Car Insurance is a contract between the insured customer and the insurance company in which the insurance company promises to settle the losses of the insured due to insured peril acting at the time of loss or damage in return for a nominal amount known as “Premium”. The insurance contract is valid for a period as mentioned in the policy document and is legally enforceable in case of deviation by either of the parties of the contract.
While Buying insurance for your car, it is not only enough to look at some important aspects of the policy, such as the cost and the coverage but also understand what terms like first-party car insurance, second party and third-party car insurance stand for. This knowledge, in turn, can help you understand the policy document so that you can make a good decision.
When purchasing online vehicle insurance, most first-time buyers wonder about the various terms used in the policy documents. It is absolutely essential for one to understand these terms as they are commonly used in the insurance domain. This knowledge can be especially useful not only at the time of the purchase but also during the motor insurance online renewal and while filing a claim for damages.
First Party Car Insurance
The own damage section of the car insurance is known as the first party car insurance. In the insurance agreement, the person who purchases the insurance is known as the first party and the company who sells the insurance is known as the second party. The customer who pays for his car insurance is known as the first party and any claims made under the first party section are settled by the insurance company under the own damage section of the car insurance policy.
The first party car insurance is an agreement between the insured customer and the insurance company whereby the insurance company agrees to settle the damages incurred by the insured in return for a considerable amount known as premium. Under the first party car insurance, the damage to the car due to an insured peril is settled by the insurance company.
The first party car insurance in short covers the loss or damage to the insured customer’s car due to an insured peril acting at the time of accident. The first party car insurance can be taken as a Stand-alone cover if your car is already insured against third party loss or damages. The first party car insurance is not mandatory as per the Indian motor vehicles act and is at the discretion of the customer to purchase it.
What is covered in first party?
The first party car insurance covers the loss or damage to your car due to an insured peril operating at the time of the accident. Let us understand the perils covered under the first party car insurance policy:-
- Loss or damage to the car by Fire, Explosion, Lightning or Self ignition and to the car by Burglary or House Breaking and Theft
- To the car by Riot or Strike, Earthquake including fire, shock damage, and Landslide or Rockslide.
- Loss or damage to the car by Act of God perils such as Typhoon, Storm, Floods, Tempest, and Inundation etc. Any loss or damage to the car due to an accidental external means;
- Loss or damage to the car due to any malicious activity committed by any third party and by any terrorist activity
- Loss or damage to the car while transporting it from one place to another through Rail, Road, Inland waterway, Lift, elevator or Air.
Second Party Car Insurance
The second party mention to the car insurance company that protects your vehicle and compensates for the losses or damages to your car. It is the insurance provider with whom the first party has signed the insurance policy contract. It is the second party who promises to provide financial protection to the first party’s car in case of any loss or damages.
In exchange, the first party is liable to pay a premium amount to the second party. Under a car insurance policy, the second party is liable to pay for any injuries, loss or damages caused to the third party on behalf of the first party.
Third Party Car Insurance
Third party insurance is a compulsory motor insurance policy to be taken by the motor vehicle owner/driver before driving the vehicle in public places. Third party insurance covers the bodily injury or third party property damage caused due to the involvement of the insured vehicle. Third party motor insurance is mandatory as per the Motor vehicles Act without which the owner/driver of the vehicle would be punished with up to Rs.5000 fine or up to 3 months of imprisonment or both.
Third Party car insurance is a contract between the car owner and the insurance company, where the insurer agrees to reimburse the insured person in case he lands into any legal complication for injuring a third party or damaging his property due to his own fault. One of the most popular words known to many people owning a vehicle is 3rd party insurance cover. Also known as TP Insurance is a type of insurance that is mandatory to have for each vehicle owner. For new buyers, there could be some doubts regarding the coverage, benefits, and exclusions in Third-party insurance.
What is covered in Third Party?
With a Third party car insurance policy in place; you can assure yourself peace of mind in situations of legal liabilities due to third party damages and injuries. With such policies you get,
- Cover for accidental death or injury caused to other people
- Cover for accidental damage caused to other people's property and Personal accident cover.
There are certain exclusions in the Third party policy which are listed below.
- Damage to your car
- Driving without a valid insurance policy
- Violating rules while driving
Benefits Available on Car Insurance Policy in India
Many of you might have searched for the term Best Car insurance in India. Car insurance is very much popular in India and there are almost 27 general insurance companies offering car insurance to the Indian customers. The car insurance premium charged by these insurance companies differs as per the coverage offered by these insurance companies. There are few factors which are to be considered before selecting the best car insurance from the list of available options.
- Claim Settlement Ratio & Cashless Garages
- After sales service
- Insured Declared Value (IDV)