Third-party or comprehensive car insurance: which one, and why

What does third-party insurance pay for?

It pays for injury or damage you cause to other people and their property when you use the car in a public place. It is a legal requirement: under the Motor Vehicles Act, 1988, driving a motor vehicle in a public place without insurance is a punishable offence. It pays nothing towards your own car. IRDAI's handbook also notes that third-party premiums are laid down by IRDAI, not by the insurer.

What does comprehensive insurance add?

A comprehensive policy, which IRDAI's handbook calls a package policy, combines the third-party cover with own-damage cover for your car. As per the policy terms, that usually includes fire, theft, accidents, floods and other natural events, and riots. It usually excludes things such as damage while driving without a valid licence, driving under the influence, and mechanical or electrical breakdown. If you already hold a valid third-party policy you can buy standalone own-damage cover instead.

What is IDV, and why does it matter?

The Insured Declared Value (IDV) is the sum insured for your own car. It reflects the car's value based on the manufacturer's present value less depreciation for its age. It is the basis of what you can be paid if the car is stolen or written off, so a lower IDV can make the premium look cheaper while paying you less when it counts.

What is a deductible?

A deductible, also called excess, is the part of a claim you pay yourself before the insurer pays. Most policies carry a standard one, and you can often choose a higher voluntary deductible in return for a lower premium. It is a trade: a lower premium now, and more out of your pocket at claim time.

How do I compare two quotes properly?

Do not compare the premium alone. IRDAI's handbook says to compare deductibles, coverage and IDV as well, because a lower premium can come with a higher deductible, less cover and a lower IDV, which hurts you when you claim. Put the quotes side by side on these points:

• The same IDV, or a clear reason why it differs.
• The same deductible.
• The same add-ons, such as zero depreciation, engine protection and roadside assistance. Names and terms differ, so read the wording. Our motor insurance page lists the common ones.
• How the insurer handles claims, including its network garages near you.

Which should I choose?

For a financed or fairly new car, comprehensive is the sensible default, and lenders usually require own-damage cover on a financed car. For an old car of low value, third-party alone can be reasonable, because the own-damage cover may not be worth its premium. Either way you must have at least third-party cover.

Questions about car insurance types

Sources

• Handbook on Motor Insurance, Insurance Regulatory and Development Authority of India
• Motor insurance, IRDAI policyholder pages

Cover, exclusions and add-on terms are as per each insurer's policy wording. This guide is general information.