Difference Between First-Party and Third-Party in Car Insurance

Choosing the right car insurance can be a real headache for many drivers, especially when deciding between first-party insurance and third-party insurance. The problem is that most car owners don’t fully understand the differences, which can leave them underinsured or facing unexpected expenses. While third-party insurance is legally required, it only covers damage or injury caused to others, offering no protection for your own vehicle. Conversely, first-party insurance provides comprehensive coverage, protecting your car against accidents, theft, or natural calamities. Understanding the key differences in first-party vs third-party insurance is essential to make an informed choice that safeguards both your vehicle and your finances.

Different parties involved in car insurance 

Every car insurance policy involves three main parties — the first party, the second party, and the third party. Understanding how each of them fits into the insurance process helps you know exactly what kind of protection you’re getting and what responsibilities each side holds.

●     First Party

The first party is you, the car owner or policyholder. You pay for the insurance policy and receive financial protection for your own vehicle. This is what comprehensive or first-party insurance is designed for — covering damage to your car caused by accidents, theft, fire, or natural disasters.

●     Second Party

The second party is the insurance provider, such as Zurich Kotak General Insurance. Their role is to honour the terms of the policy including claim settlement,, paying for repairs, or covering liabilities once a valid claim is approved.

●     Third Party

The third party refers to anyone else affected by the insured vehicle — for example, another driver, pedestrian, or damaged property. If your car causes an accident or injury, third-party insurance compensates the affected individual or covers the repair costs on your behalf.

Recognising how these three parties interact gives you a clear picture of how motor insurance works in India and helps you understand the difference between first-party vs third-party insurance, ensuring you choose coverage that truly fits your needs.

What is first-party car insurance?

A first-party car insurance policy provides cover to the vehicle owner (the first party) for damages, theft, or loss. It is commonly known as Own Damage (OD) cover in India and helps the policyholder handle financial losses caused by accidents, fire, natural calamities, or theft.

If your car is damaged in any covered event, the insurance company (the second party) pays for repair or replacement costs according to the policy. For instance, Zurich Kotak General Insurance offers Own Damage cover that can be enhanced with add-ons such as Zero Depreciation, Engine Protection, and Return to Invoice, giving you broader coverage and ease in managing repair costs.

What is third-party car insurance?

Third-party car insurance is mandatory under the Motor Vehicles Act, 1988 (amended in 2019). It covers your legal and financial liabilities if your vehicle causes injury, death, or property damage to another person (the third party).

Under this policy, the insurer compensates the affected third party for their losses as per IRDAI guidelines. However, it does not cover damage to your own vehicle. A Personal Accident (PA) cover for the owner-driver can be purchased separately or along with the policy. While third-party insurance ensures legal compliance, opting for an Own Damage or Comprehensive plan provides more complete coverage for your vehicle.

Key Differences Between First-Party and Third-Party Car Insurance Policies?

A car insurance policy is your safety net. In case of damage to you or anyone else, if you are the one to cause it, you are one to incur the losses. Hence, with a car insurance policy, you can be at peace mentally and not worry about facing financial losses under any circumstances covered by your policy.

Which One is Better: First-party or Third-party Insurance?

Both Own Damage (first-party) and third-party car insurance serve different purposes. If your aim is to meet the legal requirements, third-party insurance is sufficient, as it covers liability for injury, death, or property damage caused to others and ensures compliance with the Motor Vehicles Act, 1988.

On the other hand, if you want coverage for your own vehicle, an Own Damage (OD) cover is the better choice. It helps recover repair or replacement costs if your car is damaged due to accidents, fire, theft, or natural disasters. You can also enhance your policy with add-ons such as Zero Depreciation, Engine Protection, or Return to Invoice.

Zurich Kotak General Insurance offers Own Damage policies that can be customized with these add-ons, giving you broader cover and greater financial reassurance.

FAQs on First-Party vs Third-Party Car Insurance

1. What is the difference between first-party and third-party insurance?

First-party insurance, also called Own Damage (OD) insurance, covers damage or loss to your own car caused by accidents, fire, theft, or natural events. Third-party insurance, on the other hand, provides coverage for legal and financial liabilities if your vehicle causes injury, death, or property damage to another person. With first-party insurance, you (the policyholder) receive compensation for your losses, while in third-party insurance, the insurer settles the claim with the affected third party. Understanding this difference is key when deciding between first-party and third-party cover for your vehicle.

2. Is first-party insurance the same as comprehensive insurance?

No.. First-party insurance (Own Damage cover) protects only your vehicle. It does not automatically include third-party liability. A comprehensive car insurance policy, however, combines both Own Damage and third-party coverage, giving wider protection for both your car and any third-party liabilities.

3. Can I claim third-party insurance without an FIR?

In most cases, an FIR (First Information Report) is required for third-party claims involving injury, death, or significant property damage. For minor property damage, insurers may accept other forms of evidence, such as photographs, repair bills, or witness statements. These procedures follow IRDAI guidelines and Zurich Kotak General Insurance claim policies.

4. Can I opt for both types of insurance?

Yes. You can take both Own Damage (first-party) and third-party insurance together. A combined policy ensures that your vehicle and any third-party liabilities are covered, offering comprehensive financial protection against accidents, theft, or unforeseen events.

5. What are the benefits of first-party insurance?

A first-party (Own Damage) policy covers your car against damage, theft, fire, vandalism, and natural or man-made calamities. You can enhance your cover with add-ons like Zero Depreciation, Engine Protection, or Return to Invoice to increase claim value. Policies from Zurich Kotak General Insurance also offer benefits like cashless repairs and faster claim settlements for a smoother experience.

6. Can I add additional coverage options to my first-party insurance policy?

Yes. With Zurich Kotak General Insurance, you can strengthen your Own Damage policy with optional add-ons such as  Depreciation Cover, Engine Protection, Consumables Cover, or Return to Invoice. These add-ons increase claim payouts, reduce out-of-pocket costs, and provide more reliable financial cover for your vehicle.