Difference Between Comprehensive and Third-Party Insurance

In India, you do not have the option to drive a car without insurance. However, you have an option when it comes to the type of insurance policy you want to purchase. The two available options are a minimalistic Third-party Car Insurance Policy and the wide-ranging Comprehensive Car Insurance Policy. These two policies differ in terms of coverage and premium. The following sections of the article will highlight the major differences between these two policies so that you are in a better position to insure your car and make the most of the money spent on car insurance premium.

Comprehensive Vs Third-Party Car Insurance

Third Party vs Comprehensive Car Insurance:

The following table will differentiate between the policies based on five points. After going through the content in the table, you will get a gist of the two policies. This will help you to know more about which policy is best suited to your requirements.

PointsThird-party Liability CoverComprehensive Cover
MeaningA car insurance policy to cover third-party liabilities and comply with the law.A car insurance policy that offers enhanced coverage in the form of Own Damage Cover. It also includes the cover offered by the liability plan.
Add-on Availability?NoYes
CompulsionThis is compulsory. This is not compulsory.
CoverageIt covers the damages caused to another individual or their property due to the insured car. In addition to third-party liability coverages; theft, damage from calamities, fire, etc. are also covered for your car.
Is It Enough?No, as the insured car is still exposed to ‘Own Damage’ risks.Yes, as this is a comprehensive policy and can be customised with add-ons.
PremiumThis is the cheapest type of car insurance due to its low coverage. The cost of this car insurance policy is higher due to its wider coverage. 
RatesThe cost of a Third Party Car Insurance Policy is fixed by the Insurance Regulatory and Development Authority of India (IRDAI) based on the engine’s cubic capacity of the car.The cost of this policy is fixed by the insurer as per the terms and conditions of the policy.
DiscountsNo discounts are available. Discounts in the form of anti-theft devices, voluntary deducibles, and no-claim bonus are available. 

What Is Comprehensive Car Insurance?

Comprehensive Car Insurance offers extensive coverage that covers Third-party Liabilities and Own Damage. Buying this type of policy is not mandatory by law, however, due to its enhanced coverage, it is the preferred choice for many car owners.

Benefits of Buying a Comprehensive Car Insurance:

Here are the top benefits of purchasing a Comprehensive Cover for your four-wheeler.

1) Own Damage Cover

A comprehensive car insurance policy does more than just financially cover you against damages caused by your car to another person or their property. It covers damages to the insured car. With this policy, repairs for the damages caused to your car under circumstances like an accident or natural calamity, are covered by your insurance company.

2) Add-ons:

The extent of coverage offered by your insurance company under a Comprehensive Insurance Plan can be customised with car insurance Add-ons. You can choose from a host of beneficial add-on covers such as the Zero Depreciation, Roadside Assistance, Invoice protection, Engine Protection, No Claim Bonus Protect, etc.

3) Law-abiding Citizen

You shall be considered a law-abiding citizen concerning the mandatory car insurance requirement as a Comprehensive Cover includes the coverage for third party liabilities.

Also, read: Comprehensive Insurance vs Zero Depreciation

What is not covered under Comprehensive Car Insurance?

This section is about a list of exclusions of a Comprehensive Plan. These are situations where you cannot demand the insurer to settle the claim. Exclusions are mentioned in the respective insurance plan’s Policy Wordings. Note that there might be slight variations in the list of exclusions stated by different insurers. Thus, have a look at the exclusions of the policy offered by your insurer before buying the policy and before making a claim application. Here’s a list of top exclusions.

  • Comprehensive Plan will not cover instances if the policy had expired at the time of the occurrence.
  • Comprehensive Plan will not cover instances if traffic rules were not followed.
  • Comprehensive Plan will not cover instances in case of fraudulent activities conducted by the applicant.
  • Comprehensive Plan will not cover instances where Consequential Damages are concerned.
  • Comprehensive Plan will not cover instances mentioned under add-on coverage if the respective add-ons were not purchased by the policyholder.

What is a Third-Party Car Insurance?

Third-party Car Insurance is treated as compulsory insurance in India. It reimburses the third-parties for losses caused by the insured four-wheeler.

Benefits of Buying a Third-Party Car Insurance:

Listed below are the benefits associated with purchasing a Third-party Car Insurance policy for your four-wheeler.

Car insurance is a necessity as per Indian law. Not following this rule can lead to monetary losses in the form of penalties.

2) Liability Coverage

Liability coverage is the basic cover. It is a mandatory policy as per the law. With such a policy by your side, the insurance company shall cover instances where others have been affected by the insured car. The liability of compensating such third parties will be taken care of by the insurer.

Exclusions in a Third-Party Car Insurance Policy:

Just as there is a list of exclusions in a Comprehensive Plan, there is a list in case of the Third-party Plan as well. Here are some of the exclusions. You can go through the entire list of exclusions of a Third-party Car Insurance Policy by reading the Policy Wordings.

  • No vehicle insurance cover for damages to the insured car.
  • No vehicle insurance cover for an expired policy.
  • No vehicle insurance cover if traffic and other rules are not followed.
  • No vehicle insurance cover if proper documentation is not submitted at the time of a claim.
  • No vehicle insurance cover for violating the terms and conditions of the policy.

Top Reasons to Choose a Comprehensive Car Insurance:

If you are confused about whether you should opt for the basic liability cover or choose the policy that offers wider coverage, the following points will give you reasons to pick the latter.

1) Cover Own Damages

The Own Damage cover is the biggest advantage of the Comprehensive Plan. This cover will come in handy if your four-wheeler suffers damages. With this cover, the insurance company will pay for the bulk of the damages. In the absence of this cover, you will have to pay the entire repair bill from your pocket, which can result in depletion of savings.

2) Mandatory Coverage

Do not worry about monetary penalties for not complying with the law concerning buying Third-party Liability Cover. This plan includes mandatory coverage. Thus, by buying this cover, you abide by the law as well as insure your own car against damages.

3) Pick the IDV

In a Comprehensive Plan, you have the option to pick your vehicle’s Insured Declared Value (IDV). This is the amount of money the insurance company is liable to pay the policyholder in situations where the insured vehicle is damaged beyond repair or is stolen. You can reduce the payable premium by selecting a lower IDV. However, this will also result in lower claims pay-out in case of a total loss.

4) Flexibility

It is not like if you have purchased a Comprehensive Plan once then you must stick with it. If you feel you are not comfortable with the plan, you can change it while renewing the policy. You can include add-ons if you wish or opt for the basic Liability Cover. You can also switch the insurance company.

Ways to Buy Third-party or Comprehensive Car Insurance:

It is very easy to get your car insurance policy. Here are the options to do so.

1) Online

Simply visit the online insurer’s website (for example, www.acko.com) or use the mobile app, select the required policy, fill in your details, select add-ons if required, make the payment, and you will receive your policy instantly via email.

2) Through an Agent/Car Dealer

Usually, an insurance agent or the car dealer is affiliated to an insurance company. They will provide the necessary application forms and other payment details. You will receive the policy document via post or through the agent.

3) By Visiting The Branch

Once you select the insurance company, visit their branch for getting your car insured. The representative at the help desk will guide you through the process.

Which Insurance Policy is Best for You?

The answer to this question lies in introspection. You simply need to figure out your insurance requirements and match the cover that meets them. For instance, if you reside in a location that is prone to flash floods, selecting a Comprehensive Plan with an Engine Cover add-on is a good deal. If you have just purchased a new car, the combination of a Comprehensive Plan and a Zero Depreciation Cover is ideal. On the other hand, if you do not use your car much and are not worried about paying for the repairs, you can choose the minimalistic Third-party Car Insurance.

Factors to Consider Before Buying Car Insurance:

Here are some crucial points to ponder over before you buy car insurance.

1) Adequate Coverage

If you want to be stress-free in the event of any vehicle-related loss, opt for a Comprehensive policy. It covers the damage caused to your car and any permanent injuries. This is in addition to the cover that a third-party policy offers.

2) Right Insurer

Choose an insurance cover that provides the best price for your car insurance policy. Your insurer should also provide services that are useful in the time of need.

3) Fine Print

In any case, be sure of going through the fine print of the policy documents carefully. At the time of claim, it will be beneficial if you are aware of the inclusions & exclusions of your car insurance policy along with the terms & conditions of the insurance company.

Glossary

Here are some important car insurance terminologies you should be familiar with while buying, renewing, or claiming insurance.

1) Add-ons

These are extra services and coverage you ask voluntarily for your policy. They increase your premium but also provide better coverage.

2) Deductible

You need to pay a small portion of the bill, say Rs 1,000. It’s called a Deductible. You can voluntarily increase this to lower premiums. But, at the time of claim, you will have to pay the increased deductible amount from your pocket.

3) No Claim Bonus (NCB)

Insurers reward you when you do not make a claim. Every consecutive (for five years) no-claim year gets you a bonus or premium discount called ‘No-Claim Bonus’.

4) Coverage

The coverage and services offered vary across different insurance policies.

5) Zero Depreciation

Ensure that your insurer pays you the whole value of your car without deducting any depreciation through a Zero Depreciation cover.

6) Insured Declared Value (IDV)

IDV is not the vehicle’s resale value. However, for the sake of understanding, it can be looked at as the prevalent cost of the car. It is the amount that the insurance company will pay if the car faces total loss. 

Key Takeaways

Mentioned below are the top highlights of this article.

  • You have a choice when it comes to picking the type of car insurance policy.
  • It is a must to buy at least a Third-party Liability Cover for your four-wheeler.
  • You can buy add-ons only with a Comprehensive Plan.
  • Insurance plans are usually for a year after which you can select a different cover or an insurer.

Frequently Asked Questions:

Here are some frequently asked questions in case you need further help in understanding the difference between a Third-party Plan and a Comprehensive Cover.

Why is buying Comprehensive Car Insurance a smarter choice?

Buying Comprehensive Car Insurance is a smarter choice because it offers the dual benefit of third-party coverage as well as Own Damage cover. Plus, you can choose add-ons that will further enhance the scope of your insurance policy.

Can I switch from a Third-party Policy to a Comprehensive Policy on renewal?

Yes, you can change the type of your car insurance policy. Your car will be thoroughly inspected before your policy approval. So, just make sure to get those pre-existing dents on your car repaired, before the inspection.

Why is comprehensive car insurance more expensive than third-party policy?

Comprehensive Car Insurance is more expensive than Third-party Policy because a Third-party car Insurance Policy covers only the damages caused to the third-party person or property. It offers the most basic coverage.
On the other hand, a Comprehensive Car Insurance Policy pays for the damages caused to your car along with compensating the third-party. This extended coverage makes Comprehensive Car Insurance more expensive than Third-party Policy.

What are the best add-on covers for a Comprehensive Car Insurance Policy?

The best add-on covers for a comprehensive policy are:
>Zero-depreciation
>NCB Protector
>Roadside Assistance
>Return to Invoice
>Loss of Personal Belongings
Buying an add-on cover totally depends on your personal requirements. So, it is very important to assess them before choosing the right cover and to not overspend on car insurance.

Why is buying third-party car insurance mandatory in India?

Buying a Third-party Car Insurance Policy is mandatory in India because it ensures that the third-parties involved in an accident involving your car will be compensated for the loss.

Can I choose the IDV in a Third-party Policy?

No, the concept of IDV does not apply in a Third-party Policy as it is related to own Damage, which is not offered by the Third-party Policy.

What if there is a mistake in the policy emailed to me by the insurance company? Will I be required to purchase the policy again or is there a mechanism to rectify the mistake?

Usually, minor errors in the policy document can be rectified by a process called Policy Endorsement. You must inform the insurer about the mistake and they will rectify it and send a new policy document.

I drive slowly, follow traffic rules, and have never been involved in a car accident. Do I still need to buy car insurance?

You need to buy car insurance irrespective of how good you are behind the steering wheel. The compulsory aspect of a car insurance policy has more to do with covering third-party liabilities. For insuring your vehicle, you can buy a Comprehensive Plan.

What is an example of fraudulent activity while claiming car insurance?

Raising a claim to make a profit from the insurance company is considered fraudulent activity. For policyholders, insurance is for reducing losses not maximising profit.

Will the insurance premium go up if I buy two add-ons with my Comprehensive Cover?

Yes, each add-on comes at a cost and including add-ons in your Comprehensive Cover will increase the final payable premium.