Difference Between Comprehensive And Third Party Insurance (2024)

Road accidents continue to be a major issue of deaths and injuries in India. As per the latest figures shared by Road Transport and Highways, in 2021, India saw almost 4 lakh road accidents which took more than 1.5 lakh lives and left 3.5 lakh people injured.

These figures show clearly how crucial it is for every vehicle owner to have a proper insurance coverage for their vehicle(s) which provides financial protection against any kinds of risks which come while driving their vehicle.

When it comes to vehicle insurance, then you must know that a third-party insurance coverage is compulsory in India by law, without which no Indian is allowed to drive on roads. However, this is a basic kind of coverage which only tends to cover third party liabilities. For full protection, it is advisable to have a comprehensive insurance policy which offers a lot more than just basic coverage. Thus, it is important to have the right kind of vehicle policy which must cover you adequately, when you face something unfortunate such as an accident, collision, flood or theft.

Here’s a guide to help you in providing the clear understanding and the stark differences between the two kinds of insurance policies, that further helps you in deciding which insurance coverage will suit you and your vehicle the best.

What Is a Comprehensive Insurance Policy?

Meaning

Comprehensive insurance policy ensures to cover both third-party liabilities and own damages to your car in a most extensive way. Let’s understand it through an example:

For instance, if your car accidentally hit any third person or any third property, then a comprehensive insurance policy will cover all such liabilities arising from that third party to you, which includes both legal and financial help. Moreover, if your car met with an accident which further causes damages to your car such as dent, broken rear light or something else, then a comprehensive coverage will also cover all such expenses arising out of accidents, collision, theft or any man-made or natural disaster and causing damage to your own car.

Inclusions of a Comprehensive Insurance Policy

• Damages to your vehicle arising out of accidents or collisions.
• Damages to your vehicle due to an act of theft or burglary.
• Damages to your vehicle due to man-made calamities such as riots or vandalism.
• Damage to your vehicle due to natural disasters such as floods, landslides or cyclones.
• Add-ons covers (optional).

Exclusions of a Comprehensive Insurance Policy

• No coverage if traffic rules are violated while driving.
• No coverage in case of any fraudulent activities conducted by insured.
• No coverage if the driver was under the influence of toxic substances.
• Consequential damages which occurred after the accident are not covered.
• Cannot claim the benefits for the add-ons which are not bought.

Add-ons Coverage Available with Comprehensive Vehicle Insurance

A comprehensive insurance policy adequately covers you and your vehicle, if anything unfortunate happens to your vehicle, but at times comprehensive coverage also falls short off and at that time vehicle insurance add-ons help you in providing that extra layer of protection.

So, if you have a comprehensive insurance policy for your vehicle, then also you can buy optional add-ons covered at an extra premium cost as per your need and requirements. These add-on options help to enhance your coverage with more protection and shields you completely in the time of need.

Zero Depreciation Cover: This is the most sellable coverage under comprehensive insurance policy which is popularly known as bumper-to-bumper or nil depreciation cover. This coverage helps you in realizing the full value of your vehicle without including any depreciation cost.

Depreciation causes loss of value of the vehicle right after its purchase date. But is you have this cover, then at the time of claim, the insurer will not be able to deduct any amount on the basis of deprecation, which helps you to get coverage for the entire costs of repairs or replacements done.

Always, check the duration for which the insurance company is providing you the zero-depreciation coverage as this cover is only applied to a certain amount of years only.

No Claim Bonus (NCB) Protection: As the name suggests, this cover allows you to avail NCB discount even if you make any claims during the policy year. Otherwise, NCB discount is a kind of reward which varies from 20% to 50% on premium, only given to those insured who do not make any claims during the policy period.

However, once you have NCB protection cover in place, then you can avail this discount at the time of renewals, even if you have made any claims during the policy period.

Engine Protection Cover: Engine is one of the most expensive and important part of any vehicle, thus this add-on becomes very crucial as it covers any costs and expenses attached to the repairs and replacement of engine or its parts, which can be damaged due to overheating or lack of lubrication or due to gaskets and seals in the engine.

Roadside Assistance Cover: This coverage is extremely beneficial, as it provides emergency assistance at any hour, in case the vehicle breaks down on a road due to any mechanical or electrical breakdown. This add-on cover provides you with valuable assistance round the clock at any time of the day. It’s just that the insured needs to call the helpline number of their insurance company and inform them about their whereabouts.

However, assistance provided under this cover may vary from insurer to insurer. Therefore, you must carefully check the inclusions or the variety of assistance that will be provided under roadside assistance cover.

Return to Invoice Cover: This coverage is useful as it aims to provide financial help in case of total loss or theft of your vehicle. Here, the insured can receive the compensation which is the same as the vehicle’s invoice value, meaning, original value of the car at the time when you purchased it from the showroom. This add-on only applies in case of total loss of your vehicle, which is beyond repair or incase of theft.

Daily Allowance Cover: With this add-on in place, the vehicle owner receives the daily allowance from their insurer, in case their vehicle is under repair and placed in a garage for a certain time post the accident. This allowance helps you to cover the cost of alternative transportation which you might be using in the absence of your vehicle.

Consumables Cover: This cover allows the insured to cover the replacement cost of consumables items such as coolants, oil, power steering oil, oil filters, AC gas oil, lubricants and all similar items except fuel.

Tyre Protection Cover: Tyres of any vehicle are very much prone to damages, general wear and tear and punctures. A regular comprehensive policy might only cover up to 50% of tyre replacement costs, but with the tyre protection cover, the insured receives the full replacement of tyre and other related costs gets covered too. Thus it is wise to take this add-on, if you use your vehicles on a continuous basis for long city drives or so.

In a country like India, where the roads are generally not in a good condition and occurrence of accidents are relatively high, opting for extra financial protection via add-ons is not only a smart choice but also helps you to save a big chunk of money.

What is a Third-Party Insurance Policy?

Meaning: A third party insurance policy is the most basic and legal form of vehicle insurance policy which only covers damages or any losses incurred to a third party from your vehicle and will not provide any coverage for your own damages.

A third-party insurance policy also includes a personal accident cover (PAC) to protect you from personal injuries or death. The premiums payable under this policy are prefixed by the Insurance Regulatory and Development Authority of India (IRDAI) which are comparatively low and affordable as compared to comprehensive one.

Inclusions of a Third Party Insurance Policy

• Death of a third party.
• Bodily injuries to a third-party person.
• Damages to third-party property.
• In-built personal accident cover for the owner-driver.

Exclusions of a Third Party Insurance Policy

• Own damages to your own vehicle.
• Driving drunk.
• Driving without having a valid license.
• Add-on covers.
• In case of traffic rules violation.
• In case of any fraudulent activities conducted by insured.

For a more detailed article on Third Party Insurance, read our article on What Is Third-Party Car Insurance And How Does It Work?

Difference Between Third Party Vehicle Insurance and Comprehensive Vehicle Insurance

As we have seen, third-party vehicle insurance and comprehensive vehicle insurance are quite different from each other in terms of coverage, purpose and their role. Let’s find out the major difference between the two in detail which further helps you to make better decisions when purchasing vehicle insurance.

Which Vehicle Insurance Policy to Choose: Third Party Vehicle Insurance or Comprehensive Vehicle Insurance?

While third-party vehicle insurance is mandatory, a comprehensive insurance policy for your vehicle is optional. You might have to shell out more money while buying a comprehensive insurance policy, but it is completely worth it as the scope of coverage is much higher.

After this comparative analysis between the third party and comprehensive insurance, one thing is clear that a comprehensive insurance policy is an apt choice if one is looking to protect their vehicle fully. Plus, a comprehensive policy comes with a lot of customization options, a wide range of services and a higher level of protection, thus allowing you to save money in a longer-term.

Forbes Advisor India recommends you to buy a “Comprehensive Vehicle Insurance Policy” which will take care of all the possible expenses which might occur when you drive a certain vehicle. Opting for comprehensive insurance coverage will not only offer you enhanced comprehensive coverage but also provide ultimate financial protection, so that you can enjoy peace of mind while driving your vehicle.