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Difference Between First-Party and Third-Party in Car Insurance

Published On Jan 22, 2021 10:00 AM By InsuranceDekho

Car insurance is a contract between two parties, namely the insured and the insurer. There are two major types of car insurance namely first-party insurance and third party car insurance.

Buying a car is an important milestone in everyone’s life. One important accessory that comes with the new car is motor insurance. There are two major types of car insurance schemes available, namely third party cover, which covers damages to third parties, and first-party cover that covers damages for the property of the insured, and personal accident cover.

Difference Between First-Party and Third-Party in Car Insurance

Differences Between First Party and Third Party Car Insurance Policies

There are many key differences between the first party and the third party car insurance policies and both have their advantages of rendering extensive cover for the insured.

Third-Party Car Insurance

A third party insurance policy renders covers against all third party damages and can cover damage up to Rs. 7.5 lakhs. This scheme offers covers a range of third party damages such as,

  • Property Damage: This includes damages for the properties of others (third-party) such as a bike, car, or any other property.
  • Coverage for Death and Disability: For the death and disability of the third person created by the insured’s car, the company will compensate the third party as ordered by the court.
  • Medical Treatment: It covers medical expenses that might arise due to the accidents caused by the car.

Damage coverage will be decided by the court tribunals, on par with the extent of the damage. If the damage extends more than 7.5 lakhs, the policyholder or the first party will pay to cover the damage.

First-Party Car Insurance

These types of insurance schemes focus on the cover for the policyholder. There are two types of cover in this category.

  • Car Damage: This pertains to the damage caused by the vehicle to itself, in the event of accidents, thefts, and also natural calamities. A comprehensive car insurance policy covers damage to the property.
  • Accident cover: This caters to the physical injuries sustained by the policyholder in the event of an accident.

First Party Vs Third Party Car Insurance

The major difference between these two types of insurance policies can be illustrated as follows:


First Party Car Insurance

Third-Party Car Insurance


The primary claimant is the policyholder

The primary claimant is an unknown third party.


The claims will be settled by the Insurance company

The claims are settled by the Motor Accident Claims Tribunal court

Contest by the Insurance Company

It is the moral obligation of the insurance company to offer coverage for the insured as per the terms of the policy.

The insurance company has no obligation to pay the third party and could contest the claims made by the third party.

Filing Claims

The policyholder will have to submit the FIR copy and all documents and evidence to the insurance company as obliged.

A case has to be filed with the MACT tribunal of the court. The court decides the extent of the damage and the amount to compensate.


In a nutshell, third party insurance and first party insurance (own-damage covers) serve different purposes. The third party insurance cover is compulsory and takes care of third party liabilities. This includes the cost of bodily injuries, death and property damage. The maximum compensation for property damage is Rs 7.5 Lakh. The third party insurance is also the cheapest insurance available for cars as it offers the most basic coverage. You cannot purchase add-ons along with this cover. First party insurance, on the other hand, takes care of own-damage costs in the event of a mishap. It is not compulsory but it provides coverage for your car in a variety of circumstances including natural and manmade calamities, road accidents, theft, fires and explosions. Moreover, you can also purchase add-on covers to further enhance the coverage provided by the first party insurance. These types of covers are more expensive as they provide better coverage. However, if you are looking for giving your car holistic protection it is best to opt for a comprehensive insurance plan. This type of insurance plan will cover both third party liabilities and own-damage costs under a single premium. They also offer an optional personal accident cover along with the add-ons for additional protection.

Also, Read

Common Mistakes to Avoid While Buying or Renewing Car Insurance

How to Claim NCB on New Car Insurance Policy Premium?

Bottom Line

Though both these insurance policies differ in various ways, both of them add an extended layer of protection both for the insured and the third party in the event of an accident.

Disclaimer: This article is issued in the general public interest and meant for general information purposes only. Readers are advised not to rely on the contents of the article as conclusive in nature and should research further or consult an expert in this regard.

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