A car insurance plan is crucial to your financial well-being. This is because a good car insurance plan can help you stay protected against any unforeseen expenses and losses. Without a car insurance plan, even a minor accident can cause a significant financial setback.
More importantly, not having a car insurance plan can cause you to get in trouble with the traffic authorities. That’s right, driving without a valid third-party insurance can cost you hefty fines and can even land you in jail!
Third-party liability insurance is legally mandated as per Section 146 of the Motor Vehicles Act, 1988. So, it’s imperative that you purchase a third-party liability insurance plan before taking your car out for a spin.
Apart from third-party liability insurance, there are two other types of car insurance coverages that you can choose from. Be sure to only choose these plans after thoroughly analysing your needs and budget as this will help you choose the right plan for you!
- Third-party Liability Cover
Third-party liability cover is basic but mandatory cover. It covers only damages and losses incurred to third-parties. This can include damages incurred to third-party property or person(s).
- Collision Damage or Own Damage (OD) Cover
Covers damages and losses incurred to your vehicle in any covered event. The premium of this plan is determined by carefully examining the car’s conditions. This is done by analysing the car’s age and IDV. If you’re wondering what IDV is in insurance, we’ve got you! IDV or Insured Declared Value is nothing but the maximum amount your insurer is liable to pay in case your car is damaged beyond repair or stolen.
Comprehensive cover is an all-round protection plan. It covers third-party liabilities, own damages and a whole lot more, depending on the scope of coverage offered by your policy plan. You will typically also get a well-rounded personal accident cover that can help you financially in case of any unforeseen events. You can also add a range of riders to enhance your coverage.
While only a third-party liability insurance is legally mandated, many car owners choose to purchase a more comprehensive car insurance plan to make sure they’re adequately protected. Here’s an explainer on why a third-party liability insurance may not be enough for many of us.
- Your car remains uninsured
Many of us assume that a third-party car insurance plan protects our car. This is not the case at all, third-party insurance plans only cover damages and losses incurred by third-parties.
In case you’re met with an accident that causes damages to your car, the cost of repairing your car will have to be borne by you. Not all of us can afford to pay for expensive repairs out of pocket.
So, it’s best to purchase a policy plan that covers damages to your car as well as offers some type of personal accident cover. This will help ensure that you are financially protected in case of any emergencies.
- Negligible personal accident cover
Most third-party liability covers offer some type of personal accident cover. However, personal accident cover is not third party insurance’s key offering. What does this mean for you? Well, often personal accident cover on third-party covers is very low (around ₹2 Lakhs).
Should something happen to you, this amount will likely not be enough to cover hospitalisation and other medical expenses. With medical inflation rising rapidly, it’s more important than ever to get a policy plan that offers a comprehensive accident cover.
Riders are additional covers that you can add to your policy plan to enhance your coverage. These riders can help you tailor your plan to your needs to ensure that you’re sufficiently protected. With third-party liability plans, you do not have the provision to add riders.
- Lack of comprehensive coverage
A third-party insurance plan’s coverage is very limited, this makes your car vulnerable to a lot of other man-made and natural perils. This can include theft, fire, floods, hurricanes, etc. We can’t predict the future, so it’s a good idea to stay protected.
Relying only on a third-party insurance plan can make us vulnerable to financial losses caused by unforeseen events. So, you must be wondering – what is the ideal car insurance coverage option? Well, that can vary depending on your needs and budget.
However, here’s something that can help you make a sound decision – an own damage vs third party vs comprehensive insurance comparison table:
| Parameters | Own Damage Cover | Third-party Liability Cover | Comprehensive Cover |
| Add-on availability | Yes | No | Yes |
| Legal mandate | Not legally mandated | Legally mandated | Not legally mandated |
| Scope of coverage | Covers damages or losses incurred to own car | Covers losses and damages incurred to third-party property or person | Covers third-party liability and own damages |
| Is it sufficient? | No, the car is still exposed to ‘third party liabilities’ | The car is still exposed to ‘own damages’ | Yes, this is a comprehensive plan. You may enhance it with add-ons as well. |
| Premium | Lower than comprehensive plans but higher than third-party plans, given its limited coverage. The premium rates will go down as time passes, thanks to depreciation. | Lowest, given it’s only covers type of liability | Highest, given its broad scope of coverage |
| Discounts | NCB (No Claim Bonus) may be available | No discounts are available | Enjoy NCBs, anti-theft device discounts and voluntary deductibles |
Based in New York, Stephen Freeman is a Senior Editor at Trending Insurance News. Previously he has worked for Forbes and The Huffington Post. Steven is a graduate of Risk Management at the University of New York.