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

Usually, the perception about insurance, or any other finance-related service, is that it is complicated. There are too many technical words to understand and the terms and conditions are difficult to follow. Some feel they need an expert to help them out when it comes to insurance, be it Life, Vehicle, or Health insurance. For example, not many people know the difference between a First party and Third-party in car insurance. However, the combination of internet and smartphone is dismissing this perception.

In 2020, understanding car insurance is not only simple but also supplemented by a relatively easy online purchase process – you can insure your car within two minutes by visiting acko.com. However, it is your responsibility to take the initiative to understand some basic terms, which are not that difficult to comprehend. Best brains in the insurance industry are working towards making the policies easily understandable, accessible, and available. This article is about knowing two important terms in car insurance; First Party and Third Party. Read ahead to know more about them.

First Party insurance is a policy that is beneficial for you – the car owner. It is also known as a Comprehensive car insurance policy. This comprises the Third-party Liability policy, Own Damage Insurance cover, and a Personal Accident cover. You can also choose Add-ons with such a policy.

The Own Damage cover is one of the main covers of First Party insurance. It covers damages to your car. For example, the insurance company will compensate you for damages to your car because of fire, vandalism, flooding, etc. Theft is also covered in this type of insurance. Such type of policy is costlier than the basic Liability policy but it also offers extensive coverage.

Now that you are aware of the meaning of first party car insurance, the following sections will help you to explore the concept in more detail.

You have the option to purchase a basic plan or an extensive plan. The TP Liability cover is known as the basic plan. The premium for such a cover is stated by the Insurance Regulatory and Development Authority of India (IRDAI). You can enhance your coverage by buying a Comprehensive plan, which offers TP coverage as well as Own Damage cover. Plus, you can also buy Add-ons with such a policy. Add-ons are specific covers that can be purchased for an extra premium. The insurance companies are free to decide the premium for such policies.

It is suggested to go through the features and benefits of the policy stated on the website or in the brochure, read the fine print, and clear any doubts regarding inclusions and exclusions before purchasing any type of car insurance plan.

In case you purchase a TP-only policy, you will be offered a Personal Accident Cover and a Third-party Cover. Here, a specific type of permanent injury to the owner/driver and claims raised against FP by the TP shall be covered as per the terms and conditions.

A Comprehensive plan shall cover the insured car with the above-mentioned points as well as offer Own Damage cover against fire, flooding, vandalism, theft, etc. Zero Depreciation, Return to Invoice, and Roadside Assistance as some of the Add-on covers that can be availed with a Comprehensive plan.

The list of exclusions will be mentioned in detail in the respective policy’s Policy Wordings. Overall, here are some points that highlight the instances for which the policy will not cover the insured car.

A 1st party insurance claim is an application sent to the insurance company to check the damaged car and repair it or compensate for the repairs based on the agreed terms and conditions. To raise an FP claim, you will have to call your insurance company and inform them about the incident. They will guide you regarding the required documents and state the next steps in the claim process.

Here’s how you can purchase a First-party (Comprehensive) car insurance policy from Acko General Insurance.

In case you purchase a TP-only policy, you will be offered a Personal Accident Cover and a Third-party Cover. Here, a specific type of permanent injury to the owner/driver and claims raised against FP by the TP shall be covered as per the terms and conditions.

A Comprehensive plan shall cover the insured car with the above-mentioned points as well as offer Own Damage cover against fire, flooding, vandalism, theft, etc. Zero Depreciation, Return to Invoice, and Roadside Assistance as some of the Add-on covers that can be availed with a Comprehensive plan.

The list of exclusions will be mentioned in detail in the respective policy’s Policy Wordings. Overall, here are some points that highlight the instances for which the policy will not cover the insured car.

A 1st party insurance claim is an application sent to the insurance company to check the damaged car and repair it or compensate for the repairs based on the agreed terms and conditions. To raise an FP claim, you will have to call your insurance company and inform them about the incident. They will guide you regarding the required documents and state the next steps in the claim process.

Here’s how you can purchase a First-party (Comprehensive) car insurance policy from Acko General Insurance.

A 3rd party car insurance policy is a legal requirement for driving a car in India on public roads. This policy safeguards the interests of those who might be injured or whose property might be damaged because of an accident involving the insured vehicle. This policy costs less than a Comprehensive plan; however, the latter offers enhanced coverage than the TP policy’s minimal cover.

Here’s an example that will help you to understand 3rd party insurance claims. A car goes out of control and runs into a pedestrian walking on the footpath resulting in permanent damage to his left leg. In such a scenario, the pedestrian, who is a Third Party, can raise a claim against the First Party, who is the owner.

Since the Second Party, which is the insurer, has covered the FP, the insurer will settle the claim as per the terms and conditions. In the absence of a policy, the FP would be required to pay the appropriate compensation amount to the injured.

Third-party claims are handled by the Motor Accidents Claim Tribunal. This is a dedicated court to settle such claims, which are in high numbers. Therefore, TP claim settlement can be a tedious and time-consuming process.

Here’s a table that distinguishes between 1st Party (FP) and 3rd Party (TP) in car insurance. It covers five points that shall explain the difference between the two. Note that the Second Party is the insurance company which has insured the vehicle in exchange for the insurance premium.