Third Party Liability (TP) vs Comprehensive Car Insurance Policy
2016-05-05 15:16:00 UTC
Our earlier post talked about buying car insurance, and in it, we touched upon the different types of car policies, namely the third party liability cover and the comprehensive policy. Here we expand upon the differences between the two.
What does third party mean in this case?
First party is the owner of the vehicle.
Second party is the insurance company.
Third party is anyone other than the above two parties involved in the contract. If the beneficiary of a policy is someone other than the two parties involved in the contract, it is called a third party liability cover.
What does third-party only insurance cover?
There are two types of insurance covers, third party liability cover and comprehensive insurance policy. Third party insurance is the most basic and the minimum legal requirement, which essentially pays out if you harm another person or damage his or her property in an accident that is essentially your own fault.
Therefore, if you crash into someone’s car for example, the policy would cover the damage to his or her car, but not the cost of repairs to your own vehicle.
Third party cover table
What does a comprehensive car insurance policy cover?
Comprehensive insurance on the other hand covers the following:
- Liability to third party as above
- Accident even if you contributed to the cause of the accident
- Burglary, theft or housebreaking
- Fire, explosion, self ignition, lighting
- Riots, strikes, terrorism, malicious acts
- Earthquake, flood, storm, landslide
It is always important to check the premiums for all types of cover because you may find that a fully comprehensive policy does not actually cost you much more.
Comprehensive Cover table
Is third-party the right cover for me?
The value of your car is an important consideration. Let us say you have an old car that is valued at ₹ 20,000. Having comprehensive coverage with ₹ 1,000 deductibles means the maximum payout should you need to submit a claim will be ₹ 19,000. Is the coverage worth it given the extra premium you will pay? If your car has, a low insured value as in the above example, a third party cover may be adequate. If your car is 6-7 years old, because of the depreciation in the value of the car, it makes perfect sense to opt for a third party cover.
Most own damage cases are partial loss cases, as these are not usually covered by the policy, such as damage to fender benders/bumpers/etc. The out of pocket expenses for these claims will cost you quite a bit and it would be cheaper to pay for it yourself i.e. out of pocket expenses plus premiums plus deductible is greater than the cost of fixing the car.
Are you better off with comprehensive insurance?
Most new car owners opt for fully comprehensive car insurance because the additional cover gives them peace of mind.Below are the five main benefits of a comprehensive insurance policy:
If you cannot afford to pay for another car like the one you had, if it was lost or vandalised, you should definitely opt for comprehensive coverage and if you availed a loan to pay for your car, the finance company will probably insist on comprehensive coverage anyway to cover these scenarios.
Comprehensive cover protects you from damage caused to the vehicle by an animal or bird. If you want insurance to pay for your smashed fender, dented hood and broken windshield, comprehensive coverage is certainly the way to go.
Damage due to storm, wind and cyclone are common in india and comprehensive policy covers these scenarios.
Water can destroy your vehicle’s mechanical parts and upholstery and if there is enough damage exceeding 75% of the insured value of the vehicle, the vehicle is declared a write-off. Comprehensive policy is handy in such situations.
Comprehensive coverage pays to repair damage caused by fire or falling objects, such as tree branches.