First-party vis-a-vis third-party car insurance- Whats the difference

Now that you have purchased your first car you want to take it for a spin as soon as possible. However, before you burn some rubber, you have to comply with the motoring laws of the country and one of the most prominent laws in this country states that no car plying on the roads in this country shall be without a valid third-party coverage.

Before we move on to the complex territory of car insurance jargons, let's get the basics out of the way. A car insurance policy is essentially a contract between a car owner and a motor insurance company under which the motor insurance company promises to indemnify the car owner for losses suffered in case of damage to the car due to an accident or some liabilities incurred towards a third party. Further, the owner or the driver also get a personal accident cover where they receive a sum in case of disability or death.

What parties are involved in a car insurance policy?

First party:

The owner of the car who purchases the insurance policy is the first party in an insurance contract. In case of an unforeseen event, it is the car owner or in other words, the first party that makes a claim to receive compensation for any losses or damages suffered.


The car insurance company that chooses to insure your car is the second party in a car insurance contract. The second party will be paying off the third party in case of any damages to the car or in case of any liabilities arising towards the third party in respect of injuries, losses or damages.


The third party in a car insurance contract is the person who has suffered losses or damages because of the actions of the first party. The second party, the insurance company, agrees to indemnify any person who suffers losses or damages because of the first party’s driving. 

What is the difference between first-party and third-party insurance?

First-party insurance or comprehensive insurance is tailored to benefit the car owner in case of any damage to the car due to natural disasters like cyclone, flooding, earthquake or storms or man-made catastrophes like terrorist attacks or riots or any other political emergencies.

First-party insurance also covers any liability that might arise towards a third party in case of damage to the car, injuries of the body or death. Additionally, comprehensive insurance also gives personal accident cover and a lump sum amount is paid to the driver in case of a disability or death arising out of an accident.

First-party insurance policies also come with a host of benefits like engine protection, zero depreciation, and roadside assistance.

Third-party car insurance

 Under the Motor Vehicle Act, 2019 it is mandatory for all the cars plying on Indian roads to have at the very least a third party insurance cover. Many who forego buying a comprehensive insurance plan and simply buy a third party car insurance make the car insurance company liable to pay monetary compensation to any person who has suffered losses or damages in an accident.

The last word

Driving a car in India without insurance is illegal. However, there are quite a few insurance companies that are overcharging their customers by asking them to pay inflated premiums. Ensure that you purchase from the right place and at an optimum price by buying an insurance policy from the insurer’s website or an app like Acko car insurance. Before renewing their car insurance, one should also check whether they are being over-charged or not using the car insurance calculator.

Also, you can opt for a comprehensive Bajaj car insurance policy such as the one available on Finserv MARKETS. Car insurance from Bajaj Allianz provides coverage against natural and man-made disasters such as earthquakes, robberies and others. 

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