How to Choose between Third party and Comprehensive Car Insurance

A car is an expensive and long-term asset. For many people, buying a car is a dream, and the first step toward protecting your dream car is by buying robust car insurance. In many countries, not having car insurance is a punishable offense. Car insurance provides you with financial cover against losses due to theft, accident, and damage to the car. Some car insurance also pays for your medical expenses in the event of injuries due to an accident involving your insured car. Use a free vehicle history database like Carpilot to check if a car has a valid insurance policy.

There are two types of car insurance—third party car insurance and comprehensive insurance. Both provide a degree of protection to your vehicle and ensure you do not get into trouble with the law since motor insurance is mandatory for all car owners in India. But which one is the best option for you? Read on to find out.

What is Comprehensive Insurance?

As the name suggests, comprehensive insurance provides all-rounded protection to you and your car. It provides coverage for loss and damage because of natural or manmade calamities, fires, accidents, and theft. It also protects you against third party liabilities.

This policy is preferred by most car owners because of its wide coverage. With this insurance, car owners can choose from various add-ons such as zero depreciation cover, and enjoy benefits like the No Claim Bonus. Comprehensive insurance also allows the policyholder to seek financial assistance for any medical expenses raised due to an accident.

Benefits of Comprehensive Insurance

Buying comprehensive insurance has several benefits. Some of them include:

It ensures wide coverage and offers complete protection to the vehicle and vehicle owner.
It also covers the mandatory third party liability cover, thus, removing the risks of getting fined.
It reduces your financial losses.
Comprehensive insurance is customisable and allows customers to choose different add-ons.

Inclusions and Exclusions of Comprehensive Insurance

While the inclusions and exclusions of the policy depend on insurance providers, some of the common inclusions and exclusions are:

Inclusions

Accidents: The policy covers any damage caused due to an accident.
Calamities: Whether the calamity is natural or manmade, comprehensive insurance covers both.
Personal accidents: In case you are injured during an accident, your policy will provide financial cover for your treatment cost.
Theft: Unfortunately, your car getting stolen is a real possibility. The policy covers your car theft.
Fire and explosions: If your car is damaged because of fire or explosions, your losses would be included in insurance.
Third party liability: If a third party sustains injuries or their vehicle is damaged in an accident with your insured car, its losses will be covered under your comprehensive insurance.

Exclusions

Depreciation: No matter how well you care for your car, it will still go through the natural wear and tear process. The policy does not cover that loss.
Driving under the influence of substance: If you were driving under the influence of alcohol or drugs or without a driving license when the accident happened, your insurance will not cover those losses.
Electrical and mechanical breakdowns: Any loss due to electrical or mechanical breakdowns.
Traffic rules are not followed: The insurance will not provide cover for any losses arising due to not following the traffic rules.

What is Third party Car Insurance?

Third party insurance is a mandatory insurance cover for car owners. It protects the policyholder against liabilities arising due to damage to a third party. This means that the insurance will provide financial cover for the losses arising due to vehicle damage, property damage, medical expenses, disability and death to the third party.

However, the policy covers third party liabilities only and not personal loss. To cover your own damage, you must buy a separate insurance plan. Due to the nature of this policy, the premium is low, making it cost-effective.

Benefits of Third party Insurance

Some of the benefits of this type of car insurance are:

It provides financial assistance and legal cover.
It is cost-effective because of lower premiums.
Having insurance helps keep peace of mind as your finances will not take a hit due to any unforeseen accident.

Inclusions and Exclusions of Third party Car Insurance

Common inclusions and exclusions of third party insurance are:

Inclusions

Loss to the third party: Any loss such as vehicle damage and property damage to the third party due to an accident is covered.
Third party medical expenses: If there are injuries to the third party, their medical expenses will be covered.
Disability and death: The policy also provides financial assistance for the disability or death of a third party.

Exclusions

The insured car is not covered under the insurance policy.
Financial assistance for Personal Accidents is not provided.
In case when traffic rules are not followed, no financial cover is provided.

Choosing between Comprehensive Insurance and Third party Insurance

Now that you know some things about third party and comprehensive insurance, you can decide which one is better for you. Remember the following points of distinction:

Coverage: Comprehensive insurance covers your and third party losses, while third party insurance covers losses of the third party only.
Premium: The premium for comprehensive insurance is typically higher due to its extensive coverage, while third party car insurance has a lower premium.
Add-ons: You can choose and add several add-ons to your comprehensive insurance policy but you cannot do that in third party insurance.

Factors to Consider before Making a Decision

Value of the car: If the value is low, you can choose third party insurance since comprehensive insurance has a high premium.
Your requirement: Understand your requirements before making a decision. How much can you afford to pay for the premium? What kind of area do you live in? Is it prone to theft or floods? Decide the kind of insurance based on answers to these questions.
Age and usage: If your car is new and will be used a lot, choosing comprehensive insurance with add-ons would be beneficial. If it is older or will not be used much, you can go with third party car insurance.

Buying car insurance is a crucial decision. Consider all the factors carefully before making your choice.

Disclaimer: The above information is for illustrative purposes only. For more details, please refer to the policy wordings and prospectus before concluding the sales.