If you own a vehicle or are planning to buy one, it is imperative to have a clear idea of all the costs associated with it. One of these is your insurance policy. There are types of vehicle insurance policies to consider. Of these, a first-party policy is not mandatory, but it may benefit you in dire times.
What is first-party policy, and should you get it? Let’s find out.
What is First Party, Second Party, and Third-Party in Insurance?
The first party is the individual or entity that buys the insurance policy. In the case of motor insurance, the party who owns the vehicle is the one who is supposed to purchase the policy. Thus, vehicle owners will be considered first-party. This is irrespective of the type of policy purchased.
The second party, in the case of insurance, is your insurance provider, i.e., the company you purchase the insurance from. The second party is the one who offers the policy and the coverage. It is the entity you pay premiums to.
Third party is a term that is relatively more commonly used in insurance. It is to refer to an individual or entity that you may be liable to pay for any damages you may cause to them where your vehicle was involved. This could be anyone that is not first party or second party.
What is First-Party Motor Insurance?
When you are in the market to purchase insurance, you may not necessarily find something called first party car insurance
or bike insurance. So, what is first-party insurance? And how is it important?
Before one starts to answer this, one needs to acknowledge the different types of motor insurance
policies available. Broadly, motor insurance policies can be divided into two types - comprehensive insurance and third-party liability policy.
Of these, a third-party liability policy is a standalone cover. It is mandatory coverage that all vehicle owners are required to get for their car or bike. As the name suggests, this policy allows you to stay protected against any third-party liability such as your vehicle being in an accident where you are liable to pay the other party who has sustained damages.
Comprehensive insurance, on the other hand, is a bouquet of individual covers that is put together so that the first party can get better coverage.
Of these, the own damage cover can be understood as first-party insurance for your vehicle. What does it offer? Suppose you were involved in a mishap where your car sustained some damage. A third-party liability plan would not cover this damage. Claims are subject to terms and conditions set forth under motor insurance policy.
In this case, you would have to turn to 1st party insurance
for bike or car, i.e., your Own Damage cover. This cover is not mandatory. However, if you want to avoid having to bear all repair expenses for your vehicle in the event of a mishap, you may want to consider this cover. Claims are subject to terms and conditions set forth under motor insurance policy.
How is First-Party Cover Different from Third-Party Cover?
These two types of motor insurance are different from each other primarily in the form of coverage they provide. First-party policies, or Own Damage covers, are meant to protect you financially against damage sustained by your vehicle. The coverage offered is limited to situations such as accidents, natural disasters, and more. You may want to read through your comprehensive insurance policy document to understand what the inclusions and exclusions are.
On the other hand, third-party coverage is limited to offering financial only if you are liable to pay damages to another person/party involved.
Claims are subject to terms and conditions set forth under motor insurance policy.
Should You Get a First-Party Cover?
A thing to note when thinking about getting a first-party insurance cover for your car or bike is that the Own Damage cover is usually not available as a standalone plan. Unlike a third-party liability cover that can be purchased by itself, an Own Damage cover has to be purchased as a part of a comprehensive motor insurance
Thus, if you are considering an Own Damage cover to ensure first-party coverage for your vehicle, you may have to look into comprehensive plans for your car or bike. But why should you consider first-party coverage?
One of the simplest reasons to have a comprehensive cover, even though it is not mandatory, is to have financial support when addressing repairs to your vehicle after a mishap. With first-party coverage, you may not have to worry about dealing with all repair costs by yourself.
Having a first-party cover, i.e., a comprehensive cover, may be considered to be expensive by some. While it does add slightly to your premium costs if you were to choose this instead of a standalone cover, the increase may not be significant. Moreover, if you were to consider the benefits you may be able to avail of if you were to make a claim, you may notice that the benefits outweigh the costs. Claims are subject to terms and conditions set forth under motor insurance policy.
*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.