Difference Between First Party vs Third Party Car Insurance
Purchasing a car brings many unceasing responsibilities.
You put a lot of thought into buying a car. Similarly, it is crucial that you pay enough attention to getting your car the best protection that you can. The most pragmatic way to do that is to go ahead and buy yourself a car insurance policy that will protect your car in case of any damage.
The idea of getting auto insurance might seem intimidating to some and unavailing to others. For the latter, here’s why you need a car insurance policy.
There are situations like accidents, third-party damage, theft, natural calamities, man-made disasters, etc., which are completely unprecedented. To keep your car insured for any of these damages, you need a car insurance policy as they compensate the losses depending on your coverage amount.
But which car insurance should you purchase?
There are two types of car insurance that you can buy.
• First-Party Car Insurance
• Third-Party Car Insurance
Before we get into the details, let’s know a little bit about the parties involved in a car insurance policy.
The first-party in a car insurance policy
The first-party is the policyholder or the car owner who has purchased the policy from an insurance company. They pay the premium for the policy and can file a claim in case of any damage to their car.
The second-party in a car insurance policy
The second-party is the policy provided by the insurance company that the first party has purchased a policy from. They are responsible for insuring the claim filed by the first party under the policy in case of any damage.
The third-party in a car insurance policy
The third-party is the individual who faces personal, vehicle, or property damage caused by the first party. In case of any damage to the third party by the first party, the second party compensates for the losses on behalf of the latter.
What is first-party car insurance?
Under a first-party car insurance policy, the cost of compensation is incurred by the first-party in case of any damage to their vehicle or life. This is also called a comprehensive car insurance policy. On filing the claim, the second-party i.e., the insurance company, pays for all the losses covered under the policy by the first party.
What is third-party car insurance?
Under a third-party car insurance policy, the second-party i.e the first-party’s car insurance company compensates only for the third party. This insurance is valid in case of any damage to the vehicle, life, or property of the third-party.
What are the differences between first-party and third-party car insurance policies?
A car insurance policy is your safety net. In case of damage to you or anyone else, if you are the one to cause it, you are one to incur the losses. Hence, with a car insurance policy, you can be at peace mentally and not worry about facing financial losses under any circumstances covered by your policy.