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Is It Worth Buying A Third Party Car Insurance Policy?

December 03, 2018, 06:53 PM IST by Acko General Insurance (Sponsored)
Is It Worth Buying A Third Party Car Insurance Policy?

Buying a new car is an ecstatic feeling. A car provides luxury and better comfort as compared to other modes of transport running on the road. Buying a financial security for this luxury makes sense, as one cannot predict the impact of an unfortunate event. This is where car insurance comes into the picture. It is supposed to cover you against financial losses caused because of the insured car. 

Which type of insurance policy will be beneficial, is a question of intrigue for those who are new to the motor insurance industry. Through this article, we will address some of the most common questions that a new owner might have about car insurance.
Out of the two types of car insurance policies, third-party insurance is considered to be the most basic type of car insurance. This is due to its limited scope of coverage and fewer features as compared to the other option available, i.e. comprehensive car insurance.

What Is Third-party Car Insurance?
With respect to insurance, the policyholder i.e. the one who has purchased an insurance policy is considered as the first party. The company that provides an insurance policy is deemed as the second party and anyone affected by the insured car is called as the third party. As you must have guessed by now, Third-party insurance covers any person affected by the insured car. Coverage includes injuries, death, or compensation for damaged property. A third party car insurance policy also covers the first party for injuries or death.

For example, consider driver A was speeding downhill, saw a car moving in front but could not hit the break in time. He collided with that car. The driver of the other vehicle i.e. driver B who was obviously not expecting the jerk, lost control of the steering wheel and collided with a tree by the side of the road. The second collision led to severe damage to the other car as well as injuries to driver B. Both the cars suffered major damage.

In the above example, the insurance company will be only liable to pay for the damage caused to driver B’s car and both the driver’s injuries. The insurer will not bear the cost of repairing the insured vehicle as Driver A had bought only a third-party liability insurance policy. The entire cost of repairing driver A’s will be borne by driver A due to the limitations of coverage under the third-party policy.

Is There A Better Alternative?
Yes, it is possible to buy an insurance policy that covers the insured car as well. This kind of policy is called Comprehensive insurance. Though it is sold at a higher cost owing to the extensive coverage offered, it proves to be beneficial in the time of need.

Considering the above example, if Driver A had bought a comprehensive cover for his car, his insurance company would have borne the cost of repairing damages to his car as well. Owing to limited coverage, he had to bear a financial loss that he could not have anticipated. Additionally, he had to go through the hassle of getting his car towed to the nearest garage. Coordinate with the garage at every stage of repair and the then make the payment from his pocket. This could have simply been avoided with a comprehensive policy like the one Acko General Insurance provides. If he would have bought a policy from www.acko.com, he would have received his repaired car within 3 days, at his doorstep.

Coverage Comparison
To understand the detailed coverage offered by both types of car insurance policies, let’s take a look at the following table:

Coverage Third-party Liability Coverage Comprehensive Coverage
A personal accident cover for the owner/driver. Y Y
Injuries caused to the third party. Y Y
Death compensation to the next of kin of the deceased third party. Y Y
Third-party property damage. Y Y
Legal liabilities arising due to an unintentional accident. Y Y
Own damage, i.e. damage caused to the insured car due to an accident. N Y
A theft cover that pays an amount approximately equal to the car's current market value. N Y
Damage to the insured car caused due to the occurrence of a natural calamity like flood, earthquake, landslide, etc. N Y
Damage due to a man-made calamity like vandalism, sabotage, riots, etc. N Y
Extended coverage as per the Add-ons bought along with the policy. Popular ones are: Zero Depreciation, Consumable Cover, Passenger Cover, etc. N Y

Is Third Party Car Insurance Policy Worth Buying?
Through the example, you would have an idea about the limitations of a Third-party car insurance policy. This policy leaves you underinsured and vulnerable in the events of own damage. If you are looking for a policy that provides a wholesome coverage, you should buy comprehensive insurance as buying only a third-party cover will hardly be useful.

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