Reasons why a comprehensive car insurance plan is more costly than a third party liability only plan

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04 Aug 2023

Learn why a comprehensive car insurance plan can be more expensive than a third-party liability-only plan with Kotak General Insurance in our latest blog post.

Buying a new car is indeed a matter of great joy and excitement. As you go ahead with the paperwork and formalities, it is important to plan a little ahead and also finalise what kind of car insurance you would buy. Make sure you put the time and thought into this, as having car insurance is not only mandated by the Motor Vehicle Act but also very helpful in averting financial liabilities. In India, broadly, there are two kinds of car insurance plans available. Let us first understand them:

1. Third-party liability car insurance plan:
As the name suggests, in case of an accident, a third party liability car insurance coverage will pay for the damages caused to the third party. The damages that you or your car may have incurred will not be covered.

2. Comprehensive car insurance plan:
Comprehensive car insurance offers compensation for third-party liabilities along with own damage, from collisions to unforeseen natural damages, such a policy offers all-round protection. So, a comprehensive car insurance plan = third-party liability + own-damage protection.

Now let us a look at the reasons that make comprehensive car insurance costlier than third party liability insurance:

  • Comprehensive insurance includes third-party liability.
    Comprehensive car insurance offers coverage over and above third-party liability insurance, thus making it more expensive. You get the features of liability coverage as well as your own damage, so you need to pay a higher amount.

  • Comprehensive car insurance offers more coverage.
    The biggest difference between comprehensive and third-party car insurance is the coverage. As discussed, third party cover is for third party liabilities only. On the other hand, your comprehensive policy would cover damages that are caused due to man-made as well as natural disasters. Whether it was your fault or someone else’s, your insurer will cover the damages. In case your vehicle gets stolen or gets damaged beyond repair, you would receive compensation that equals the insured declared value you have selected.

  • You can opt for add-ons with a comprehensive policy.
    Another reason that makes comprehensive insurance costlier than third-party insurance is that comprehensive coverage allows you a lot of customisation in the form of add-ons. By paying a little extra, you can opt for better coverage when you buy car insurance online as well as offline. An add-on such as zero depreciation can increase your insurance premium by 15% to 20%. But at the same time, you need to remember that the add-on adds a lot of coverage to your policy as well.

  • Comprehensive insurance is based on the car’s IDV.
    When it comes to the premium amount, the insured declared value of the car is a major factor. The higher the IDV, the higher would be the premium. However, when you are learning about third party car insurance online you will see that it is the IRDAI that sets the premium. The premium is based on the cubic capacity of the vehicle, and therefore, a number of cars may have exact same third-party insurance premium.

Third party liability insurance is a compulsory feature that you have to have in order to drive your car. While the coverage offered by a comprehensive policy ensures overall protection, you can go for the third-party cover alone in case you drive a very old car, or rarely take the car out on the road. However, if you have a relatively new car that you regularly use, it is highly recommended that you opt for comprehensive car insurance.

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Team Kotak GIC

The content of this blog has been created and carefully reviewed by the esteemed team at Kotak General Insurance, with the sole purpose of providing valuable guidance and sharing insights on the importance of general insurance. Our objective is to assist users in making informed decisions when purchasing or renewing insurance policies for their cars, bikes, and health. Our expertly curated information aims to empower our readers with the knowledge they need to protect their valuable assets and financial interests.