Difference between First Party Insurance and Third Party Insurance


Vehicle/car/bike insurance not only saves you from a big financial crisis arising due to an accident in future, it also saves you from a huge mental tension, penalty and court-court affair. In our previous articles on car insurance, we have explained in detail about third party insurance and comprehensive insurance. Many of our readers have asked what is the difference between first party insurance and third party insurance? In this article, we will answer this question and also clarify that what kind of insurance would be beneficial for you?

What is the difference between First Party Insurance and Third Party Insurance in Hindi. Before understanding the difference between both types of insurance, it is important to know what are first party and third party in insurance? 

  • First Party: First Party is the person who buys the insurance plan.  
  • Second Party: Second Party is the insurance company which is offering the insurance plan.
  • Third Party: Any other vehicle, other person or other property, which is damaged by your vehicle, is called Third Party in vehicle insurance.

Difference between first party insurance and third party insurance

First party insurance is a type of vehicle insurance due to which an insurance company pays compensation for damages caused to your own vehicle. In the language of vehicle insurance, it is known as Own Damage Cover. But, you can get this facility (Own Damage Cover) only when you have taken Comprehensive Insurance Plan (Complete Insurance). 

But, insurance companies also do not provide any kind of insurance in the name of First Party Insurance, but provide it in the name of Comprehensive Insurance. That is, only comprehensive insurance can be called first party insurance. It is not legally mandatory to get this insurance, but due to the better insurance protection it provides, insurance experts recommend it. Because within this the benefits of third party insurance are also included. 

Third party insurance is such vehicle insurance, due to which, the insurance company pays compensation for the damage caused by your vehicle to someone else’s vehicle. The insurance company pays compensation even if your vehicle causes bodily harm or death to another person. Similarly, the insurance company also gives compensation for the damage caused to someone else’s property.  

It is mandatory for the owner of any engine driven vehicle in India to have third party insurance. Driving without third party insurance can result in a fine of Rs 2000 or a jail term of 3 months. Both the sentences can also be given simultaneously. Along with third party insurance, compulsory personal accident insurance of Rs 15 lakh has also been made mandatory.  

What are the benefits associated with first party insurance?

By taking comprehensive insurance, you get the following types of insurance protection-

Compensation for damage to your vehicle (due to own damage cover): Having comprehensive insurance gives you the benefit of own damage cover . Under this, you get compensation from the insurance company if your vehicle is damaged in an accident. Such as loss due to road accident, arson, vandalism, theft, storm, earthquake, etc. If your vehicle is completely destroyed or stolen in an incident, then compensation is also available according to the current estimated value (IDV) of the vehicle.

Compensation on damage to other’s body, vehicle, property (due to Third Party Insurance) 

Comprehensive Insurance also includes the benefits of Third Party Insurance, because you can get Comprehensive Insurance only when you have already taken Third Party Insurance, or are taking it simultaneously. In first party insurance of any vehicle, third party insurance is also compulsorily included. Due to the inclusion of Third Party Insurance, the damage caused by your vehicle to any other person, or to any other vehicle, or to any other property is also compensated by the insurance company.

Compensation for bodily harm to yourself (due to personal accident cover): Along with comprehensive insurance, you also get the benefit of personal accident insurance. And the insurance policy holder gets compensation for bodily harm to himself. Because according to the new laws, it is legally mandatory to take Compulsory Personal Accident Insurance of Rs 15 lakh along with Third Party Insurance. And third party insurance itself is a part of comprehensive insurance. 

 Facility to add other ancillary insurance facilities (with the help of add-on covers)

The three types of benefits mentioned above with comprehensive insurance are in the form of its basic coverage. Apart from these, there are many types of ancillary insurance cover which you can add to your main insurance policy. These are known as add-on covers or riders Such as Zero depreciation cover, no claim bonus protector, engine protection cover, road side assistance cover, return to invoice cover etc. Apart from these, there are many types of addons. Which you can add by paying a separate premium. 

What are the benefits associated with third party insurance? 

Under the Motor Vehicle Act 1988 in India, third party insurance is mandatory for any vehicle plying on the road. Even if you do not get first party insurance or (comprehensive insurance), it will work. But if there is no third party insurance then legal action can be taken against you. Having third party insurance gives you the following 4 types of benefits-

  1. Your insurance company pays for the damages caused to someone else’s vehicle due to a collision with your vehicle. Your company also bears the burden of court action related to compensation. That’s why third party insurance is also called Third Party Liability.
  2. Your insurance company pays for the treatment of bodily harm caused to another person in a collision with your vehicle. In case of someone else’s death, his insurance company also compensates you.
  3. In case of damage to someone else’s property or goods caused by your vehicle, the same is also compensated by the insurance company.  

Along with third party insurance, it is also mandatory to take Compulsory Personal Accident Insurance of Rs 15 lakh. This insurance gives you compensation ranging from Rs 7.5 lakh to Rs 15 lakh in case of grievous bodily injury or death.

So friends, this was the information about the difference between first party insurance and third party insurance.


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