What is the Difference Between First-Party and Third-Party Car Insurance?

Purchasing a car in India is one of the important milestones of one’s life. With various other accessories, one significant accessory that comes with a car is its insurance policy. There are two main types of car insurance policies available in India, which are, first-party insurance cover and third-party insurance cover. On one hand, where first-party insurance cover provides insurance against the damage to the first-party such as damages to the car of the policyholder and personal accident cover. On the other hand, the third-party cover provides insurance coverage against damages to third parties.

However, this is not it, there are significate differences between these two types of insurance plans and here we are covering the same.

Difference Between Third Party and First Party Car Insurance Policies

Car Insurance

A car insurance policy is an agreement between the insurer and the insured. There are two main types of car insurance policies available in India, which are third-party insurance and first-party insurance. When we talk about first-party and third-party car insurance plans, there is some significant key difference between these two. Before understanding the difference between these two, let us know about the parties that are involved in every type of car insurance policy.

Parties Involved in a Car Insurance Policy:

Every car insurance policy involves three parties:

  • First-Party: In an insurance agreement, the first party is the person who purchases the car insurance. In this way, a car owner is the first party in a car insurance policy. The first party pays the premium of the car insurance policy and files a claim to get the compensation or benefits provided in car insurance.
  • Second-Party: The insurance provider here is known as the second party. This is the party from whom a car owner buys a car insurance policy. It is the second party that promises to give financial protection to the car of the first party in case of damage or loss. In exchange for this service, the first party pays the premium to the second party.
  • Third-Party: In a car insurance policy any party that is other than the first party and the second party is known as a third party. It refers to a person who gets affected by the actions of the first party while he/she is driving the insured vehicle.

First Party Vs Third Party Car Insurance

There are differences between first-party and third-party car insurance policies, let us have a look:

  • Third-Party Car Insurance: A third-party car insurance plan provides coverage against all the damages to the third party and may cover the damages of up to Rs.7.5 lakhs. This insurance scheme offers covers for a range of third-party damages like:
    • Property Damage: This provides coverage against damages to third-party property like car, bike, or anything else.
    • Medical Treatment: The medical treatment cost of third-party that arise due to the accident that is caused by the insured car.
    • Coverage for Disability and Death: In case of death or disability to a third-party person incurred due to insured vehicle. The compensation, in this case, is compensated as per the orders of the court to the third party.

The damage cover is most of the time decided by the tribunals of the court as per the damage extent. If the damage is more than Rs. 7.5 lakhs, the first party or policyholder has to pay the damage cover.

  • First Party Car Insurance: Under this type of car insurance policy the main focus is on the policyholder. There are two types of covers available in this policy:
    • Car Damage: When the damage is caused to the insured vehicle in an accident, natural calamities, theft, etc. then the cover is provided under this insurance type. One gets the coverage for the same under a comprehensive vehicle insurance policy.
    • Accident Cover: In this insurance policy all the physical injuries sustained by the insured at the time of an accident.

In the below table we are discussing some key differences between first-party and third-party car insurance policy:

Parameter First-Party Car Insurance Third-Party Car Insurance
Claimant Here the primary claimant is the insured. Here the primary claimant can be any third party.
Claim Settlement The claims are settled by the insurance provider. The claims here are settled by the Tribunal Court of Motor Accident claims.
Liability of the Insurance Provider The insurance provider is liable to pay the claim to the insured as per the terms and conditions of the policy. There is no obligation on the insurer for paying the claim to the third party and it can contest the claims that are made by the third party.
Claim Filing The insured has to provide a copy of the FIR and all the relevant documents as well as the evidence to the insured as required. A case should be filed with the MACT tribunal court. This court decides the extent of the damage and the amount that has to be compensated.

The Final Words!

Finally, the purpose of third-party insurance and first-party insurance are completely different as they serve different requirements. It is mandatory to have at least a third-party insurance cover for taking care of the liabilities of the third party. This covers the damages and injuries caused to third-party property or persons. Moreover, a third-party insurance policy is the cheapest and it offers the most basic coverage to the insured car. However, first-party insurance covers the damages and loss caused to the insured vehicle. So, if you want to choose between these two, then you must make a wise decision and select the most suitable one.