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CAR INSURANCE

Difference between Third Party and Comprehensive Car Insurance

Joan Mathews Joan Mathews 23 March 2020

While choosing car insurance, people often get confused whether to go for a third-party insurance policy or a comprehensive insurance policy. Read this article to find out the differences between the two and which would be the best choice for one’s vehicle.

Third Party Car Insurance

To drive on Indian roads, it is mandatory for the car-owner to have an insurance cover in place for his or her vehicle. Motor insurance companies in the country offer two kinds of policies - third-party insurance and comprehensive insurance. The former is cheaper as it covers only third-party damages, while the latter offers wider coverage and hence costs more in premiums. In this article, we will look at the differences between the two and evaluate which would be the better option.

What is Third-Party Car Insurance?

According to the Motor Vehicle Act, having at least a third-party insurance cover is mandatory.This type of insurance is also referred to as an act-only policy and liability-only plan. Third-party car insurance offers financial protection from legal liability towards a third party after an accident that leads to death, injuries or property damage. It is, however, important to note that third-party car insurance does not provide coverage for the insured car itself.

The motor third party liability insurance premiums for FY 2019-20 effective from 16th June 2019 are as follows:

Private CarsPremium with effect from 16th June 2019 (Rs.)
Not exceeding 1000 cc2,072
Exceeding 1000 cc but not exceeding 1500 cc3,221
Exceeding 1500 cc7,890

Source: The Insurance Regulatory and Development Authority of India

Usually, third-party insurance is issued for a period of one year. In 2018, the Insurance Regulatory and Development Authority of India permitted insurance providers to come up with three-year third-party insurance for cars. This kind of cover is referred to as standalone long-term third-party insurance policy. The insurance regulator was directed to implement the decision on insurance policies sold from September 1, 2018. A circular issued by the IRDAI said that general insurance companies should "offer only three-year Third Party Car Insurance covers for new cars," The Economic Times reported.

What is Comprehensive Car Insurance?

Comprehensive car insurance, as its name would suggest, provides complete financial protection for the vehicle owner. It includes third-party insurance, own damage insurance and personal accident cover (for the driver). Incidents like car theft, damage due to fire, damage caused by natural disasters and man made calamities, etc. are covered under a comprehensive car insurance policy. Policyholders can boost their coverage by including add-ons to the base plan. Some of the additional covers offered by insurance companies include Depreciation Waiver Cover, Windshield Glass Cover, Roadside Assistance Cover and Engine Protection Cover. While the add-ons will increase the premium amount, the policyholder can benefit from a more effective insurance cover.

Third-Party Insurance or Comprehensive Car Insurance

Although the law only makes it mandatory to have a third-party insurance cover in place,vehicle owners are often advised to get a comprehensive car insurance policy, which includes third-party insurance among other benefits. Individuals who own high-valued or brand-new cars should definitely consider availing comprehensive car insurance, along with the suitable riders.

A comprehensive insurance plan will cost more in premiums when compared to third-party car insurance as it offers a wider coverage. In case an individual’s budget won’t stretch that much, he or she can go for third-party insurance. This type of insurance can also be opted for old cars that are no longer in the prime condition.

Having a motor insurance policy is a must for all vehicle-owners. Accidents can take place unexpectedly at any time, and it can heavily impact one’s finances. With a car insurance policy, an individual can have complete peace of mind. The car-owner would not have to worry about any sudden financial crunch that may arise in the event his or her vehicle is stolen or damaged.

Joan Mathews
Written by Joan Mathews
Joan has over 4 years of experience writing for the BFSI industry. She enjoys watching mystery TV series, listening to 80s classics and spending time with her furbabies.