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First-party insurance refers to an insurance plan that protects the first-party (the policyholder) in case of an unexpected event. In the context of car insurance, the first-party is the individual who purchases the car insurance policy.
For example, in the case of an accident, a first-party insurance plan will help cover damages and/or losses incurred by the car owner. A first-party car insurance plan is also commonly known as ‘own-damage’ car insurance.
A first-party car insurance plan (or own-damage car insurance) protects the car owner against unforeseen events like accidents, theft, vandalism, etc. Here, the first-party refers to the policyholder (the car owner). This type of insurance is not mandated by law but is highly recommended as it provides coverage for various unexpected events.
Additionally, first-party plans can be customised with add-ons, such as:
Zero Depreciation Cover
Roadside Assistance Cover
Engine Protection Cover
Tyre Protection Cover
In an insurance contract, the second-party refers to the entity from whom the insurance plan is purchased, typically the insurance provider.
A third-party in car insurance refers to anyone other than the first-party and second-party. This could include another driver, a pedestrian, or any other individual or property affected by the insured event. Third-party insurance protects third parties against damage or injury caused by the insured vehicle. In India, third-party car insurance is legally required under the Motor Vehicles Act of 1988.
First-party and third-party insurance plans for cars are distinctly different from each other. Understanding these differences is important for selecting the right insurance plan. Here’s a comparison:
Parameters |
First-Party Car Insurance Plans |
Third-Party Car Insurance Plans |
|---|---|---|
Meaning |
Protects the insured against unforeseen events (own damage). |
Protects third parties (people or property) affected by the insured. |
Scope |
Covers the policyholder’s car and damages they incur. |
Covers damage or injury caused to third parties (individuals, property, etc.). |
Legal Implications |
Optional – not required by law. |
Mandatory under the Motor Vehicles Act, 1988. |
Accident Cover |
Typically covers accidents involving the insured vehicle. |
Covers compensation for third parties affected by the insured's accident. |
The key differences between first-party and third-party insurance plans for cars can be further understood by examining the inclusions and exclusions:
Parameters |
First-Party Car Insurance Plan |
Third-Party Car Insurance Plan |
|---|---|---|
Primary Cover |
Covers damages to the insured's car. |
Covers third-party liabilities (damage to others or their property). |
Is It Mandatory? |
Not legally required, but highly recommended. |
Legally required in India under the Motor Vehicles Act, 1988. |
Major Exclusions |
Does not cover third-party liabilities (unless a third-party rider is added). |
Does not cover own damages to the insured vehicle. |
Is It Sufficient? |
Provides comprehensive protection for the policyholder. |
Often not sufficient on its own, as it only covers third-party liabilities. |
customisation |
Can be customised with add-ons (e.g., zero depreciation, roadside assistance). |
Cannot be customised with add-ons. |
The difference between first-party and third-party insurance lies in their coverage. First-party insurance covers the policyholder's vehicle, including accidents and damages. Third-party insurance, however, covers liabilities arising from damage to other vehicles, people, or property caused by the insured vehicle.
Yes, first-party car insurance can be customised with add-ons like zero depreciation cover, roadside assistance, and engine protection. These options enhance the policy’s scope and provide more comprehensive coverage based on the policyholder's needs, unlike third-party policies, which cannot be customised.
No, first-party bike insurance is not mandatory by law in most places. However, it's highly recommended as it protects against own damages, theft, or accidents. Third-party insurance is compulsory, but first-party insurance offers comprehensive protection beyond the basic legal requirements.
No, third-party insurance does not cover damage to your own vehicle. It only protects you against damage or injury caused to others, including property or people. For coverage on your own vehicle, first-party insurance (own-damage coverage) is required in addition to third-party insurance.
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