In this article, we will understand what is First Party Insurance and Third Party Insurance. And all of your Insurance related doubts will be covered in this video itself. but for that, I request you to read the article till the end of it. First, we will discuss why we even need Insurance.
Whenever I take my car on the road, I may face many risks. I may hit some person by mistake on the road. or I may hit some other car by mistake. Or I may have someone’s private property while driving my car. In that case, I become liable to pay for the damage I made to him or her. to cover for his car damage/Property damage/physical damage Ultimately, I would have to pay for any possible loss, so here is the need for Insurance Company Insurance is a contract between You and Insurance Company. and as per the contract, I will pay a fixed premium every year to the company and in return, even if You hit someone’s property, the company will pay that loss caused by you. so first, let’s talk about the term First Party, Second Party and why such names.
First Party is the Person in whose name Policy is issued. Suppose it’s my car, and I insured it so that I will be the “First Party” in this case. Second Party is the insurance company to whom I am paying the Premium. And in return for that premium, the Company covers my risk. The third Party is the person whose property/car got damaged because of my car accident. Or he might be injured/handicapped/expired in the accident because of an accident. So that person becomes the “Third Party” in the accident.
First, let’s discuss Third Party Insurance itself. As per Motor Vehicle Act 146, all cars must have Third Party insurance at least before I drive my car on Indian Roads. So in Total Third Party Insurance is a compulsion and not a choice. now let’s discuss all the things that are covered under Third Party Insurance. 3rd Party Insurance is a compulsion because I might have a low net worth and I might have a small car, but I may hit a person who is a high net worth suppose 2 3 crores per annum And suppose I damaged his property a lot in an accident or suppose he lost his life, But I won’t be able to pay him this much amount so, in that case, someone has to pay him/family that amount So, Govt has made a norm that you should have 3rd Party Insurance at the least so that Insurance Company can pay that amount to the third person who met an accident with your car.
3rd Party Insurance will cover 3 types of risks. Damage of Car/Property of the third person will be covered in this. Injury/life loss of the third person will be covered under this. Third component which you are not told by the insurance company is PA Cover: Personal Accident Cover Suppose in accident you lost your life or you got some permanent disablement in that case you also have Rs. 15 Lacs cover even in 3rd Party Insurance and the premium you pay for insurance has a component for this PA cover. earlier this amount used to be Rs. 50-100 and cover was and it used to give PA cover of Rs 1- 2 Lacs. But over the time it has been revised IRDAI regulates the Insurance sector in India. and it keeps amending the rules/norms/premium of insurance. and as per the latest amendment, PA Cover component of 300 Rs has been added and you will get 15 Lacs PA cover.
in case of Permanent Disablement / Death of the First Party. In case of the 2-wheeler the premium of the 3rd Party Insurance is very low as the damage you can cause by bike to third person is very less. so lesser chances of damage and less premium. similarly cars below 1000 CC engine size have small premium which gets increased in cars with engine size 1000-1500 CC. and in vehicles above 1500CC this component gets doubled because with engine size, size of vehicle gets increased and ultimately the damage you can cause to third person gets increased. there is one more thing that insurance agents do not tell you is that this PA cover is for drivers only.
Generally, you travel in your car with your family/friends. so you should take additional PA Cover for your co-passengers also. and at max you can take PA Cover for people which are allowed to sit in the vehicle if you have not taken this cover by mistake, then I request you to please take PA Cover for at least 2 persons. because in case of a mishappening, you may have someone in your family with you and this cover will give you financial support in case of mishappening. But third-party insurance has some terms and conditions. Suppose you damaged a thirds person’s property/Vehicle. in that case Insurance Company will give a fixed amount to the third person but if that person got some injury or that person lost his life in that case it is not fixed and its “unlimited amount” and it depends on the Courts which will decide the settlement amount ultimately.
And many factors are considered in it, like his annual income his daily income and whether he was the sole earner or how many dependents he had and many more similar factors are considered before deciding the amount. And in many cases, like if some NRI is involved it reaches upto 4 5 Crore settlement amount. But there are two conditions which violates 3rd party insurance and company may not pay for the losses. First condition is Drink & Drive. Suppose I am first party and I was driving while I was drunk, and I met an accident in that condition so insurance company wont pay for losses I caused to someone. Second Condition is that I don’t have a valid license If these 2 condition are met, so in Court Rulings, You will be liable to pay this amount and not the company Now lets talk about First Party Insurance.
1st Party Insurance is an Add On to the 3rd Party Insurance. All the benefits & risks of Thirds Party insurance will be covered here And you will get some “Additional Benefits” in this Your own vehicle damage which was not covered in 3rd Party Ins. that will be covered under 1st Party Insurance In totat, 10 type of Risks are covered of your vehicle. all those risks are mentioned above, please pause video to read all those.
But basically your accident damage will be covered Malicious intent damage done to your car will be covered. Damage due to some fire will be covered. Earthquake, landslide, loss in transit will be covered. 1st Party Insurance is also called “Comprehensive Package Policy” Even when you have a 1st Party Insurance, and you met an accident and you got your car repaired on insurance and whatever amount you spent on repair of vehicle on the whole sometime insurance company do not give you back whole amount That difference is because of “Depreciation Factor” Depreciation is the loss of value due to wear and tear over the time in different parts of the car with passage of time.
So insurance company reduces the value of spare part due to depreciation And then company pays Rest of the value to you talking generally, most of the Plastic parts in your car are considered under 50% depreciation Fiber parts are considered under 30% depreciation. that means company wont pay the depreciation value of component. so due to this suppose your expenditure came out to be 100 Rs athe insurance company will pay you somewhere around 70 Rs. And rest 30 Rs. go into depreciation loss itself.
To cover this gap many type of “Add-Ons” were launched by insurance companies “Add Ons” means you get extra benefits on your policy by paying extra. Most popular of these “Add-ons” was “Zero Depreciation” Which is also called as “Zero Dep” or “Nil Dep” Zero Depreciation means that for the initial 5 years of your car no depreciation will be considered due to Zero Dep. But it is available for the first 5 years only Beyond that most of the companies do not offer Zero Dep so in case of any damage, almost all amount is paid by the insurance company. and many more Add-ons are available in market. so whenever you choose First Party Insurance, then make sure from the insurance agent/website which risk/benefits would be covered under the policy.
