Traffic rules and regulations are laid down within the Motor Vehicles Act, 1988. The Act specifies the rules for driving on Indian roads for all sorts of vehicles. One such rule specified by the Act is the dependence on a valid insurance plan around the vehicle. The Act states when a vehicle is to be used on Indian roads, the automobile must have valid insurance policy. This coverage would protect the interests of third parties when the vehicle causes them any type of harm.
Based on the directives from the Motor Vehicles Act, 1988, car insurance policy policies are offered by general insurance companies. These policies fulfil the legal mandate from the Act and also help the vehicle owner cope with financial losses associated with the vehicle. Motor insurance policies are available in two variants – third-party liability and comprehensive. Let's understand these variants and the coverage that they offer:
Third-party liability insurance
A third-party liability policy covers any 3rd party liability that you simply face in case of accidents involving your automobile. These liabilities range from the following –
- If any individual is killed because of your vehicle, you face a financial liability
- If anyone is physically hurt, injured or wounded due to your vehicle you face a financial liability
- If you damage anyone's property with your vehicle, you face an economic liability
In case associated with a of these liabilities, the 3rd party insurance plan takes over. The policy pays the claims which you face freeing you from the financial strain. The Motor Vehicles Act, 1988 mandates every vehicle to possess a third party insurance policy.
Comprehensive insurance
A comprehensive car insurance policy policy is known as package policy since it includes a wide scope of coverage. The policy covers the required third-party liability that you simply face if any 3rd party is harmed because of your vehicle. Moreover, the insurance policy also covers damages suffered by your vehicle itself because of the following causes –
- Man-made causes like fire, malicious acts, riots, etc.
- Natural causes like earthquakes, lightning, floods, landslides, etc.
- Theft of the vehicle
- Damages suffered when the vehicle has been transported, etc.
The policy, therefore, covers the mandatory third-party liability as well as the damages suffered by the vehicle. It pays for the repairs incurred when the vehicle is broken and undergoes repairs. In the event of theft also the policy pays a lump sum value and compensates the loss.
Difference between comprehensive and third party insurance
Here would be the main differences between comprehensive and 3rd party insurance coverage –
| Basis of difference | Third-party insurance | Comprehensive insurance |
| Coverage | The policy covers only 3rd party liability | The policy covers both third-party liabilities in addition to damages suffered through the vehicle itself |
| Determination of premium | The premiums of third party plans are fixed through the Insurance Regulatory and Development Authority asia . The premiums are, therefore, fixed across all vehicle insurance coverage across different companies. | The premiums are determined by the insurance company itself. The premiums, therefore, vary across different insurance companies. |
| Rate of premium | The premium is low and affordable | Premiums of comprehensive insurance coverage are greater than 3rd party liability plans. It is because comprehensive plans possess a wider scope of coverage than third party liability plans. |
| Claim payable | In the situation of third party liability claims, the claims depend on the rulings of motor accidents tribunal. In case of death, there is an unlimited liability. The insurance company pays the amount decided through the tribunal. In case of damage to property claims, though, there is a coverage limit. | The claims under comprehensive insurance policies depend on the type of claim. Third-party claims are paid according to the ruling from the tribunal. In case of damages suffered by the vehicle, the particular repair costs are paid. The maximum claim liability taken by the insurance company depends on the Insured Declared Worth of the vehicle also is the value of the insurance policy. In case of theft, the Insured Declared Value pays. |
| Add-ons | Third-party policies just offer the basic coverage against third-party liability. No add-ons can be found underneath the plan. | You can purchase additional coverage options called add-ons within comprehensive policy if you are paying an additional premium |
| No claim bonus | If no claim is created in almost any policy year, the policy does not pay any benefit | If no claim is made in a policy year you earn a no claim bonus. This bonus is awarded like a discount in the renewal premium. Moreover, the no claim bonus also increases after each successive claim-free year. |
Which policy to buy- third party or comprehensive?
Third-party policies have lower premiums and they also fulfil the legal dependence on a legitimate insurance policy. That's the reason many vehicle owners should you prefer a 3rd party policy. However, the policy does not cover the damages suffered by the vehicle itself or even the theft from the vehicle. In case your vehicle is broken you'd face high costs of repairs. These costs usually takes a toll on your finances and thus having a comprehensive policy is much better. Moreover, in the event of theft from the vehicle, you would incur a substantial financial loss. A comprehensive policy covers this loss and provides you financial assistance in such situations. While it's true that the premiums for comprehensive plans are higher, the coverage benefits far outweigh the premium cost.
A third party policy might prove suitable if your vehicle is very old or if you avoid using it often. Otherwise, a comprehensive policy is recommended to cover all of the possible cases of financial loss suffered due to your vehicle. So, comprehend the difference between comprehensive and third party insurance plans to understand the coverage that you can get under different types of car insurance policy plans. Also, think about the advantages of having a comprehensive motor insurance cover and select it over 3rd party insurance plans for financial security.
