What is First Party and Third Party Car Insurance? Which One Should You Buy?

Owing to the rapid growth, insurance companies in the UAE provide comprehensive and bespoke insurance plans according to customers’ needs. Today, individuals are not only able to secure their life but also their belongings. After health and life insurances, car insurances in UAE are one of the most popular protection plans. Vehicle/car insurance is a contract between the vehicle owner and the insurer wherein the insurance company secures the vehicle against loss or damage due to accidents. It also provides cover for the driver and passengers in case of life loss or disability during accidents.

Buying a new car in the UAE also brings the responsibility of following the transport regulations and laws in the UAE. As a vehicle owner, the first and foremost compulsion for you is to get insurance for your car. And the most basic insurance or specifically compulsory plan is third-party motor insurance. 

Those not well versed with car insurance may find the first and third party car insurance confusing. Let’s find out various parties involved in car insurance in UAE and how car insurance work for them.

Various Parties in a Car Insurance in UAE

Unlike life and health insurance, where two members are involved, car insurance involves three parties. The details of various involved parties in car insurance in UAE are as follows - 

• First Party -  Individual who purchases the car insurance in UAE is referred to as the first party. The vehicle owner pays the insurance premium to avail of the benefits of motor insurance against accidental loss or damage to the vehicle. 

• Second Party - The company that insures the vehicle and its owner from accidents is the second party. The car insurance company receives the premium from the first party and in exchange, it protects the policyholder and the insured vehicle against accidents. 

• Third Party - Any individual other than the policyholder and the insurer can be recognised as the third party. The third party may be directly or indirectly affected by an accident due to the insured vehicle. It can be an owner of the other vehicle or a pedestrian involved in the accident with the first party. The insurance company is obliged to pay settlement for the loss of property or injury to the third party incurred due to an accident by the first party.

Types of Car Insurances in UAE

Before getting your new vehicle out on the road, you need to have compulsory insurance ready. And prior to that, you need to know the various car insurance in the UAE to choose the best insurance for your car as per your needs. The Road Transport Authority of UAE has made it mandatory for all vehicles to have third party insurance in UAE. Details of different car insurances are given below.

• Comprehensive Car Insurance

It is also known as first-party motor insurance. Comprehensive car insurance secures the owner and the insured vehicle from losses due to accidents even if the vehicle is not on road. As the name suggests, comprehensive car insurance provides complete protection to your vehicle from unforeseen events such as fire and allied perils, theft, vandalism, etc. The insurer is liable to pay for the losses incurred during accidents. Apart from that, comprehensive insurance also provides personal accidents cover to the first party. If the driver or the passenger suffers from a total or partial disability, death, etc., the insurance company pays for the losses. 

Comprehensive car insurance also comes with a variety of additional riders. Vehicle owners can avail of added protections by paying a higher premium. A few additional riders available for the car owners are engine protection, roadside assistance, repair expenses, etc. 

• Third-Party Liability Car Insurance

Third-party car insurance protects uninsured individuals who are affected by an accident due to the insured vehicle. The third party can also file a claim settlement directly with the insurance company. The second party or the insurer is liable to pay for the third party losses such as injury, death or property damage, etc. by the insured vehicle. 

For example - You hit another car while driving on a foggy road. In such a case, you are responsible to pay for the losses incurred to the victim. However, with third-party car insurance, your insurer will compensate for the third party damages/losses when they file a claim settlement. 

As per the UAE Road Transport Authority, third-party car insurance in UAE is mandatory for all running vehicles. 

What are the Differences Between a First-Party and Third-Party Insurance?

Major differences between the first-party and third-party insurances are tabulated below -

First-Party Car Insurance

Third-Party Car Insurance

It is the insurance policy purchased by a person to avail of protection against accidental damages to the vehicle and self.  The first party gets accidental coverage through comprehensive car insurance in which the insurance company compensate for injury or death of driver or passenger during an accident.  To get himself covered, the vehicle owner needs to buy a car insurance plan with accidental coverage. Various insurance providers offer different amounts of compensation depending on the insurance plan and the premium.  The first party (owner) won’t receive any benefits for himself/herself if his/her vehicle is insured only with the third-party car insurance.

It is the policy that covers the individual affected by an accident caused due to the insured vehicle.  The third party gets accidental coverage through third-party car insurance. The insurance provider compensates for his/her losses on the first party’s behalf.  The third party doesn’t need to purchase any insurance plan for getting compensation for their losses. They can directly file a claim with the insurance company for any damages caused due to the insured car.  In case of accidents resulting in the injury or death of a third party, the maximum settlement offered is AED 200,000 by most car insurance providers in the UAE. Whatever car insurance the vehicle owner opts for, the third party would receive the settlement.

Key Inclusions and Exclusions of First-Party Car Insurance in UAE

First-party insurance provides comprehensive protection to your vehicle. Whether your car is on the road or parked, your insurance provider would compensate for the losses/damages. 

Major Inclusions of First-Party Car Insurance in the UAE

• Loss or damages to your vehicle due to fire, explosion and allied perils. 
• Any loss or damages to your vehicle due to vandalism or third-party malpractices. 
• The policy also covers damages to third-party vehicles in an accident due to an insured vehicle.
• The policy covers loss or damages to your vehicle in case of an accident. 

Major Exclusions of First-Party Insurance in the UAE

• The comprehensive or first-party insurance does not cover the depreciation of your vehicle.
• The policy does not cover mechanical and electrical failures. 
• It does not protect against the normal wear and tear of your vehicle. 
• The first party wouldn’t receive any compensation for the accidental damages and losses caused to the car if the driver was under the influence of alcohol/intoxicants. 

Key Inclusions and Exclusions of Third-Party Car Insurance in UAE

Every car owner needs to buy third-party car insurance in UAE before hitting the road. The third-party car insurance consists of the following inclusions and exclusions. 

Major Inclusions of Third-Party Car Insurance in the UAE

• The third-party insurance includes coverage against third party property loss.
• The insurance also includes coverage of up to AED 200,000 against injury or death of a third party due to an accident caused by an insured vehicle. 

Major Exclusions of Third-Party Car Insurance in UAE

• The third-party insurance does not cover damages to your own car. 
• You don’t get a car replacement or repair option under third-party insurance.

Which Car Insurance Should Your Buy between First and Third-Party Insurance?

As third-party car insurance is mandatory by the UAE transport law, you don’t have an option not to choose it. If you want comprehensive protection for yourself, your passengers and the vehicle, you should opt for first-party car insurance. In addition to that, the first-party car insurance also comes up with numerous add-ons and customisations, making it a better choice for your complete protection on the road.

Conclusion

Driving on the road can be very unpredictable. Individuals need to have car insurance for their own security. They may consider their insurance requirement while buying the best car insurance in uae as per their needs. To have basic coverage, they can opt for third-party car insurance. If they wish to avail of complete protection for their vehicle and passengers, they should buy a comprehensive insurance plan in the UAE.