First-party insurance, as the name suggests, is one that protects the first-party in case of an unexpected event. In the case of a car insurance plan, the first-party is the person that purchases the car insurance policy.
Let’s say that an accident occurs, a first-party insurance plan will cover damages and/or loss incurred to the car owner. A first-party car insurance plan is also known as own-damage car insurance cover. In this article, we’ll explore first-party car insurance plans and the differences between first-party and third-party car insurance plans.
A first-party car insurance plan, otherwise known as a own-damage car insurance plan, protects the buyer (and their car) against unexpected events like accidents, theft, vandalism, etc. Here, the first-party is the customer. A own-damage car insurance plan is not mandated by law but is highly recommended as it helps you stay protected against a wide range of unforeseen events. Additionally, you can also customise your own-damage car insurance plan according to your requirements with help of add-ons. Some popular add-ons include zero depreciation cover, roadside assistance cover, engine protection cover, tyre protection cover, etc.
On a similar note, the second-party in any insurance contract is the entity from whom the insurance plan is purchased. This is typically the insurance provider.
Third-party refers to anyone other than the first-party and second party. It can be another driver, pedestrian, etc. A third-party liability cover protects third-party against unexpected events. This type of insurance plan is legally mandated in India under the Motor Vehicles Act, of 1988.
First-party and third-party car insurance plans are quite different from one another. It’s important that you know the difference between the two, so that you can choose the right plan for you. Here’s a table mapping out the key differences between first-party and third-party car insurance plans:
Parameters |
First-Party Car Insurance Plans |
Third-Party Car Insurance Plans |
Meaning |
A first-party car insurance plan, or own-damage car insurance plan protects the insured against unforeseen events. |
A third-party liabilities car insurance plan protects affected third-party person(s) or property against unexpected events. |
Scope |
A first-party is anyone that owns a car and has an own-damage cover |
A third-party is anyone that’s affected by the insured during an unforeseen event |
Legal Implications |
A first-party car insurance plan is completely optional and the decision to purchase it or not is left to the discretion of the owner. |
A third-party liability car insurance plan is legally mandated under the Motor Vehicles Act, of 1988. |
Accident Cover |
Own-damage car insurance plans typically come with accident covers. |
In the event of an accident, the third-party will be compensated by the insurer based on the extent of the damage and/or loss |
Here are some of the key inclusions and exclusions of first-party and third-party car insurance plans:
Parameters |
First-Party Car Insurance Plan |
Third-Party Car Insurance Plan |
Primary cover |
A first-party car insurance plan provides coverage to the insured’s car |
A third-party car insurance plan provides coverage against third-party liabilities |
Is it mandatory? |
A first-party car insurance plan is not legally mandated, the decision to purchase it or not is entirely up to the car owner |
A third-party car insurance plan is legally mandated under the Motor Vehicles Act, of 1988 |
Major exclusions |
Does not cover third-party liabilities |
Does not cover own damages |
Is it sufficient? |
A first-party car insurance plan is a great way to stay protected against a wide range of unexpected events, it’s recommended that you get this policy even though it’s not compulsory |
A third-party car insurance plan, just by itself, may be insufficient by itself as it only protects third-party liabilities. |
Customisation |
You can purchase add-ons to make your own-damage car insurance plan to better suited to meet your coverage requirements |
A third-party car insurance plan cannot be customised with add-ons. |
Frequently Asked Questions on the Difference Between First-Party and Third-Party Insurance
Should I get a first-party car insurance plan or a third-party car insurance plan?
Well, it really depends on your requirements and budget. However, a third-party car insurance plan is legally mandated under the Motor Vehicles Act, of 1988. On the other hand, a own-damage or first-party car insurance plan is entirely optional and the decision to purchase it or not is up to the car owner. However, if your budget allows for it, it’s a good idea to get a own-damage cover as well as it helps enhance your coverage. Additionally, you can also tailor your first-party car insurance plan to suit your coverage needs. You can do so with the help of add-on covers like zero depreciation cover, roadside assistance cover, engine protection cover, tyre protection cover, etc.
How is a first-party car insurance plan different from a third-party car insurance plan?
A first-party car insurance plan protects the buyer against covered events. On the other hand, a third-party liability car insurance plan protects third-party persons and property in case of an unexpected event.
What are the different types of insurance plans available in the market?
Broadly, there are three different types of insurance plans - comprehensive car insurance plan, own-damage car insurance plan, and third-party liability car insurance.
Can I get add-ons with my first-party car insurance plan?
Yes, you can tailor your first-party car insurance plan (own-damage car insurance plan) with add-ons like roadside assistance cover, engine protection cover, tyre protection cover, etc.
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