Finance Blog

What Is The Difference Between Comprehensive And Third-Party Car Insurance?

The sale of cars has increased with time. Many people are buying them for themselves as well as their families so that they can roam freely without wasting time waiting for public transport. Another advantage here is that they can save themselves from changing the modes of transport and can also go out of the city on road trips. Those who spend a lot of funds in buying a car should ensure to get a protection cover to recover costs in case of damage.

All car owners must own car insurance to drive on Indian roads. All motor insurance companies in the country offer two kinds of policies – comprehensive insurance and third-party insurance. Comprehensive insurance is much costlier than a third party cover because it provides broader coverage and premium costs.

What is comprehensive insurance?

A comprehensive car insurance policy provides complete financial protection for the owner. It includes third-party insurance, own damage insurance, and personal accident cover for the driver. Other calamities such as theft, fire, natural and human-made disasters are also covered. Policyholders have the liberty to boost their coverage by including add-ons to the policy. Some of the popular add-on covers include accidental covers, depreciation covers, personal accident cover, and so on. The add-ons increase the premium amount of the insured, but they can nevertheless benefit from the policy.

What is third-party insurance?

It is mandatory to have a third-party car policy according to the Motor Vehicle Act and is also known as a liability only plan. The third-party policy offers financial protection from legal liability towards damage of third property or person after an accident which includes death, injuries, or property damage. The policy does not offer coverage for the insured car itself. It has validity for one year.

In 2018, the Insurance Regulatory and Development Authority of India (IRDAI) permitted insurance providers to introduce a third-party policy for all four-wheelers. This kind of cover is also known as a standalone long-term third-party insurance policy.

What is the difference between the policies?

Although the law mandates all car owners to have a third-party insurance cover in place, they can also apply for a comprehensive insurance policy which includes not only third party covers but additional benefits as well. Individuals who own brand new and premium automobiles should consider getting a comprehensive insurance plan along with suitable riders. The insurance plan may cost higher premiums than a third-party plan because of the complete coverage that it offers. It depends upon the budget of the individual. They can also opt for a third-party insurance plan if they are unable to afford a comprehensive one. Old cars that are no longer in demand can also get comprehensive coverage.

All car owners must have a motor insurance policy. Accidents are unprecedented and can impact finances heavily. After people buy car insurance online, they can drive in peace. They need not worry about the financial status and condition that may arise due to the damage or theft of the four-wheeler. They can also claim insurance from the insurance company during such events and save money.

Those who apply for an insurance cover but have not met with any accident or vehicle damage get additional benefits. They get a No Claim Bonus (NCB), which is a discount on the policyholder’s premium amount towards the plan. The benefits of NCB include lower premiums, rewards, and transfer to a new plan or policyholder. The person earns at least 20 per cent discount on the premium for every claim-free year.

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