Third Party vs Comprehensive Car Insurance: Which to Choose?

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Difference Between Comprehensive and Third Party Insurance

The key difference between comprehensive and third-party insurance policies is the ambit of the coverage that they offer. The comprehensive insurance policy, as the name suggests, has a large coverage and includes own damage as well as third-party damages. For example, if your car has an accident with another car, a comprehensive insurance policy will cover the expenses of repair of your damaged car.

Suppose you are found at fault and were responsible for the accident. In that case, the comprehensive insurance policy will also cover the repair expenses of the other car or pay for the damage to the property

On the contrary, the third-party insurance policy has a limited scope and coverage. It only covers the damage suffered by the other party and will not cover the repair of your car. While a comprehensive insurance policy is optional and comparatively costly, third-party insurance is mandatory and relatively affordable.

What is Comprehensive Car Insurance?

A comprehensive car insurance policy is a holistic insurance plan that provides a financial safeguard against a wide range of liabilities. Comprehensive car insurance is one of the two types of car insurance, the other being third-party insurance. Comprehensive car insurance covers two broad segments; it covers you against the possible risks involving your car and driving, and it also covers the damages you may incur against others during an accident involving your car. The comprehensive car insurance provides financial cover for damages to your car and personal injury in a car accident and protection against theft. It also covers you for damages or liabilities towards a third-party who may have suffered injury or damage to the property.

Advantages and Disadvantages of Comprehensive Car Insurance

Advantages:

Covers Damages to Your Car

A comprehensive car insurance plan covers the cost of repair for any damage to your car in an accident. Since repairing a car after an accident can result in a shockingly huge bill, comprehensive car insurance can be a financial safeguard.

Third-Party Liabilities Covered

Comprehensive car insurance policy will also cover liabilities you may incur towards a third party in case of an accident, such as treatment for injury or cost of repair of damage to another person’s property. It will fulfil your legal obligation to have mandatory third-party insurance.

Personal Accident Cover

The comprehensive car insurance policy will cover the medical cost you may incur if you or your family members suffer any partial or permanent disability due to an accident.

Protection in Case of Theft

There is always a possibility of car theft. The comprehensive car insurance plan will cover the loss or theft of your car

Add-on Covers Available

This is an important difference between comprehensive and third-party insurance plans. Unlike the third-party insurance policy, comprehensive car insurance plans can be customised with an optional add-on that broadens the benefits coverage. The add-ons that you can avail are zero-depreciation cover, the engine protection cover and the no-claim bonus protection cover. You have to select these add-ons at the time of the purchase of the policy.

Disadvantages:

Costly Premium

Since comprehensive car insurance offers many benefits and financial securities, the premiums for these policies are costlier than those of a third-party policy.

No Coverage for Regular Wear and Tear

Comprehensive car insurance plans do not offer any coverage for the costs of regular wear and tear of your car.

Exclusions in a Comprehensive Car Insurance

Here are a few exclusions under the Comprehensive Car Insurance Cover:

Drunk Driving

Claims made in a situation when you meet with an accident when driving under the influence of alcohol will not be covered under this insurance plan.

Driving With No Licence

It is mandatory for every individual to have a valid government approved driver’s licence. If you drive your insured car without a valid driver’s licence, your claims will not be covered under this insurance policy. Even if you have a learner’s driver’s licence, you must have a valid driver’s licence holder in the front passenger seat. If this is not the case and you meet with an accident, your claims will not be covered under this insurance plan.

Consequential Damages

The damages which take place as a result of a car accident are known as ‘consequential damages’. These damages can not be covered under your comprehensive car insurance policy if you do not purchase an add-on cover.

Contributory Negligence

If you do not follow the instructions laid down by your car’s manufacturer, the damages thereby incurred will not be covered under this insurance plan.

Add-on Benefits

Unless you buy add-on covers, you can not claim for their benefits.

What is Third-Party Car Insurance?

Third-party car insurance is very limited in scope and provides limited financial safeguards in case of a car accident. The third-party car insurance policy will cover the expenses for repair of damages or treatment of injury to a third party if your insured car is involved in the accident. So, if another person is injured in an accident involving your car or another person’s property is damaged by your car, the insurance provider will cover these expenses on your behalf. The policy, however, will not provide any coverage to you or your car in case of injury to you or damage to your car during the accident. Third-party car insurance is mandatory under the Motor Vehicles Act. If you do not have third-party car insurance, you will be liable for a fine, imprisonment, or both.

Advantages and Disadvantages of Third-Party Car Insurance

Advantages:

Affordable

Though third-party insurance offers limited coverage, it remains a more affordable format of car insurance plan.

Mandatory under law

Third-party insurance is a legal requirement in India. You may face a fine, imprisonment, or both if you do not have third-party insurance.

Liabilities from Injuries

Third-party insurance plan will financially safeguard you from treatment expenses you may otherwise have to spend in case you accidentally injure another person with your car.

Liabilities from Property Damage

Third-party insurance plan will financially safeguard you from expenses you may have to spend in case you accidentally damage another person's property with your car.

Disadvantages:

Compensation After Court Verdict

The compensation is granted only after a court verdict, which may or may not be in your favour and which remains a time-consuming process.

Limit on Compensation

There is a limit of Rs. 7.5 Lakh on the compensation covered by a third-party insurance cover in case of the damage to the property.

No Coverage for Own Damages

Third-party insurance plan does not cover any damages to you or your own car in case of an accident. The expenditure on the repair of a damaged car can be huge depending on the extent of the damage and the severity of the accident.

Own Damages

A third-party car insurance policy provides coverage against the third-party liabilities and damages caused to the insured car.

Drunk Driving

Difference Between Comprehensive and Third-party Car Insurance

Particulars	Comprehensive Insurance Policy	Third Party Insurance
Coverage	It offers a wide-range of coverage and provides financial safeguard to you and your car in case of an accident, and also pays for the third-party liabilities.	It provides limited coverage and only provides financial safeguards to third-party liabilities in case of an accident.
Premium Rates	It has higher premium rates and is relatively costly.	It is relatively affordable and has lower premium rates.
Customisation	You can customise your policy and include add-on features.	This plan cannot be customised, and you cannot include add-on features.
Mandatory	It is not mandatory under law.	It is mandatory under law.

Final Thought

It is important and prudent to secure your car with a beneficial insurance plan. There are marked differences between comprehensive and third-party insurance policies, while both have their specific requirements. A third-party insurance plan may be cheaper, but it offers very limited coverage and may not salvage your financial burden in case of a car accident. On the contrary, the comprehensive insurance plan may be costlier, but it offers a large set of financial security and may prove to be of great advantage in case of a car accident. The comprehensive insurance policy definitely provides more financial protection than third-party insurance, which offers minimal coverage and limited financial safeguard.

What is the key difference between comprehensive and third-party insurance?

The main difference between comprehensive and third-party insurance is that a comprehensive insurance plan offers a wide-range of financial security while third-party insurance covers only third-party liabilities in case of an accident.

Which insurance plan is more affordable?

A third-party insurance plan is more affordable than a comprehensive insurance plan.

Will a third-party insurance plan cover damages to my car?

No, a third-party insurance will not provide any financial assistance to you in case of damage to your car in an accident.

Does comprehensive insurance also include third-party insurance?

Yes, a comprehensive insurance plan will always include third-party insurance.

Is comprehensive insurance mandatory under the law in India?

No, comprehensive insurance is not mandatory under the law in India.

Is third-party insurance mandatory under law in India?

Yes, third-party insurance is mandatory in India under the Motor Vehicles Act. In case of a failure to have third-party insurance, you will be liable for a fine, imprisonment, or both.

Why is comprehensive car insurance more expensive than third-party policy?

A comprehensive car insurance cover is more expensive than third party car insurance policies because it offers a higher level of coverage. A third-party car insurance cover provides coverage against injuries or damages to the third-party. On the other hand, a comprehensive car insurance plan provides coverage against third-party liabilities as well as own damages.The premium of a comprehensive car insurance plan takes into consideration factors such as your car’s age and model, the city of purchase, and more.

What are the best add-on covers for a comprehensive car insurance policy?

This is dependent on your car’s age and the coverage type you are looking for. If the age of your car is lower than 5 years, zero-depreciation cover or the return to invoice cover would be the better options. Besides, the roadside assistance cover is advantageous for every type of car irrespective of its age and other factors.

Why is third-party car insurance cheaper than comprehensive car insurance?

A comprehensive car insurance policy is more expensive because it covers both third-party liabilities and own damage.

Which is a better choice - Comprehensive or Third Party Insurance?

A third party car insurance policy solely provides protection against third-party obligations, such as those arising from accidents involving the insured vehicle. On the other hand, a comprehensive auto insurance policy provides total coverage for both own damage and third-party liabilities.