While taking bike insurance, most of us tend to get confused between whether to get first-party insurance or third-party insurance. You must already know that choosing the right insurance type is a must. The protection of your legal rights and the amount of compensation you will get for any damages entirely depends on it.
Therefore, first, let's understand the basic difference between first-party insurance and third-party insurance.
First-Party Insurance
First-party insurance provides complete coverage against the damages to your vehicle. The plan includes coverage against fire, natural calamities, theft, or man-made disasters.
In first-party insurance, there are only two parties to the insurance contract: the insured (policyholder) and the insurance company. In the event of an insurance claim, the compensation is directly made from the insurance company.
Examples of a first-party insurance policy entail:
- Bike Insurance
- Car Insurance
- Property insurance
- Content insurance
The main advantage of having first-party bike insurance is that it provides coverage against damages of all kinds and types, whether it is a man-made or natural disaster. However, there are certain cases under which you cannot make a claim:
- Normal wear and tear
- Depreciation
- Mechanical or electrical breakdown
- Damages caused to tyres and tubes - in case the damages are due to an accident, the liability of the insurance company is up to 50%
- Damages caused while the driver did not have a valid driving license
- Damages caused due to driving under the influence of alcohol and drugs or in an inebriated state
- Damages caused due to mutiny war or nuclear attack
Third-Party Insurance
A third-party insurance policy, also known as a liability policy, insures the policyholder from any legal liabilities arising out of injuries to the third party i.e. property or person caused due to an accident involving the policyholder.
It is called third-party insurance because it only covers damages caused to a third person or their property. For example, if you have met with an accident involving your bike, the opposing party can file a claim at the bike insurance company for the following expenses:
- Medical expenses
- Unlimited coverage in case of disability or death due to accidents
- Coverage for third-party property damages
In third-party insurance, you will not be able to file a claim for damages to your bike, if there is an accident or it gets stolen.
First-Party Insurance vs Third-Party Insurance
We have seen the fundamental differences between first-party and third-party insurance. But, before buying a bike insurance policy, you should analyse and compare both the insurance types to make the right choice.
Coverage Details
A third party bike insurance policy only provides coverage for damages caused to the third party for property damage and bodily injuries due to an accident. Here, the policyholder cannot claim damages/loss for his own vehicle in the mishap.
A first-party bike insurance policy provides limited coverage restricted only against any damage to your bike, whether caused due to man-made or natural disasters. Most of the first-party bike insurance policies also include a personal accident cover of Rs 15 lakh for the owner or rider in case of an accident.
Value of Bike
If you have an old bike whose value is low, then it is always suggested to opt for a third-party bike insurance, as any maintenance and damages will be easily taken care of. Also, it is economical compared to buying a first-party bike insurance cover with a higher premium.
Whereas, if your bike is new or an expensive one, then it is recommended to have first-party bike insurance, as in case of damages, you will be able to recover the losses from your insurance easily.
Inclusion of Add-Ons
A third-party bike insurance policy offers limited benefits to the insured in terms of coverage to his/her own bike. Additionally, it only offers the add-on option of personal accident cover.
Contrarily, with first-party bike insurance, you can opt for many add-ons, including zero-depreciation cover, road-side assistance cover, consumable cover, return to invoice cover, accident coverage for co-rider, key replacement cover, etc. These add-ons make sure that policyholders have access to a full and comprehensive bike insurance policy.
Premium Price
- The premium for third-party bike insurance is less expensive and has a major share in the Indian two-wheeler insurance segment. On the other hand, the premium price for first-party bike insurance is higher compared to third-party, as the owner's maximum risks are covered.
Nature of Claims
In third party bike insurance, the claim is only filed by the third-party person. Since it only entertains claims related to accidental damages, the third party has to go through all the legal procedures before getting the claim amount. The Motor Vehicle Act, 1988, allows making a third-party claim under the "no-fault liability claims" category. It means, the claimant is not under obligation to prove negligence on the part of the policyholder that caused the accident or fault liability claims.
Under first-party bike insurance, the insured can directly file a claim with the insurer and is entitled to recover the losses as per the terms of the policy. In case of failure of the insurance company to honour the claim, it leads to a breach of contract, and the insurer could be subject to penalty.
Why Should You Select First-Party Bike Insurance?
In India, most of the bike owners buy third-party bike insurance due to its low premium and ability to help maintain compliance with the law. But, by taking third-party bike insurance, you are more vulnerable to risks from losses arising from accident, natural damages or theft.
In India, most of the bike owners buy third-party bike insurance due to its low premium and ability to help maintain compliance with the law. But, by taking third-party bike insurance, you are more vulnerable to risks from losses arising from accident, natural damages or theft.
Having first-party insurance helps you to minimise your own losses from damages to bikes. You can also benefit from additional covers, which helps you to customise your bike insurance policy.
The most significant advantage of first-party bike insurance is that the insurance companies have an obligation of good faith and fair dealing. This means that the insurer will investigate the claims promptly as per the terms of the insurance contract.
Closing Thoughts
The main purpose of taking insurance is risk management and reducing financial losses. However, buying the wrong insurance type defeats the purpose and can cause significant financial loss, which could wipe out your savings.
Therefore, before buying insurance coverage for your bike, always analyse and compare all the options. And, if you want complete protection for your bike, you should buy a comprehensive bike insurance policy in the form of a combination of first and third party insurance. It will give you peace of mind and also fulfil your insurance expectations.
Recommended Link: How Can I Claim Third Party Two Wheeler Insurance?
