Who is a ‘First Party’ in car insurance policy

5 min read

Do you know about the  different parties involved in a car insurance policy? Do you know what is a first party insurance? If not, read on to get detailed knowledge about it.

As we know, an insurance is an agreement between two parties; the insurance providers and the insured or the person opting for the insurance. The agreement of the insurance guarantees certain promises as laid down by the insurer to the insured to fulfill the monetary liabilities (coverage) of the latter arising out of any unforeseen event or accident causing damage to the driver or the vehicle.

Here, the coverage assured by the insurer to the insured is based on the kind of the policy that the insured has opted for. As per the coverage available, an insurance policy can be segregated into three kinds, namely;

  • Third party car insurance (where liability lies only on third-party damages)
  • Comprehensive car insurance, and
  • Standalone car insurance (only own damages are covered)

Read below to find the parties that are involved in an insurance policy.

Which all parties are involved in a Car Insurance plan?

Below are the different parties that are involved in a car insurance plan:

  • First Party – first party is the one buying the car insurance policy on his/her car.
  • Second Party – second party is the insurance company that offers cover against financial loss caused to the vehicle of the first party owing to any mishap or unfortunate event involving the vehicle.
  • Third Party – third party can be anyone not related to the vehicle or the first party and the second party but who has incurred physical injury or financial loss due to any unfortunate event that involves the insured vehicle.

Third Party Car Insurance Policy

This is a type of insurance policy that cover against any financial liability caused to a third party by the first party or the insurance policy holder. This liability can occur because of any accident or unforeseen situation that involves the vehicle of the first party. So, with a third-party insurance the policy holder can use the insurance claim to pay for any damages caused to a third-party (physical injury, and/or property damage) involving the first party vehicle. Below are the situations when such a claim can be made:

  • Claim for partial cover for physical injuries caused to a third party.
  • Claim for unrestricted cover in the event of the death or permanent disability of a third party.
  • Claim for up-to 7.5 lakh rupees for property damage of third party.

Also Read: Difference between First Party and Third Party Car Insurance in India

First Party Car Insurance Policy

The first party car insurance is the coverage against any damage caused to the insured or the first party in the event of an accident where the loss was incurred by the insured on his/her vehicle. It is a necessary requirement for every vehicle owner to have a personal accident cover of minimum 15 lakh rupees, which the vehicle owner can buy along with the car insurance or separately.

This personal accident (PA) coverage protects the insured in the event of any disability caused to the person or if the accident caused the death of the insured. Further, car owners can also buy health insurances to cover them against any physical damage caused in an accident.

In addition to the above, policy owner can buy the below mentioned covers:

  • Third party legal liability cover ( for hired driver)
  • Personal accident cover (for hired driver)
  • Personal accident cover (for passengers in car)

Difference Between First Party and Third Party in Car Insurance

Below are the details of the difference on some basic parameters to show the between two parties:

Based on First Party Third Party
Connotation Refers to the insured person who purchases the policy of car insurance. Refers to the person who gets affected by an insured vehicle of the first party in the event of an accident.
Scope Can be anyone who owns the vehicle and who buys the insurance policy. Can be an individual who got injured, got permanent disability or died in the mishap. Or can be property loss caused by the insured car in an accident.
Insurance First Party or the insured must buy a third party insurance to cover the third-party against any damage (physical/property). The insured can also buy a comprehensive policy for more benefits. Third Party or the injured person is the one who gets the benefit of the insurance cover for the damage – bodily injury or property loss –  via the insurance policy of the first party.
Obligation It is a compulsory requirement for every first party car owner to buy a third party cover for his/her vehicle as per Motor Law. Third party individuals has no compulsion of having an insurance to ensure safety while on road.
Accident Cover A car insurance plan entitles the insurance owner or the First Party to receive PA cover or personal accident cover of 15 lakhs rupees. The cover of PA can be an add-on package bought with the third party policy or a part of the comprehensive plan The third party is permitted to receive a compensation amount as per scope of damage done to the third party, which is done based on the decision of the Tribunal for motor accidents.

Difference of Claims between First Party and Third Party

Below are some of the differences between first party and third party insurance claims process:

  • The most common difference is in terms of the claimant or the applicant who makes the car insurance claim. It can be either the policy holder or the third party involved depending on the type of claim – 1st party insurance claim or the 3rd party insurance claim.
  • In third-party insurance, the Court of Motor Accident Claims Tribunal takes care of the process of claim. But for first-party claims the process is taken care of by the insurance providers.

It is actually the responsibility of the insurer to offer coverage to the insured as per the terms of the policy for first party car insurance claims. On the other hand, for third-party claims there is no moral obligations of the insurance company to provide coverage to third party. These claims are made by the third-party and overseen by the Motor Accident Claims Tribunal Court. However, in such case the insurance providers have the authority to challenge the third-party claims.

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Gayatri Prabhu, Head-Digital Business at Mahindra Insurance Brokers Limited (MIBL) is one those few digital leaders who has the width and depth that is required to execute an ROI driven holistic digital strategy. She cuts through the noise, identifies the critical levers and leads her team to successful execution of the defined strategy. Her core mantra to win new and retain existing customers is: understand the consumer behavior and craft experiences around it.

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