Like any other finance-related service, insurance is also regarded as complex in nature. With quite a few technical jargons and terminologies, getting a grasp becomes slightly complicated. Although that being said, it isn’t a herculean task. Breaking down these terminologies to what a lay man comprehends can help in a better understanding. For that purpose, insurance companies often mention what each of these terms mean in its policy document.
Since you are aware that it is mandatory to have an insurance policy if you own a bike, it comes down to selecting the coverage for it. Third-party plans are the minimum legal requirement by the Motor Vehicles Act of 1988. However, there is another option of first-party or comprehensive insurance covers. This article emphasises on understanding these terminologies under bike insurance plans. Let’s have a look.
What is first-party insurance and the coverage it offers?
First-party insurance is the one that provides an all-round coverage for your bike. For this reason, it is also known as a comprehensive bike insurance policy. First party insurance is between the insurance company and you, the policyholder. In the event of an accident or any damages, the costs of these repairs are covered by first-party plans. Moreover, the compensation in this policy is directly paid to you by the insurance company. Following are the situations that is covered by first-party policy –
- Damage due to fire.
- Natural calamities.
- Theft.
- Man-made perils.
However, situations like routine wear and tear, depreciation on your bike, any electrical or mechanical breakdown, damages to tyres, tubes and other consumable spares, damages where the driver does not have a valid driving license or is under the influence of alcohol or other intoxicating substance are excluded from first-party coverage.
What is third-party insurance and its coverage?
As the name suggests, third-party bike insurance covers the holder, i.e. you against the damages due to a person outside the contract of insurance. Thus, a third-party cover is also known as liability-only insurance. Since it has limitation in its coverage, the two wheeler insurance price of these plans are cheaper when compared to first-party policies. Thus, it is advisable to use a two wheeler insurance premium calculator to balance both, the benefits and the price you pay for it.
The above highlights the stark difference between first-party and third-party coverage. Now, let us look at how a first party plan ranks above third-party cover.
As mentioned above, a third-party cover is the least you need to purchase. But buying first-party plans has its share of advantages. Not only does it provide comprehensive coverage, but also allows customisability. Using add-ons, first-party plans can be customised to provide the right coverage for your expensive bike. Moreover, with a first-party policy, you can get all that your insurance company has to offer, thus offering mental peace knowing you have the best coverage offered. Driving in congested traffic increases the risk manifold. With a first-party coverage, you no longer need to worry about the hole that might burn in your wallet in case repairs are required. However, that does not mean you can practice negligent driving.
In the end, it is a smart move to opt for first-party coverage and not limit your insurance policy to a liability-only plan. But make sure to carefully analyse what are your requirements and then choose the policy based on it. Insurance is the subject matter of solicitation. For more details on benefits, exclusions, limitations, terms and conditions, please read sales brochure/policy wording carefully before concluding a sale.