Should I buy third-party car insurance or a comprehensive cover?

There are no two ways about it when it comes to car insurance. If you own a car in India, you need valid insurance coverage on it as mandated by the Motor Vehicles Act, 1988. However, the Act does not mandate a comprehensive cover. It requires you to own valid third-party insurance coverage only to drive the car legally. Does that mean that you don’t need a comprehensive plan?

Before getting into the debate of third-party v/s comprehensive, let’s just quickly have a look at both types of plans.

• Third-party car insurance

A third-party car insurance plan is one that provides coverage against third-party liabilities, i.e., liabilities suffered if your car causes any financial loss to another individual due to physical injury, death or property damage. The policy, however, excludes coverage for the damages that the car itself might suffer.

• Comprehensive car insurance

A comprehensive car insurance plan offers an all-inclusive scope of coverage, hence the name. It covers the mandatory third-party liability and compensates the third party on your behalf. Furthermore, the plan also covers the damages that the car itself might suffer in an accident or due to natural or man-made calamities. 

Additional Read: Pros and Cons of Buying Car Insurance Online

Now that you know what these two policies mean, let’s have a look at the pros and cons of each.

Pros and cons of third-party and comprehensive car insurance plans

Which one should you choose?

The pros and cons give a fair idea of the policy which is suitable for your car. A comprehensive car insurance plan has more benefits than drawbacks. It also scores over third-party plans on a number of factors. As such, a comprehensive car insurance plan is usually the better choice of the two. 

Here’s a detailed look at the factors that make comprehensive car insurance plans a must-buy –

• All-inclusive coverage

The coverage of a comprehensive policy makes it an indispensable choice. You get covered for the following instances that might cause car damage –

• Car accidents
• Man-made calamities like fire, explosion, riots, strikes, etc.
• Natural calamities like earthquakes, floods, hurricanes, storms, etc.
• Theft of the car
• Damage suffered when transporting the car

Hence, these coverage features to ensure that you get financial compensation for the losses that you might suffer in unexpected emergencies involving your car. 

• Flexibility through add-ons

Comprehensive car insurance plans provide a range of optional coverage features called add-ons. These add-ons help in enhancing the scope of coverage and the claim amount. This enhanced coverage reduces your out-of-pocket expenses in the case of emergencies and brings financial relief. 

Some of the popular add-ons that you can avail of include the following –

• Zero depreciation cover helps you get coverage for the depreciation costs and get a higher claim payout
• Roadside assistance cover under which the insurer promises 24/7 assistance in the case of breakdowns
• No claim protection cover that protects the no claim bonus even after you make a claim
• Return to invoice cover that pays the invoice value of the car if your car is damaged completely or is stolen
• Engine protection cover that covers engine damages due to water seepage

Thus, you can choose one or more add-ons at a small additional premium and enjoy 360-degree coverage in your car insurance plan. 

• Attractive premium discounts

Comprehensive car insurance plans help in reducing the total premium outgo by offering attractive discounts. The first discount, which is also universal across all car insurance plans, is for not making claims in your policy. You can earn a no claim discount starting from 20% for the first claim-free year and going up to 50% if you don’t make claims for five successive years. 

Besides the no claim bonus discount, you also get discounts if you have any of the following –

• Membership in a recognised automobile association
• Have installed safety devices in your car
• The car is modified for the use of a disabled individual
• Have bought the policy online
• Existing customers of the insurance company, etc.

Thus, you can avail of these discounts, bring down the premium and yet enjoy a comprehensive scope of coverage. 

• Complete peace of mind

With a comprehensive car insurance plan, you can have complete peace of mind knowing that your car-related emergencies and their financial implications would be insured. Whether it is about fulfilling the mandate of the Motor Vehicles Act, 1988 or providing your car with a comprehensive scope of coverage, the policy does it all. So, you can drive your car with peace of mind and in the case of contingencies, the car insurance policy would shoulder the costs and spare you the financial trouble.

The verdict

A comprehensive policy, thus, is preferable, especially when your car is new or you have invested in a luxury model. If, however, you use your car sparingly or if your car is extremely old, you can make do with the third-party cover only. So, assess your needs and then make a choice. The comprehensive policy, however, proves ideal in most cases. 

So, to sum it up, a car insurance policy is a mandatory requirement. When deciding about the type of coverage, understand the scope and limitations of both third-party and comprehensive plans. Choose a comprehensive plan for a wider scope of coverage and get your car insured against possible contingencies.