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Motor insurance, is not just important to avoid a heavy Challan, but also comes handy in case of unforeseen perils. It safeguards the driver and owner safe from unfortunate events like theft or accident. There are two types of motor insurances – first party and third party insurance.
Many may not be aware of their features and differentiate between the two types. Here’s a look at unique features of first party and third party insurance
What is Third Party Insurance?
Like the name suggests, in third party insurance the benefit is received by the third party instead of the owner of the vehicle. In this insurance, the third party is the person who is to be compensated for the loss. Suppose your bike or car accidently hits another bike or car, the compensation for the damage caused in the accident will be extended to the third party by your insurance company. However, if your own vehicle is damaged or you are injured, you won’t get any assistance. Under third party insurance, only the third party gets the benefit in case of a loss or injury.
What is First Party Insurance?
In a first party insurance, everything is covered. From your own vehicle, to injury to self and the third party, insurance company takes care of everything. Under the first party insurance, you can even raise a claim if your vehicle is stolen or goes into total loss. It allows the vehicle owner to claim zero depreciation benefit twice a year. First party insurance is optional and its scope is also wider as the insurance company compensates for the loss of both the parties.
What’s mandatory
The government has made third party insurance legally mandatory for all those who own a vehicle. According to the new rules, driving without a valid insurance may attract a fine of Rs 2,000 or imprisonment for 3 months or both. Under compulsory accident insurance, it is mandatory to take a minimum accident insurance of Rs 15 lakh with both types of insurance plans (compulsory personal accident cover). This compulsory insurance is for the vehicle owner-driver. By taking comprehensive insurance, the road accident cover can be increased to more than Rs 15 lakhs, whereas in third party insurance, compulsory accident insurance is available only up to 15 lakhs.