Buying bike insurance is one of the most common requirements that the owner has to fulfil when they buy a bike, for as long as they own it. This is because having insurance coverage for your two-wheeler is a requirement as per the Motor Vehicles Act of 1988. However, the regulations only extend to a third-party insurance policy. The owner of the two-wheeler is at liberty to decide whether they want to opt for a comprehensive plan with any add-ons. However, getting a third-party insurance plan is mandatory.
But what is a third-party insurance policy? And why is it termed so? Does the existence of a third party imply the existence of a first party as well as a second party? If so, are there specific policies for each of the parties involved? Let’s find out.
What is Third-Party in Insurance?
To better understand all this terminology, its usage in the insurance industry, and the policies associated with each of these, let’s start with understanding the term ‘third party’, and what a third-party two-wheeler policy is. One of the most important things to know about a third-party bike insurance plan is that it is a mandatory policy for all bike owners to have.
Why is this so? Imagine a situation where your bike is involved in an accident. Irrespective of whose fault it may be, or it may simply be a complicated situation, there is a possibility that the other party involved in the accident may sustain some damage. This damage may be to their person or their property.
Either way, it may come to the point where you end up taking the financial responsibility of the other party, i.e., the damages they have sustained. This could put you in a difficult position. A third-party liability insurance plan is meant to save you from having to suffer in such situations.
When you find yourself in such a position, you can claim your third-party liability coverage. This coverage offers you pay-out to compensate for any damage that you may have caused to another party involved or are liable for it. ^
^Claims are subject to terms and conditions set forth under motor insurance policy.
You may have guessed that in this case, the third party is the opposite party that has sustained any damage. Thus, the third-party liability policy is used to cover any damages caused to the said third party.*
First Party and Second Party
Now that you know what a third party is, what is first party and second party? If you are privy to this sort of terminology, you may have guessed that the first party, in the case of insurance, is you – the policyholder. The second party in this situation is the insurance provider.
To understand this terminology better in the context of insurance, let’s delve deeper into the types of insurance available. Besides the mandatory third party bike insurance
policies, a two-wheeler owner can opt for a comprehensive insurance policy. Alongside a third-party liability cover as well as a personal accident cover, a comprehensive plan offers an Own Damage cover.
What is an Own Damage cover? As the name may suggest, it is coverage for when you sustain damage to your bike in a mishap, irrespective of the involvement of any third party. This contract for coverage against premium, be it for a third-party liability cover or an own damage cover, is between you (the policyholder) and the insurance provider.* That makes you the first party and your insurance provider is the second party.
You may also understand your own damage cover as a 1st party insurance for bikes
, where you get into a contract with the second party to get coverage for yourself.*
Buying Bike Insurance
Understanding the difference between first-party, second-party, and third-party is important for all policyholders to know. While you may still be able to buy insurance for your two-wheeler without knowing all these terms, having this knowledge may help you understand your policy better. You may be better acquainted with what your policy offers and take informed decisions when it comes to offline or online bike insurance renewal
To sum it up, the Own Damage policy which comes as a part of the comprehensive insurance, is a cover that may benefit the first party. On the other hand, the third-party liability cover is meant to protect you against any damage done to a third party. The second party is your insurance provider.*
Now that you know better about these terms, ensure that you carefully understand your policy and its features. When buying or renewing your policy, you may like to use a two wheeler insurance premium calculator
to get quotes for the policy you have chosen. Getting maximum coverage for your two-wheeler through add-ons may help you stay fully protected.
*Standard T&C Apply
Insurance is the subject matter of solicitation. For more details on benefits, exclusions, limitations, terms, and conditions, please read the sales brochure/policy wording carefully before concluding a sale.