The Motor Vehicles Act (MVA) of 1988 introduced the concept of two-wheeler insurance in India. Under this act, all two-wheeler vehicles throughout the country need to have a valid Third Party insurance policy. In addition to Third Party Liability, there is another plan known as the Comprehensive Cover. A Comprehensive Cover compensates for not just the third party damages but also losses suffered by the policyholder.
The coverage offered by Comprehensive Cover is far greater than the Third Party Liability insurance. Let’s understand these two types of two-wheeler insurance in detail:
1. Third-party liability insurance
Third-party liability insurance is a policy that covers the financial cost of losses or damage caused to a third party vehicle. It is also responsible for compensating the third party person in case of any injury arising due to the insured vehicle. However, this does not cover any loss or damages suffered by the owner of the vehicle. Remember, the pillion rider of the motorbike is not considered a third party.
*PRO-TIP: As per the law in India, it is mandatory to have valid third-party insurance for all two-wheelers on the road. This ensures two-wheeler owners have a basic financial cover against damages caused to a third-party person, vehicle, or property.
2. Comprehensive Insurance
In terms of coverage, the scope of Comprehensive Insurance is much wider. Apart from covering damages caused to the third-party, it also covers “Own Damage” (OD) suffered by the owner. Comprehensive Insurance also provides financial protection against unforeseen incidents such as theft, riots, etc. Loss or damages to the vehicle due to natural calamities like cyclones, floods, earthquakes etc are also taken care of by the insurer.
*PRO-TIP: Accidents or damages occurring while the rider is under influence of illegal drugs or alcohol are excepted from the coverage of Comprehensive Policy. Policyholders cannot make claims for protection under these circumstances.
Coverage in the case of Third Party and Comprehensive Insurance:
Here is a table to help you understand what is covered under Third Party and Comprehensive two-wheeler insurance respectively:
| Coverage | Only Third Party Liability Cover | Comprehensive Cover |
|---|---|---|
| Damage to third party vehicle | Covered | Covered |
| Damage to third party property | Covered | Covered |
| Personal Accident Cover | Covered | Covered |
| Damage to the vehicle in case of an accident | Not covered | Covered |
| Damage to the vehicle in case of natural calamities | Not covered | Covered |
| Damage to the vehicle in case of riots or strikes | Not covered | Covered |
| Theft of vehicle | Not covered | Covered |
Difference between Third-Party Liability Cover and Comprehensive Policy:
Ajay and Sagar both brought a brand new Honda CB Unicorn self-start 100cc bike in January 2018. In Mumbai, the on-road price for this two-wheeler was INR 85,000. Ajay decided to insure his bike with the mandatory third-party cover only. Sanjay invested in a Comprehensive policy (which covered both own damage + third party liability cover). Third-party premiums consider Engine CC while calculating the premium amount. So, let’s assume the cost of Third-party liability cover for Ajay was INR 750. While the cost for a Comprehensive policy for Sanjay was INR 1,500.
In August, both met with a small accident, and the total repair cost was estimated to be approximately INR 5,000. Since Ajay only has a third party policy, the entire cost for repair will be paid by him. His insurer will only pay third party property damage costs. There is no compensation for the damages incurred on the bike. While Sagar’s who bought a comprehensive policy can demand the insurance company to pay for the repair cost.
| Key Values | Ajay (Only third-party liability) | Sagar (Comprehensive policy) |
|---|---|---|
| Premium amount paid | INR 750 | INR 1,500 |
| Third-party damages | Covered by the insurer | Covered by the insurer |
| Cost for Own-damages | Not Covered by the insurer | Covered by the insurer |
| Total expenditure | INR 750 + 5000 | INR 1500 |
| INR 0 | Approx. INR 3000 |
Note: Prices are indicative only and subject to change.
From the above example, it is clear that Sagar’s investment was better than Ajay’s investment. The total expenditure amount paid by Ajay was INR 5,850. Whereas Sagar had to only pay INR 1500. It may seem like Ajay had to pay a lower premium amount. But in the long-term, Sagar’s investment proved to be better. Also, the net savings for Sagar was considerably more than Ajay.
Summary
As per the law, Third Party Liability cover is mandatory for all vehicle owners. However, due to its limited coverage, two-wheeler owners rely on Comprehensive Cover, in times of emergencies. A Comprehensive Cover offers adequate financial protection and even compensates for damages or losses caused due to unforeseen situations like natural calamities and theft.
