Difference Between First-Party and Third-Party Car Insurance
First Party Insurance Vs Third Party Insurance
A car insurance policy is a contract between a car owner and an insurance company in which the latter promises to insure the former against financial liabilities which may arise due to an unfortunate event or mishap such as a road accident involving the insured's car.
The coverage of insurance provided by the insurance company depends on the type and nature of policy purchased by the car owner. On the basis of coverage, there are three types of car insurance policies - third party liability, comprehensive car insurance policy and standalone own damage car insurance policy.
Different Parties Involved in a Car Insurance
First Party - First party is the car owner who has purchased a car insurance policy.
Second Party - The insurer/insurance company which has promised to indemnify the policyholder for financial damages/losses incurred by the first party due to an event involving the insured's car.
Third Party - Anybody other than the first party and the second party who has incurred any financial loss/damage due to an event involving the insured's car.
Types of Car Insurance in India
Third-party car insurance: Covers liability for any damage caused to third-party persons or property in an accident. It is mandatory by law.
Comprehensive car insurance: Provides coverage for damages to your car as well as third-party persons or property. Highly recommended for optimum coverage.
Zero Depreciation car insurance: Covers the full cost of repair or replacement without factoring in the depreciation value of parts or car.
What is Third Party Car Insurance Policy?
A third party liability only cover is a type of car insurance policy which insures the policyholder (first party) from any third party liability arising out of an accident/mishap involving the insured's car. The policy allows the insured policyholder (first party) to claim indemnification from the insurer (second party) in the following cases:
- Limited coverage for bodily injuries of a third party.
- Unlimited coverage in case of permanent disability and death of a third party.
- Cover of up to Rs. 7.5 lakh for third party property damage.
What is First Party Car Insurance Policy?
Since the first party is the policyholder himself/herself, a first party car insurance refers to the personal accident cover. All car owners are compulsorily required to have a personal accident (PA) cover of up to Rs. 15 lakh, however, to buy it with a car insurance policy or separately is a choice of the car owner.
The PA cover insures the car owner in case of permanent disability and death. To insure oneself against bodily injuries, a car owner can purchase health insurance.
Besides the aforementioned covers, a policyholder can also purchase the following covers:
- Third party legal liability cover for a hired driver of the insured's car.
- Personal accident cover for hired driver of the insured's car.
- Personal accident cover for unnamed co-passengers travelling in the insured's car.
Difference Between First Party and Third Party in Car Insurance
The first party and third party distinguish on several points under the concept of car insurance. Here is the explanation of the difference between the two parties on the basis of some common parameters:
| Basis | First Party | Third Party |
| Meaning | First Party refers to the policyholder or insured person who buys the car insurance cover. | Third Party refers to the person or persons who gets impacted by the first party’s insured car during an accident or a mishap. |
| Scope | First Party can be an individual anyone who is the owner of the car and purchases the car insurance policy to insure it. | Third Party can be a person who sustains injuries, disability, death or property loss due to an accident with the involvement of the insured car. |
| Insurance | First Party owns the responsibility to purchase a third party car insurance plan or to extend the cover by choosing a comprehensive car insurance policy. | Third Party is the person who can get the coverage to an extent for his or her injuries and property damage from the first party’s car insurance policy. However, for comprehensive protection, third party persons are advised to opt for a personal accident cover or a health insurance policy. |
| Compulsion | First party individuals are supposed to own at least a third party insurance cover for their car as a compulsion in accordance with the Indian Motor Tariff. They may have to face penalties for not owning it. | No compulsion is applicable to the third party individuals for purchasing an insurance policy in order to secure them or the person of any other party. |
| Accident Cover | The First Party is entitled to get a Personal Accident Cover (PA) of Rs. 15 lakhs under a car insurance plan. The PA cover can be bundled with the liability only policy or comprehensive policy and the first party can make a claim for it on the basis of specified terms and conditions. | In the case of an accident or a mishap, the third party is entitled to get compensation on the basis of the extent of the damage suffered and according to the judgement given by the Tribunal for motor accidents. |
Difference Between First Party And Third Party Claims
An insurance policy is designed to add a protection layer for insured persons as well as third-party persons in the event of an accident. However, the first-party and third-party claim processes are different in several ways. Finding out the difference between the claim process for both parties can assist you in taking the right path towards the claim settlement. Here are the points of difference:
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The Claimant
The basic difference lies in the parties involved in raising the car insurance claim. When it comes to the first-party insurance claim, the primary claimant tends to be the policyholder, whereas in the case of third-party insurance claims, the primary claimant tends to be a third-party person. Therefore, the responsibility of registering an insurance claim changes in different situations.
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Claim Settlement
In third-party car insurance covers, the claim settlement is processed by the Motor Accident Claims Tribunal Court. On the other hand, in the event of first-party car insurance covers, the claim settlement process is initiated by the insurance company.
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Legal Responsibility
Since policyholders entered into a legal agreement with an insurance company, in the case of first-party claims, the insurer holds the moral obligation to provide coverage in accordance with the car insurance policy terms. While, in the case of third-party claims, the insurance company holds no such obligation to offer any coverage, infact, they can contest the third-party claims.
FAQ
1. What is first party car insurance?
First party car insurance provides complete coverage against the damages to your vehicle. The plan includes coverage against fire, natural calamities, theft, or man-made disasters. In first-party insurance, there are only two parties to the insurance contract: the insured (policyholder) and the insurance company.
2. What are the benefits of first party insurance?
The benefits of first party insurance First-party insurance, also called Own Damage (OD) cover, helps when something goes wrong with your car, like theft or accidents. But remember, it doesn't protect other people's things, only your car.
3. How can I reduce my first party car insurance price?
The easiest way to reduce your insurance cost is by earning a No Claim Bonus (NCB) through a claim-free year. This means refraining from filing claims for minor damages and covering them out of your own pocket. Additionally, driving responsibly to prevent accidents is crucial.
Disclaimer: This article is issued in 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.
