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Own damage and third-party insurance: Which is more important?

If you have a car or are planning to get one, you know that what you definitely need is car insurance. Insurance for your car can be third party car insurance and own damage. A comprehensive car insurance covers both and is the ideal policy to have. 

Third party car insurance is mandatory in India, as per the Motor Vehicles Act, of 1988. This covers any damage to a third-party person or property in case of an accident. Apart from this, there is own damage car insurance policy which covers any damage to the car. It is often confusing to know which type of coverage holds more significance. Let us learn the details of both types of coverage and figure out which is more important for Indian motorists.

Own damage car insurance

Own damage car insurance pertains to damages to the car due to accidents, natural calamities, vandalism, or theft. It is an optional type of coverage that you can purchase for your vehicle. This policy covers damages sustained by your car, including components such as the engine, transmission, chassis, and other critical parts.

Own damage insurance provides coverage against expenses incurred during repairs or replacement of your car's damaged parts. To avail of these benefits, you will have to raise a claim with your insurance provider along with the minimum deductible amount. The deductible is the amount you must pay out of your pocket, and the rest is borne by the insurance provider.

You have a choice of add-on covers like a return to invoice and zero depreciation, besides others, to make the coverage better for yourself.

Third-party car insurance

Third party car insurance covers the damages to a third-party person or property during accidents involving your vehicle. It is also a mandatory type of coverage you must purchase at the time of buying a car, and it is illegal to drive without this policy. 

No cover is given in this policy for any damage caused to the insured vehicle. The coverage is mainly for third-party property or vehicle damage or injury, disability, and death of a third party. 

Which is more important?

Now that we have learned about both types of insurance policies, we must determine which type of policy holds more importance. To do this, we must first consider the Indian Motor Vehicles Act.

The Indian Motor Vehicles Act mandates the need for third party car insurance. As per the act, car owners must hold at least third-party insurance to legally drive on Indian roads. Neglecting to purchase this policy can result in legal charges and hefty fines.

As far as own damage insurance is concerned, it is not mandatory to hold this policy. However, it is always in your best interest to go for this coverage as it provides financial coverage against any damages sustained by your vehicle. It can offer peace of mind, knowing that any accidental damage, theft, or natural calamities are taken care of under this insurance.

If you must choose between your own damage or third-party insurance, third party car insurance should be your top priority as driving your car without this would result in legal action. 

Benefits of own damage insurance and third-party car insurance

Car insurance is an essential aspect of vehicle ownership, providing financial protection against unforeseen incidents. Now that we have understood what own damage insurance and third-party car insurance is, let us explore the benefits of each:

Own damage insurance

Comprehensive coverage: Own damage insurance provides coverage for damages to your vehicle caused by accidents, natural disasters, theft, vandalism, and fire. It offers extensive protection, ensuring peace of mind.

Repair or replacement: In case of damage, own damage insurance covers the expenses of repairing or replacing your car, depending on the extent of the damage. This saves you from bearing the costly burden.

Personal accident cover: Some own damage policies also include personal accident cover, providing financial assistance in case of injury or death caused by an accident involving your insured vehicle.

No Claim Bonus: By maintaining a claim-free record, you can avail of a no claim bonus, which leads to a reduced premium during policy renewal. It rewards responsible driving behaviour.

Third-party car insurance

Liability coverage: Third party car insurance offers protection against legal liabilities arising from injuries, damages, or death caused to a third party due to an accident involving your vehicle. It covers the expenses of compensation claims.

Legal compliance: As per legal requirements in many countries, third-party car insurance is mandatory. It ensures that you meet the legal obligations and avoid penalties.

Peace of mind: With third party car insurance, you have peace of mind knowing that you are financially protected against any legal liabilities that may arise due to an accident. It minimises the financial burden on you.

Property damage coverage: Third-party insurance also covers damages caused to the property of a third party, such as other vehicles, buildings, or infrastructure. This coverage safeguards you from significant financial losses.

Cost-effective option: Compared to comprehensive own damage insurance, third-party car insurance tends to be more affordable. It provides basic coverage at a lower premium, making it a cost-effective option.

Difference between own damage insurance and third-party insurance 

Listed below are the differences between own-damage insurance and third-party insurance, 

Category 

Own damage insurance

Third-party car insurance

Coverage

Provides coverage for damages to your own vehicle caused by accidents, theft, natural disasters, fire, and vandalism.

It covers legal liabilities arising from injuries, damages, or death caused by a third party involved in an accident with your insured vehicle.

Property damage coverage

Covers damages caused to your own vehicle, including repairs or replacement costs.

Covers damages caused to the property of a third party, such as other vehicles, buildings, or infrastructure.

Personal accident cover

Some policies may include personal accident cover, providing compensation for injuries or death resulting from an accident involving your insured vehicle.

Does not typically provide personal accident cover unless specifically included as an add-on optional benefit.

Legal compliance

Optional, not mandated by law, but often included with comprehensive policies.

Mandatory by law to have at least third-party car insurance for all vehicles plying on Indian roads.

Premiums

Relatively higher premiums due to comprehensive coverage and additional benefits.

Lower premiums compared to own damage insurance since it provides basic coverage for third-party liabilities, and the rates are fixed by IRDAI depending on the car

No Claim Bonus

Eligible for no claim bonus for maintaining a claim-free record, leading to reduced premiums during policy renewal.

A no-claim bonus is not applicable to third-party car insurance as it only covers third-party liabilities.

Conclusion


Car insurance policies provide motorists with financial protection and peace of mind. Before making a policy purchase, it is mandatory to apprise yourself of the types of policies, including own damage and third-party insurance policies, and which one to choose. Always prioritise third party car insurance, and if possible, go for comprehensive motor insurance coverage for complete protection.

Disclaimer: The above information is for illustrative purposes only. For more details, please refer to policy wordings and prospectus before concluding the sales. 

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