Third Party vs Comprehensive Car insurance

Every time you buy a car insurance, the first question you may be asked is this:

‘Do I want a Third-Party Car Insurance or a Comprehensive Car Insurance?’

 

What Is Third-Party Car Insurance?

  • A third-party car insurance is a type of four-wheeler insurance that offers financial protection to you in case there were damages or injuries caused by your car to another person or their property.
  • It is the most basic form of auto insurance coverage in India.
  • Every four-wheeler owner legally needs a third-party car insurance cover to drive on the Indian roads. This is to ensure that in case of a road accident, the person being harmed by your vehicle is compensated.

What Is Comprehensive Insurance?

  • A comprehensive insurance is a combination of third-party liability insurance and own-damage cover. This means that a comprehensive car insurance policy does more than just financially covering you against damages caused by your car to another person or their property. Repairs for the damages caused to your car under circumstances like an accident or natural calamity, are also covered by your insurance company. The extent of coverage offered by your insurance company under a comprehensive insurance will depend on the policy terms and conditions.

Third-party VS Comprehensive Insurance

Here’s how Third-party insurance stacks up against Comprehensive car insurance.

TypeThird-Party InsuranceComprehensive Insurance
What does it cover?It covers the damages caused to another individual or their property due to accidents.In addition to third-party liability coverages, it covers all kinds of damages caused to your vehicle because of accidents, sabotage, fire, theft, natural calamities, etc.
What does it not cover? (Exclusions)Damage caused to:
Own vehicle
Injury caused to:
Self
Damage caused due to:
- Theft
- Natural calamities
- Sabotage
- Fire
- Civil disturbance
Damage caused when:
- Driving/riding without a valid licence
- Driving under the influence of drugs or alcohol
- The policy is not active
- Loss of personal belongings kept in the car.
Damage caused when:
- Driving without a valid licence
- Driving under the influence of drugs or alcohol
- The policy is not active
- Loss of personal belongings kept in the car
What are the add-ons?Third-party liability insurance comes with an additional personal accident or PA cover. - Engine protection
- Zero Depreciation
- Return to Invoice
Note: Personal accident cover is already included in the primary coverage
Which is the cheapest?Third-party insurance is the cheapest considering it has more exclusions. In fact, IRDAI fixes the rates of third-party component in car insurance on the basis of the engine capacity of your vehicle. These rates are revised every year or so. Since it offers a wide coverage, you pay a higher amount as the Comprehensive insurance premium.
The premium would have two primary components: Third-party premium (as fixed by IRDAI) and own-damage premium.
Which is the best?This has limited coverage and does not cover you or your car.Such a policy offers an extended coverage. It covers you, the third party and both of your vehicles. So, it keeps you protected in all cases.

Let’s understand the difference between third-party insurance and comprehensive insurance.

Situation

You are driving at night in low visibility. Suddenly, it seems like an animal crosses the road. You press brake and veer left.

And then, you feel a sudden jolt. And another.

Your car hits a person when you veered left. The car breaks into a rice farm, damaging that person’s property.

Naturally the person is very angry and in pain.

What happens next depends on your car insurance.

What Happens When You Have A Third-Party Insurance?

Your try to placate the person and explain about the animal.

You take the person to the hospital, and explain that your third-party car insurance could fetch him a compensation for the injury as well as the damage to the paddy field.

End of story, up until you file for a claim.

What Happens When You Have a Comprehensive Insurance?

The story does not end.

Your insurer pays for the third-party damages as per the ‘Third-party’ component cover.

The insurer then pays for your four-wheeler’s repair.

 

Which Is The Best? Third-Party Or Comprehensive Car Insurance?

A third-party Car insurance is mandatory by law.

However, it only covers damages caused to other individual or their property. It has limited coverage.

But, what about the damage that your car may suffer?

Moreover, your car may be damaged in cases other than minor road accidents. A broken windshield during storm, an engine breakdown because of rain, fire or even theft is covered.

Why pay for the repair bill from your pocket unnecessarily?

A comprehensive car insurance policy offers extensive coverage. It covers you and your car too.

This makes a comprehensive car insurance a far more useful option.

When To Buy Third-Party, When To Buy Comprehensive?

A Third-party car insurance is compulsory. But a comprehensive car insurance is a smarter choice. And your comprehensive plan includes third-party coverage too.

That said, you could still be confused about which plan to choose.

Consider these three factors while buying a car insurance policy:

Value of the car

  • If you have a high-value car, you could consider a Comprehensive car insurance policy.
  • In the event of loss or damage, you need not pay for the high expenses from your pocket.

Coverage

  • If you want to be stress-free in the event of any loss, opt for a comprehensive policy.
  • It covers the damage caused to your car and any possible injuries.
  • This is in addition to the cover that a third-party policy offers.
  • It also covers damages for reasons other than a collision.
  • If you want a wider coverage, go for a comprehensive policy.

Expense

  • If you do not have a high insurance budget, opt for a third-party insurance.
  • It is cheaper than a Comprehensive car insurance.
  • In the long run, however, it could turn out to be costlier.

7  Must-Know Terms while buying Third-Party or Comprehensive Insurance

Add-ons

  • These are extra covers that you might need to cover your car better against financial loss.
  • You need to pay extra to get these add-ons.

Zero-depreciation

  • The value of your car reduces due to wear and tear and general ageing.
  • This add-on cover ensures that depreciation on parts like metal, plastics, fibre glass etc is not deducted from your claim amount.

No-claim bonus

  • You get a bonus for not making any claims in a year.
  • Your next year’s premium can be lowered by up to 50% on the accumulation of no claim bonus.

Deductible

  • This is the part of your repair bill that you pay from your pocket.
  • It is usually a small amount like Rs. 1,000.

Sum assured

  • The insurer guarantees to pay a maximum sum of money in the case of loss or damage.
  • This amount is called the sum assured.

Insured declared value

  • It is the current market value of your car.
  • It is also the maximum sum assured by your insurer.
  • In the case of theft or total loss, the IDV is the maximum claim amount you get.

Return to invoice

  • In the case of total loss of theft, this add-on cover pays you the original value of the car.
  • This also includes the registration charges and the road tax paid.

Some common questions people often have

Can I switch from a third-party policy to a comprehensive policy on renewal?

  • Yes, you can change the type of your 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 inspection.

How to reduce the car insurance premium?

The premium amount depends on several factors such as the value and the age of the car, add-ons, extra security features, etc.
You can:

  • Reduce the insured declared value of your car.
  • Increase the Deductible amount.
  • Avoid claiming for every small expenses.
  • Renew your policy on time to avail No-claim Bonus.
  • Avoid buying unnecessary add-ons.
  • Install anti-theft and other security features in the car.

What is a car insurance calculator? How does it help?

  • A car insurance calculator helps you compare the different policies insurance companies offer.
  • It gives you an idea about the premium amounts for each of these policies.
  • You can also check the different types of plans offered by the top insurance companies.
  • It helps you get the best deal at the best.
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