Which Is Better Policy - Third Party or Comprehensive Car Insurance?
A third party insurance plan is compulsory to own, but due to its limited coverage, the comprehensive car insurance looks better. Let’s find out which insurance cover is actually the better one.
As per the ruling of the Indian Motor Tariff, every car owner should at least own a third party car insurance plan while driving, otherwise, they can be imposed with a fine of Rs. 2,000 and/or imprisonment of up to 3 months. This basic insurance cover holds a limited amount of coverage which covers the expenses you may incur towards a third party after getting involved in an accident or mishap with them while driving your insured car.
However, the motor insurance plans are available in three variants which include third party liability cover, standalone own-damage cover and comprehensive insurance cover. Let’s go through the details of these plans and the coverage they offer.
Third Party Liability Insurance
A third party liability policy provides coverage for a third party liability that you face by getting involved in an accident with your car. This insurance plan covers the expenses arising due to the bodily injury or death of a third party individual due to your car. The third party policy also covers the expenses caused due to the damage to someone’s property by your insured car. In case of such liabilities, the third party insurance coverage pays the expenses on your behalf.
Standalone Own-Damage Insurance
Standalone Own-Damage Car Insurance is a plan which specifically covers for the damages and losses incurred by the insured car. The coverage offered under the own-damage insurance cover includes expenses of damages as well as losses arising due to accidents, collisions, natural calamities, man-made calamities, fire, and theft. As the name suggests, the standalone own-damage insurance plan offers coverage only for the policyholder’s car and not for the third party damages.
Comprehensive Insurance
A comprehensive insurance policy is designed to provide complete coverage to the policyholders with its wide scope of coverage. As it operates on a holistic approach, this insurance plan, unlike the standalone-own damage cover, gives coverage for third-party liability along with the own-damage liabilities. The comprehensive policy covers the damages sustained by your car due to accident, theft, fire, man-made disasters, natural calamities as well as third party liabilities.
Difference Between Comprehensive and Third Party Insurance
Listed below are the main differences between comprehensive and third party insurance plans:
|
Basis |
Third Party Insurance |
Comprehensive Insurance |
|
Coverage |
The policy gives coverage to third party liability only. |
The policy gives coverage to third-party liabilities as well as own-damages sustained by the insured car. |
|
Premium |
The premium for third-party insurance plans is fixed by the Insurance Regulatory and Development Authority of India (IRDAI). |
The premiums for comprehensive insurance plans are determined by the insurance companies themselves, hence, it varies from insurer to insurer. |
|
Affordability |
The premium amount is low and affordable. |
Premium costs of comprehensive insurance plans are higher than that of third party liability covers as the former offers a wider scope of coverage than the latter. |
|
Claim Settlement |
The claims of third party liability plans are settled by the tribunal and the insurance company pays the amount decided by the tribunal. |
The claims of comprehensive insurance policies are based on the type of insurance claim, where third-party insurance claims are settled by the tribunal and own-damage claims are settled on the basis of policy coverage, where the maximum claim to be paid depends on the Insured Declared Value of the vehicle. |
|
Add-ons |
No add-ons are available under the third party policy. |
The comprehensive policy offers various add-on covers by paying an additional premium. |
|
No Claim Bonus |
The No Claim Bonus is not applicable in this policy. |
No Claim Bonus is offered to policyholders for every claim-free year, which could be availed during the policy renewal. This discount accumulates with every successive claim-free year. |
Which Is Better Policy - Third Party Insurance or Comprehensive Insurance?
Third-party insurance policies are available at lower premiums and they also fulfill the legal requirement to own the basic insurance cover while driving a car, hence, many policyholders prefer to hold this insurance plan only. But, they forget that this policy provides limited coverage only and offers no coverage for the cost of damages sustained by the car itself or with the theft of the car.
In the case of an accident or mishap, you could have to bear the high costs of repairs, while in the case of theft, you will have to endure a substantial financial loss. Therefore, in such situations, a comprehensive insurance policy is always considered better as it offers financial assistance in almost all sorts of situations. Even though the premium for comprehensive policies is higher, the coverage benefits far outweigh its cost.
However, a third party policy could be considered a suitable cover for old cars or for cars which are used quite less often. But, in all other situations, the comprehensive policy is highly recommended to cover all the possible conditions of financial losses that may be sustained by your car or due to your car.
Conclusion
When it comes to insurance, you must be aware of the difference between comprehensive and third party insurance policies to find the relevant coverage for your car. As discussed in this article, we could predict that a comprehensive cover is better than a liability only plan. Therefore, always consider the benefits of holding a comprehensive car insurance cover and try to choose it other than a third party insurance plan for overall financial security.
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.
