Difference between Comprehensive Insurance & Third-Party Insurance

By PolicyBazaar

Buy Car Insurance in 30 Seconds !

Average Rating / 5 (ratings )
1421 Views
Published: 11 June 2019Last Updated On: 10 May 2021
akshay-img

The quest to find the best car insurance coverage for you can be a bit lengthy and may require some thorough research but in the end, it is all worth it. Several factors plays very important role when you are choosing your car insurance and one of them includes choosing the type of insurance cover. Insurance companies in UAE offer two basic kinds of vehicle insurances – comprehensive car insurance and third-party insurance. Both these insurance types have their individual benefits but they also have several differences. As an aware customer, it is important that you have a basic understanding of both.

Comprehensive Car Insurance

A comprehensive car insurance plan is meant to provide full coverage to both the insured and the third party in case of an accident. From damages incurred by the vehicles to medical bills of the third party and the insured, almost everything is covered by a comprehensive car insurance policy, hence the name. On top of accidental insurance cover, comprehensive car insurance  also covers theft, complete loss of the vehicle, fire, natural disasters, vandalism, civil disturbances like riots, and some add-on services like engine cover, accessories cover, zero depreciation, etc.

Although car insurance and vehicle insurance is mandated by law in the UAE, it does not make comprehensive can insurance a compulsion, However, being the most thorough insurance available out there, comprehensive insurance is often recommended and preferred by most vehicle owners out there.

But What Exactly is Comprehensive Car Insurance? Let’s Understand with an Example

To understand the coverage umbrella of a comprehensive car insurance plan better, let us see an example. Say you have parked your car out in a street. A tornado happens to hit overnight and the raging rains happen to destroy the car in the process. Even when it is nobody’s fault that the car has been destroyed and requires extensive repairs to be of use again, the insurance company will cover the full cost of the damaged car, minus the deductible to be paid by the insured.

Another example can be an accident. You were driving and your car collided with another and damages are incurred by both the vehicles. Even if you happen to be at fault for the accident, your insurance company will cover all costs of damage repairs and medical bills for both you and the third party if they make a claim.

Benefits of Comprehensive Car Insurance

  • Undoubtedly, comprehensive car insurance is the highest and the best level of insurance that you can get for your vehicles.
  • It will cover not only your personal medical damages and damages incurred by the vehicle but also any third-party damage claims.
  • Along with that, lawsuits and legal fees against you are also covered here.
  • All-natural and man-made disasters are also fully covered under comprehensive insurance.
  • The IDV or the Insured Declared Value of your car can be chosen freely by you in the case of comprehensive car insurance. It is the amount that the insurance company will pay in case of loss or complete damage to the car. Although, higher the IDV, higher the premium.

What does Comprehensive Car insurance Cover?

  • Damages incurred to you in an accident (vehicles + personal)
  • Damages incurred to a third party (vehicles + personal + property)
  • Natural Calamities like floods, tornados, landslides, earthquakes, etc.
  • Man-made disasters like riots, strikes, terrorism, fire, vandalism, etc.
  • Theft of the car.
  • Third-party claims or liability – includes the lawsuits and legal fees.
  • Mechanical expenses to upkeep the wear and tear of the vehicles.
  • Engine protector cover.
  • Roadside assistance for jump starts, tire changes, etc. in case of roadside emergencies.
  • Extended Accident Cover that will include passengers, and paid drivers as well.
  • Tire protection cover.
  • Consumable cover.
  • No Claim Bonus Protection cover.

Exclusions in a Comprehensive Car Insurance

  • Damages incurred when using the vehicle for illegal activities.
  • Damages incurred when using the vehicle after its due usage limit.
  • Damages incurred during the war, nuclear accidents, etc.
  • Accidents caused when driving under influence of drugs or alcohol.
  • The invalid license of the driver or under-age drive.
  • Damages caused by the owner, wilfully.
  • Damages caused due to negligence or improper upkeep of vehicles.

Third-Party Car Insurance

Third-party car insurance will offer full coverage in the event of liability to a third party for the damages caused by your vehicle due to your fault. It is mandatory to have at least third-party insurance in the UAE for all cars. Third-party liability insurance would cover any damages incurred by the vehicles of the third party as well as their own medical bills in case they have sustained injuries. One thing to note here is that your own car is not covered for damage under this type of insurance plan and neither are your own injuries.

Let’s Try to Understand Third-Party Cover in a Better Way

Let us see an example to get a better understanding of third-party coverage. You are driving on a highway and happen to meet an accident while overtaking. Your car as well as the car you collided with have suffered damages along. You and the other driver are also injured. You being at fault, your insurance company will cover for the damages caused to the third-party vehicle and injuries caused to the third-party itself. However, the damages caused to your vehicle will not be covered and neither will your own medical bill.

Another example here can be natural disasters, theft, and fire. If your car happens to be damaged during a natural disaster or a man-made disaster like riots, terrorism attacks, etc. or gets stolen, the insurance company will not cover for the loss of your car or the damages.

Benefits of Third-Party Insurance

  • Security from Legal Liabilities is the biggest pro of third-party car insurance. Even when at fault, it is not necessary that the insured person causes the accident knowingly. Having to pay hefty legal claims from third-party can be a huge burden. This type of insurance cover will save you that trouble.
  • Third-party car insurance plans are cost-effective protection against damages. Since the cover umbrella is smaller, the premiums and deductibles are also lesser.
  • Third-party insurance is a great fall-back option when your car is not brand new anymore and you can afford to pay the self-repair charges yourself.

What does Third-Party Car insurance Cover? 

  • Damages incurred by third-party vehicle
  • Medical bills of injuries sustained by the third-party driver
  • Legal claims made by the third party

Exclusions in a Third-Party Car Insurance 

  • Any damage incurred by the car of the insured during accidents and by natural or man-made disasters
  • Theft or complete loss of the vehicle of the insured
  • Loss of car accessories of the insured
  • Medical bills of the insured due to the accident
  • Passengers or paid drivers for the car of the insured

Comprehensive Car Insurance VS Third-Party Car Insurance – In a Nutshell

 

Third-Party Car Insurance

Comprehensive Car Insurance

Definition

The most basic and mandatory car insurance plan that covers damages incurred by third-party vehicles as well as person due to an accident, when the insured is at fault An all-around cover that insures everything from third-party damages, your own damages due to an accident, and other factors like natural disasters and theft.

Coverage

Third-party vehicle and person Third-party vehicles, person, your own car damages and medical bills, damages due to man-made and natural disasters, thefts, and complete loss of the vehicle.

Pros

Protects you from all kinds of legal liabilities in case of an accident Protects you from legal liabilities and covers your vehicle from any kind of damage – accidental or otherwise

Cons

No coverage for your own car Can be a little expensive due to extensive coverage

Customizations

Not available Can be customised with a number of add-ons

Premium

Cheaper in comparison to comprehensive insurance Higher than any other type of car insurance

Which is better to buy for your new car?

It is better to go with comprehensive coverage if you have a brand-new, high-end car, straight out of the showroom. The coverage will be extensive and you will not have to bear the cost of repairs and damages yourself. The market value of a new car is high so it happens to get stolen, you will not incur any huge loss. Combine it with a zero-depreciation cover and you will have an ideal deal on your hands. It is easy to switch policies when the time for renewal comes so when you start to feel like the price of the premium is coming out more than the value of the car altogether, you can simply switch to another type of mandatory insurance.

Reasons to Upgrade to a Comprehensive Car Insurance

Legally Appropriate: A comprehensive insurance plan is not legally mandated like third-party insurance but it is more than sufficient to replace the mandated insurance since it covers third-party liability insurance as a part of it.

Complete Damage and Loss Cover: A comprehensive insurance would cover everything from accidental damages to yours and third-party vehicle to damages by natural disasters, theft, loss, etc. Combine some add-ons and even your car accessories will be covered by the plan. You will basically have complete coverage for your car with comprehensive car insurance.

Unique Add-On Covers: With options like extended covers for passengers and accessories, no claim bonus protection cover, and zero-depreciation cover, comprehensive car insurance come with unique and out-of-the-world customisation options for the insured. 

Factors to Consider Before Buying Car Insurance

  1. Coverage: The very first factor to consider when buying car insurance is the kind of coverage you would like or the kind that your vehicle requires. It may be a sound choice to go choose a comprehensive cover if your car is new or luxury or if you live in high-risk areas where accidents are prone to happen. It becomes essential in the latter case as only a comprehensive policy would save you from legal claims and cover your car damages as well. Third-party insurance can be a good choice if you want basic protection from legal claims and can afford to pay for the damages of your car yourself.
  2. Deductibles: Depending on the policy that you choose, you can get a mandatory or voluntary deductible choice. Voluntary deductibles can be increased or decreased as per your choice while the mandatory ones cannot. Also, the higher the deductible that you pay, the lower your premium will be.
  3. Premium: If you do not wish to pay high premiums then third-party insurance can be a good fit for you. Comprehensive insurance plans come with high premiums because of the extensive coverage that they offer. 
  4. Value of the Vehicle: Not that you will not be able to get a comprehensive plan for an old vehicle, an old, seldom-used car may not be at as much risk as you will pay for its insurance. Meaning, the old car that you have will have lower market value, could be easily repaired, and may not be at the risk of being in an accident as much as a new vehicle. Always compute these factors before you decide on an insurance plan.

FAQs

Q1. Why is buying comprehensive car insurance a smarter choice?

Ans. A comprehensive cover will give your vehicle all-round protection against all unforeseen accidents and calamities. The add-on services can even help in claiming the original value of the vehicle at the time of total loss or theft of the car. In short, a comprehensive plan is fool-proof protection for your vehicle against all damages and liabilities that come your way.

Q2. Can I switch from a third-party policy to a comprehensive policy on renewal?

Ans. Yes, you can easily switch to comprehensive car insurance from a third-party insurance plan upon renewal. The process is pretty much the same as buying a new policy from your provider too. Just locate the application form on the website of the provider and fill up the necessary details to start the process.

Q3. Why is comprehensive car insurance more expensive than third-party policy?

Ans. Simply because of the benefits that it offers. Comprehensive insurance covers your vehicle in event of damages caused by almost any means including accidents (insured and third party both), theft, loss, man-made disasters, etc. Since the risk is higher for the insurer in the case of comprehensive cover, it is more expensive than the third party which covers only out of all the factors that comprehensive plans cover.

Q4. What are the best add-on covers for a comprehensive car insurance policy?

Ans. Following add-ons can be considered when buying a comprehensive car insurance cover:

  • No Depreciation Cover: Covers the cost of depreciation and helps in getting a higher claim amount in case of total loss or damage.
  • Engine Protection Cover: Protects loss or damages incurred by the engine.
  • Roadside Assistance Cover: Comes in handy for 24x7 roadside assistance and services in case of emergency
  • Return to Invoice Cover: Helps in obtaining the invoice value of the car in event of total loss or damage.
  • No Claim Bonus Cover: keeps you eligible for no claim bonus even if you apply for a claim