Owning a car comes with a great feeling. However, owning a car comes with its responsibility. It will help if you abode by the rules and regulations of the country before you can drive on public roads. One of the essential laws for you to follow is buying auto insurance for your vehicle before driving on public roads. Whenever you witness people discussing car insurance, you probably might have heard the term “third party” or “first party.” If you are not conversant with insurance terminologies, you probably do not know what those terms mean in the context of auto insurance. Read on to know everything about “third party” or “first party” in auto insurance and the significant differences.
Types Of Parties Involved In Auto Insurance:
Vehicle insurance is a contractual agreement between two parties. This contract also discusses implications concerning both parties. Before you get confused, here’s an improved explanation of the types of parties in auto insurance:
First Party
You must have heard the statement ‘the customer always comes first’ countless times. It is a simple method to comprehend and recollect who is the first party in auto insurance. The first party is you, the customer. When you buy auto insurance coverage from a certified insurance company, you become the First Party regarding the agreement.
Second Party
The insurance company you buy the insurance policy plan from by paying the required insurance premium is the Second Party in the contract. The Second Party accepts your money and offers certain protections, a promise bound by the agreement. The Second Party, which is the insurance company, assures the First Party that is you, that if anything happens to your car, the company takes responsibility for its care depending on the terms and conditions of the policy.
Third Party
It may very well be anybody; for instance, a walker strolling in the city. These Third Parties can get injured or their properties damaged due to an accident caused by your (First Party) vehicle. When this happens, the First Party is responsible for remunerating the Third Party in such situations, and due to the First and the Second Party having an agreement in place. The insurance company will deal with the liabilities as part of the third party insurance coverage.
What Is First Party Auto Insurance?
First Party insurance is a policy that protects you and your vehicle. It is also known as Comprehensive auto insurance coverage. This policy comprises the third party Liability cover, the Own Damage policy, and a Personal Accident Liability cover. The Own Damage plan is one of the significant policies of First Party insurance. It protects you and your car in case of an accident or natural disasters or riots etc. For instance, your insurer will compensate you for damages to your vehicle in case of fire, natural phenomenon, vandalism, terror attacks, etc. Theft is also covered in this type of policy.
What Is Third Party Auto Insurance
A third party auto insurance policy is a policy where the benefit is provided to a third party. This policy allows the second party (i.e., the insurance company) to pay any third party (i.e., other people) legal liabilities of the first party (i.e., you) to the third party. The legal liabilities arising out of the first party causing bodily injuries or damages to the third party with his/ her vehicle. For instance, you accidentally hit a pedestrian with your car. Legally, it is your responsibility to pay compensation to the pedestrian (third party victim). But with third party auto insurance coverage, your insurer will pay the pedestrian (third party) on your behalf.
