No–Claim Bonus is not applicable on third–party motor insurance policies.|
Now that you know the basic difference between 1st and 3rd party insurance, you can easily choose the insurance cover that suits your needs perfectly.First party or third–party motor insurance: which should you choose?
The insurance coverage given is the most significant difference between first and third–party insurance. Since third–party insurance policies do not cover the damages incurred to your vehicle, these policies are better suited for insuring budget cars or bikes. However, if you own an expensive car or bike, you should definitely consider buying a comprehensive or first–party motor insurance policy. This is because it can help you bring down the costs of your getting your ride repaired after an accident.
The other major difference between 1st party and 3rd party insurance is affordability. Hence, if you have a tight budget, you can consider buying a third–party insurance policy. Alternatively, if you have sufficient budget, you can opt to buy the first–party motor insurance policy.Bottom Line
The right type of insurance policy for you depends on two major factors, namely, budget, and the required coverage. Hopefully, with the above given information, you have now learned the difference between first party and third–party insurance policies and have found a clearer idea as to which of the two insurance types is the best option for you.Disclaimer: The above information is indicative in nature. For more details on the risk factor, terms and conditions, please refer to the Sales Brochure and Policy Wordings carefully before concluding a sale.