Car Insurance

What Happens When You Change Third Party To Comprehensive Car Insurance Cover

By Admin
Feb 24, 2021

Selecting an insurance policy might seem like an uphill task for it involves a lot of background research and rummaging through endless paperwork with a host of incomprehensible words. 

To help you out, the broad outlines of two such motor insurance policies, its differences, benefits, and other nitty-gritties have been given below. 

Read on to know more!

What is the difference between a third-party insurance cover and comprehensive insurance cover?

Basis

Comprehensive Insurance Policy

Third Party Insurance Policy

Meaning

 

Inclusive cover offers protection for the losses and damage caused to the car along with providing a cover for third-party liabilities.Liability insurance for protection against the claims of third-party in case of damages and losses suffered during an unforeseen incident.

Coverage

 

For eventualities such as –

  • theft, fire
  • damage caused to or by third-parties
  • riot damage
  • arson or vandalism
  • natural disasters

For third-party eventualities such as –

  • Partial disability
  • Permanent total disability
  • Death
  • Property/Vehicle damage

Add-ons

 

There is scope for customisations in the form of add-ons such as Zero Dep, Engine Protection, etc.There is no scope for customisation.

Premium

 

Higher premium than third-party insurance.Low premiums as it does not cover own vehicle’s damage. The premium is decided by the Insurance Regulatory and Development Authority of India (IRDAI).

Who should opt for it?

 

By anyone who would like to secure higher protection for their car.It is mandatory as per the Indian laws i.e. Motor Vehicles Act, 1988 

Benefits

 

The following benefits are offered by the insurer –

  • It covers both own damages and third-party liabilities.
  • One can opt-in for add-ons to enhance coverage of the policy.
  • Some insurance companies offer the insured the privilege of customising the Insured Declared Value (IDV), i.e. the market value of the car.
  • It offers coverage for damages on the automobile due to natural disasters such as floods, earthquakes, etc., and man-made perils.
  • It also offers compensation in case of theft of the vehicle.

The benefits that accrue out of third-party insurance are as follows –

  • Helps the insured drive legally on the roads and by extension free them of any adverse legal repercussions. For example, it protects the pocket from hefty penalties or traffic fines.
  • It has a very quick and easy process for purchase.
  • The coverage offered is affordable.
  • It prevents the insured from facing any financial stress arising due to the losses incurred on the third party by the insured car from an unforeseen incident.

Concerns

 

The policy does not cover–

  • wear and tear costs at the time of settlement of claims.
  • certain vehicle parts and associated damages such as fibre and rubber.
Does not cover own damages.
Exclusions
  • The vehicle was being used for any illegal purpose at the time of the accident.
  • The damages and losses were suffered during war or a nuclear attack.
  • The accident was caused as a result of the consumption of alcohol or other intoxicating substances.
  • The person driving the car was either underage or lacked a valid driver’s license.
  • The damages were caused as a result of consequential damages that occurred after the occurrence of the actual accident.
  • The damages are a result of contributory negligence i.e. the insured has not exercised caution/due care.
  • The vehicle is stolen thereafter and is not in the possession of the insured.
  • The accident was premeditated.
  • Third-party insurance will not cover for own damages i.e. damages caused to the vehicle of the insured or if the insured has suffered some bodily injury himself.
  • In situations where property damages arise, the insurer will cover a maximum of INR 7,50,000. All additional costs will be borne by the insured.
  • The vehicle was being used for any illegal purpose at the time of the accident.
  • The accident was caused as a result of the consumption of alcohol or other intoxicating substances.
  • The person driving the car was either underage or lacked a valid driver’s license.
  • The vehicle is stolen thereafter and is not in the possession of the insured.
  • The accident was premeditated.

How can you switch the Third Party to Comprehensive Car Insurance Cover?

A switch from third-party insurance to a comprehensive policy can be made easily. The manner in which it is to be done is shown below –

Should you switch from a third-party to a comprehensive car policy?

The policy offers a broader, well-rounded coverage that is worth investing in. However, the need for this switch must be based on individual preferences, surrounding circumstances, and the overall value addition that such an insurance product can bring to the policyholder.

Who should switch from only third-party liability cover to comprehensive car insurance?

For all those car owners who would like a more tension-free driving experience, a comprehensive car insurance policy is the right choice to make. It is also beneficial for inexperienced drivers who have purchased a car for the first time and for all new car owners as this comprehensive cover is needed in case of any unforeseen incident. This switch might also prove useful if the car is being driven around in an accident-prone area, places that are prone to floods, earthquakes, or any other natural disaster, or in places where theft/crime rates are high.

Factors to consider before switching

The following aspects must be kept in mind before changing over to a comprehensive policy –

  • The cost of the policy will increase since the coverage of the comprehensive policy will be significantly more than a simple third-party insurance. With add-ons, this amount may increase further.
  • The comprehensive policy cover will insure not just for third-party liabilities but also for two other risks namely, own damage and theft. This offers a more holistic protection to your prized possession.
  • Voluntary and compulsory deductibles need to be factored in with the change in policy. The cap that is placed on the voluntary deductibles need to be looked into. It is pertinent to note that the quantum of voluntary deductibles you pay (which is decided at the time of purchase of the policy) will reduce the cost of the policy.
  • It is prudent to look into the No-claim bonus that will be awarded by the insurance company when you do not raise any claim for the stipulated term period. This will assure significant gains financially at the time of renewal of the policy.
  • The Insured Declared Value (IDV) is the market value of the car. It is of importance as it is the basis on which the cost of the policy and the premium amounts to be paid in the future will be determined by the insurance company. Refrain from overvaluing or undervaluing the same to gain from in; instead fix the value at a price which is closest to the prevailing market rate to derive maximum benefit.

Conclusion

The insurance industry has made the lives of the insured very easy with the aforementioned options. It is up to the insured to make use of such opportunities provided to ensure that they secure the best possible protection for their most treasured possession.

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