back

Preferred Language

Preferred Language

image

Know the difference between first-party and third-party car insurance

Know the difference between first-party and third-party car insurance

With the incorporation of digitalisation, purchasing car insurance has become more convenient than ever. All reputed insurance companies sell their plans online, where intending customers can visit their preferred insurer's website and purchase a policy that suits their requirements.

Here are different types of car insurance policies and their major differences.

Types of car insurance

There are primarily three types of vehicle insurance plans in India. Read on to know about them.

First-party car insurance

The first party indicates the person who purchases the insurance plan, referring to the car owner/policyholder. This first party pays the premium amount and raises a claim to receive compensation for its own damage in case of contingencies.

Second-party car insurance

The second party in an insurance plan denotes the insurer from whom the customer purchases the policy by paying the necessary premium amount. The second party receives the premium and offers the policy bounded by certain terms and conditions as per the insurance agreement. According to policy terms and conditions, the concerned insurance company commits to providing financial protection to the first party's vehicle in case any damages or loss occurred in any incident.

Third-party car insurance

A third party can be anyone under a vehicle insurance plan other than the first and second parties. It refers to individuals who can get affected by the first party's actions while driving the insured vehicle.

For example, in case a third party's property or a vehicle is damaged in an accident, the first party is liable to provide compensation to the former. Moreover, because the first and second parties have a contract between them, the insurance company will handle the liabilities as an essential part of third-party insurance.

A third-party car insurance plan is comparatively more affordable than a comprehensive insurance cover due to the limited coverage and benefits. Such an insurance policy is mandated by law, without which car owners have to pay a hefty fine or encounter legal consequences.

Therefore, the intending policy buyers must understand the different terms used in the insurance domain. It can be useful during the time of purchasing the plan and during car insurance renewal, and while filing a claim for damages caused to the vehicle.

Difference between first-party and third-party car insurance

Take a look at the table to better understand the difference between a first-party and third-party car insurance plan. Take a look at them:

Differentiating points First-party Third-party
Meaning First-party car insurance caters to the person who purchases the insurance policy. A third party in an insurance policy can be anyone. To specify, it can be any individual or property that gets affected by the first party's vehicle.
Coverage First-party insurance covers the damages or losses caused to the policyholder or his/her vehicle, along with third-party liabilities. The damages can be sustained during riots, strikes, earthquakes, floods, fire, theft etc. Third-party insurance covers damages or losses caused only to the third party due to an accident.
Accident cover The first party is eligible to receive a substantial personal accident cover with such policies. The first party can raise a claim against it depending on the terms and conditions. In case of an accident, the concerned third party can avail of coverage, depending on the extent of damage that occurred and as per the decision of the Motor Accident Claims Tribunal.
Legal mandate As per the Motor Vehicles Act of 1988, purchasing a first-party car insurance policy is not mandatory. In this case, it is mandatory to purchase a third-party cover as per the Motor Vehicles Act of 1988.
Policy purchase It is the first party who purchases the policy. The first party/vehicle owner purchases the policy to cover the third-party liabilities financially.

 

From the above table, customers will understand the differences between the two insurance plans and can go for one that suits their requirements. To purchase such motor insurance policies seamlessly, customers can visit the Bajaj Finance Ltd. website to explore a range of insurance policy options such as car insurance, two-wheeler insurance, goods carrying vehicle and passenger carrying insurance. You can purchase any policy as per your needs in a few simple steps.

Did you know, a good CIBIL score can help you get a better deal on loans and credit cards?