Insurance is one of the must-have financial securities you need in life. Whether it’s health or life or even motor or home, living a life without insurance is like throwing caution to the wind.
With the growing importance of insurance, it has become imperative to have insurance for your motor vehicles too. Moreover, it is a regulatory requirement to have a valid copy of insurance documents.
The various jargons and terminologies used in the insurance documents are hard to comprehend for a layman. While you might be puzzled understanding the terminologies in your car insurance policy, in this article, we have simplified what first-party and third-party mean when it comes to an insurance contract. Continue reading to know more.
For starters, who are the parties involved in a car insurance policy?
Insurance is a contract between the policyholder and the insurance company to indemnify the losses suffered during the policy tenure. The insurance company charges a price termed as premium for this contract.
The famous saying – the customer comes first is the easiest way to recollect that the policyholder is the first party in a contract of car insurance. Thus, when you purchase car insurance policy online or offline, the buyer is termed as the first-party.
The insurance company from whom the car insurance is bought is the second party in the contract of insurance. The insurer accepts the premium and agrees to extend its coverage based on the plan selected. In this contract, the second party agrees to reimburse the first party depending on the terms underlying in the agreement.
Any person outside the contract of insurance between the first party and the second party is called as the third party. Any car insurance contract at least covers liabilities arising towards third parties. These liabilities can be due to accident or damage by the first party for which the second party has entered in a contract. Moreover, the regulations stipulate a minimum of third party car insurance which helps make up for any damage or loss or injury to a third person. Third-party insurance policy is also known as liability-only insurance. When you purchase a comprehensive plan, it includes the third party cover too.
Now that you know the fundamental distinction between first, second and third party, let us look at the differences between first party and third party.
||First party is the one who purchases the car insurance policy.
||Third party is an individual who suffers loss or damage or injury due to the first party/insured. A third party is not a part of the insurance contract but can be the beneficiary of one.
||Any person who owns a car and avails insurance coverage is termed as the first party.
||Any person who is affected due to the fault of the first party is covered under third party insurance.
||The Motor Vehicles Act does not mandate requirements of first party insurance.
||The Motor Vehicles Act requires every vehicle to at least have third party insurance cover.
||The first party or the insured has the option to buy a third-party insurance policy or comprehensive plan.
||While a third party cannot avail car insurance policy to protect himself or herself proactively, a health insurance plan can come handy to protect for any accidental injuries.
So if you are a first-time buyer, make sure you make note of these terms. It will smoothen the process of policy selection and help you understand your rights better. In case your policy is due for renewal, don’t miss the option of car insurance renewal online. This will not only speed up the process, but also will reduce documentation formalities and get you insured instantly. Evaluate your quotes with the car insurance calculator instantly.