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Car Insurance Plans
Difference Between First Party & Third-Party Car Insurance
With the purchase of a car comes the duty of adhering to the country’s motor laws. One of the most crucial laws for you to follow as a car owner is to have car insurance for your four-wheeler that includes at least third-party coverage. It is illegal to drive on public roads without a valid third-party insurance policy.
Let’s learn everything there is to know about the parties involved in a car insurance policy, as well as the fundamental differences between first and third-party car insurance. We’ll compare and contrast first-party and third-party insurance to see how they differ and what that means for you as a policyholder.
What Are The Parties Involved In Car Insurance?
Every car insurance policy includes three types of parties. They are as mentioned below:
- First Party: The owner of the car or the person in whose name the policy is registered is the first party under a car insurance policy. This first party is responsible for paying their car insurance premiums to their insurance company and is eligible to receive benefits under the policy.
- Second Party: The second party is your car insurance company, which protects and compensates you for any losses or damages to your vehicle. The insurance policy contract has been signed by the first party with the insurance provider. As a result, if an accident occurs, the second party is obligated to reimburse the first party’s claims, as long as the first party has paid their premiums on time.
- Third Party: A third party is a person or a vehicle owner who has been harmed in any manner by the conduct of the insured vehicle of the first party. For example, if the first party’s vehicle causes damage or injuries to the third party’s vehicle or owner, the second party pays the third party’s insurance benefit.
What Is A First Party Car Insurance?
The type of car insurance that benefits the first party is known as first-party car insurance. It provides own damage cover, which makes the second party liable for any loss or damages caused to the first party’s car as a result of unfortunate events such as natural disasters, man-made disasters, and so on.
Third-party claims are also covered by comprehensive car insurance. As a result, if a third party is injured, property damage is caused, or a life is lost as a result of the first party’s insured vehicle, the second party will satisfy the claim on the first party’s behalf.
For example, a cyclone wreaked havoc in your neighborhood, destroying everything in its path. Unfortunately, it utterly destroys your car. Your car insurer will compensate for the loss of your car and assist you in replacing it with a new one if you have comprehensive car insurance.
What Is A Third Party Car Insurance?
Third-party car insurance is a form of policy in which the policy benefit is given to a third party. They are entitled to the first party’s insurance coverage in the event of bodily injury, death, or damage to third-party property or persons. As a result, the second party, or the first party’s insurance provider, pays the compensation on the first party’s behalf.
For example, while driving in dense fog, you collided with a pedestrian. It will be your legal responsibility to compensate the third-party victim. Your insurance provider will pay the third party on your behalf if you have third-party car insurance.
What’s Covered In First & Third Party Car Insurance?
|Coverage||First Party Car Insurance||Third Party Car Insurance|
|Personal Accident Cover||Yes||Yes|
|Own Damage Cover||Yes||No|
|Return To Invoice||Yes||No|
How Are First & Third-Party Car Insurance Different From Each Other?
We will understand the differences between first-party and third-party car insurance with the help of some parameters. Let’s have a look at them one by one:
|Parameters||First-Party Car Insurance||Third-Party Car Insurance|
|Basic Meaning||This is a comprehensive car insurance policy that covers not only your third-party responsibilities but also you and your own vehicle.||This is the most basic car insurance plan, which only covers damages and losses caused by your car to third-party people, vehicles, or property.|
|Scope||Under the first-party car insurance, the first party is anyone who owns the car and insures it.||Under third-party insurance, the third party is anyone who is injured or to whom the damage is caused by the first party’s vehicle.|
|Compulsion||Here, it is not obligatory to cover the first party’s interest under car insurance.||Here, third-party interests must be covered under four-wheeler insurance.|
|Customization||You can add particular add-ons covers to your first-party car insurance plan, such as zero-depreciation coverage, engine and gearbox protection, return to invoice, and breakdown assistance, to name a few.||No customizations are possible under third-party car insurance.|
|Limitations||It costs a little more than third-party car insurance.||It does not provide coverage for damage to your own vehicle.|
As you can see, there is a significant difference between first-party and third-party car insurance, and understanding the differences is critical to completely comprehending how your insurance plans function for you.
Frequently Asked Questions
No. The comprehensive or first-party car insurance does not cover damages caused due to normal tear and wear of the car.
The following points are excluded under the first party car insurance:
- Driving without license
- Driving drunk
- Consequential damages
- Contributory negligence
- Add-ons not bought
The first party is liable to pay premiums to the second party, in exchange for which the second party provides financial protection to the first party’s car or vehicle. In case of any damage or loss occurred to the first party’s vehicle, the second party or the insurance company provides essential coverage to the policyholder.
This decision is based on the sort of coverage you desire. However, for the best coverage and protection of both first and third parties, a comprehensive car insurance package should be chosen.