Third-party insurance is compulsory for every car on Indian roads, but it only protects others — it does not pay a single rupee towards repairing your own vehicle. If your car is damaged in an accident, stolen, or caught in a flood, you would face the full repair or replacement cost out of pocket without first-party cover.
First-party car insurance, also known as own damage (OD) cover, is the part of your motor insurance that protects your own vehicle. This guide explains what it includes, what it excludes, how premiums are calculated, and how to get the most value from your policy.
What Is First-Party Car Insurance?
First-party car insurance is a contract between you (the policyholder, also called the first party) and the insurer (the second party) that protects your own vehicle against losses or damages. The insurer compensates you for repair or replacement costs up to the Insured Declared Value (IDV) of your car, subject to the policy terms and applicable deductibles.
It is an optional cover that can be purchased as a standalone own damage policy or as part of a comprehensive car insurance plan that includes third-party liability as well. It does not cover damages caused to third parties — that is handled by your third-party liability cover.
First-party cover can be enhanced with add-ons such as zero depreciation , engine protection , return to invoice, roadside assistance , and consumables cover. These add-ons increase the premium but reduce your out-of-pocket expenses during claims.
How Is a Car Insurance Premium Calculated?
The cost of first-party ( own damage ) car insurance depends on several risk factors. These are the key drivers of the premium:
Insured Declared Value (IDV): The car's current market value after depreciation is the primary factor. A higher IDV means a higher premium because the insurer's maximum payout increases.
Vehicle age: Older cars have lower IDVs due to depreciation, which reduces the premium. However, very old vehicles may attract a loading surcharge due to a higher risk of mechanical failures and costly repairs.
Engine capacity (CC): Cars with larger engines typically cost more to insure because they are associated with higher repair costs and greater risk exposure.
Registration location: Cars in metro cities with higher traffic density and theft rates attract higher premiums than those in smaller towns.
No Claim Bonus (NCB) : A discount of up to 50% on the own damage premium is available for consecutive claim-free years. See the full NCB slab table below.
Add-ons selected: Each add-on, such as zero depreciation or engine protection, increases the base premium but extends coverage for specific risks.
GST at 18%: This is applied to the total premium amount, including the base premium, add-ons, and any applicable processing fees.
Voluntary deductible: This is the share of every claim you agree to pay from your own pocket. Choosing a higher voluntary deductible reduces your premium. (Note: a compulsory deductible of ₹1,000 for engines up to 1,500cc and ₹2,000 for engines above 1,500cc is also applied by all insurers per IRDAI rules, regardless of the voluntary deductible.)
Premium Calculation Example
Consider a petrol sedan with an ex-showroom price of ₹10,00,000, now 3 to 4 years old (attracting 40% depreciation as per IRDAI schedule).
IDV = ₹10,00,000 × (1 – 0.40) = ₹6,00,000
Base OD premium at 2.5% of IDV = ₹15,000 (illustrative rate; actual rates vary by insurer)
After 35% NCB (3rd claim-free year): ₹15,000 × 0.65 = ₹9,750
Add zero depreciation add-on (₹2,000): ₹9,750 + ₹2,000 = ₹11,750
After 18% GST: ₹11,750 × 1.18 ≈ ₹13,865 total premium
This example is illustrative. Actual premiums vary by insurer, location, fuel type, and the specific add-ons chosen.
Benefits of First-Party Car Insurance
Own damage coverage: Covers repair or replacement costs for accidents, fire, theft, natural calamities, and vandalism — protecting you from large, unexpected expenses.
Theft protection: Provides compensation up to the IDV if your car is stolen and not recovered.
Cashless repairs at network garages: The insurer settles the repair bill directly with the garage, so you do not need to pay upfront and wait for reimbursement.
Personal Accident (PA) cover: Provides financial support of up to ₹15 lakh in case of accidental death or permanent total disability of the owner-driver. This cover is mandatory for all private vehicles under IRDAI regulations, including those with only a third-party policy — it is not exclusive to first-party insurance.
Add-on flexibility: Customise the policy with optional covers such as zero depreciation, engine protection, roadside assistance, and return to invoice based on your specific needs.
NCB accumulation: Each claim-free year earns you a progressive discount on the OD premium, making your renewal progressively more affordable.
First-Party vs. Third-Party Car Insurance
Parameter | First-Party (Own Damage) | Third-Party |
Coverage | Covers damage to your own vehicle. | Covers liability to third parties only. |
Legal requirement | Optional. Recommended for newer or high-value cars. | Mandatory under the Motor Vehicles Act, 1988. |
Premium | Higher; varies by IDV, vehicle age, and chosen add-ons. | Lower; fixed by IRDAI tariff annually. |
Add-ons | Available (zero depreciation, engine protection, roadside assistance, etc.). | Not available. |
No Claim Bonus (NCB) | Applicable. Up to 50% discount on OD premium over 5 years. | Not applicable. |
Claim benefit | Repair or replacement cost of your own vehicle up to the IDV. | Compensation to the injured third party. |
Inclusions Under First-Party Car Insurance
Accidental damage: Covers repair or replacement costs for damages from collisions, overturning, or impacts with objects.
Theft: Compensates you up to the IDV if your car is stolen and not recovered.
Fire damage: Covers losses from fire, explosion, self-ignition, or lightning.
Natural calamities: Covers damage from floods, earthquakes, storms, hailstorms, and landslides.
Vandalism and malicious acts: Covers damage from riots, strikes, or deliberate acts by third parties.
Personal Accident (PA) cover: Mandatory ₹15 lakh cover for the owner-driver in case of accidental death or permanent total disability.
Transit damage: Covers damage to your car while it is being transported by rail, road, or water.
Add-ons (if chosen): Optional covers such as zero depreciation, engine protection, roadside assistance, consumables cover, and return to invoice.
Exclusions Under First-Party Car Insurance
Negligence: Damage from leaving the car unlocked, keys in the ignition, or similar careless acts is not covered.
Intentional damage: Losses from deliberate acts by the policyholder are excluded.
Normal wear and tear: Depreciation, ageing, mechanical breakdown, and damage from lack of maintenance are not covered.
Illegal activities: Losses from unlawful acts — including driving under the influence of alcohol or drugs — are excluded.
Driving without a valid licence: Claims are rejected if the driver did not hold a valid, current driving licence at the time of the accident.
Consequential losses: Indirect financial impacts of the car being off-road — such as lost business revenue or car hire costs — are not covered.
Commercial use of a private vehicle: Damage that occurs while using a privately registered car for paid commercial purposes (e.g., running a taxi service) is excluded.
How First-Party Insurance Coverage Works
When your car is damaged in a covered event:
Notify your insurer immediately. Most policies require notification within 24 hours for theft and within 48–72 hours for accident damage. Refer to your policy document for the exact window.
File an FIR at the nearest police station if the damage involves theft, a major accident, or third-party injury.
Submit the claim form with your policy copy, driving licence, RC, repair estimates, and damage photographs.
The insurer assigns a surveyor to inspect the damage and estimate the repair cost.
For cashless claims: take the car to a network garage. The insurer approves and settles the bill directly with the garage. You pay only the applicable deductible.
For reimbursement claims: pay the repair bill yourself at any garage, then submit invoices to the insurer for reimbursement. You receive the amount after deducting the deductible and depreciation on parts (unless you have zero depreciation cover).
Factors to Consider While Buying First-Party Car Insurance
Set the IDV correctly: Choose an IDV close to your car's actual market value. Under-insuring saves on premium but leaves you exposed during a total loss. Over-insuring is not permitted — the IDV cannot exceed the market value.
Evaluate add-ons by car age: Zero depreciation cover is most valuable for cars under 5 years old. Engine protection is important if you live in a waterlogging-prone area.
Check the network garage list: A larger network means more cashless repair options near your home or workplace.
Compare quotes from multiple insurers: Premiums for the same IDV and add-ons can vary significantly between companies. Use online premium calculators to compare.
Understand your deductibles: Compulsory deductibles (₹1,000 for engines up to 1,500cc; ₹2,000 for engines above 1,500cc) are fixed by IRDAI and non-negotiable. Voluntary deductibles are your choice — a higher amount lowers the premium but increases your cost per claim.
How to Buy and Renew First-Party Car Insurance
You can buy or renew first-party car insurance online in a few minutes. Here is the step-by-step process:
Visit your insurer's website and go to the car insurance section.
Enter your car's details: registration number, make, model, manufacturing year, and fuel type.
Select your preferred IDV. You can adjust this within the range shown by the insurer.
Choose your coverage type (standalone OD or comprehensive) and add the add-ons that suit your needs.
Review the premium quote and compare it across insurers if needed.
Complete the payment. The policy document is issued digitally and sent to your registered email.
For renewals, complete the process before the policy expires to retain your accumulated NCB. A lapse of more than 90 days may require a fresh vehicle inspection and result in loss of NCB.
How to File a Claim Under First-Party Car Insurance
Notify the insurer: Report the damage or loss as soon as possible — within 24 hours for theft and 48–72 hours for accident damage.
File an FIR: Required for theft, major accidents, and third-party claims.
Submit claim documents: Policy copy, driving licence, RC, FIR (if applicable), repair estimate, and photographs.
Surveyor inspection: The insurer assigns a licensed surveyor to assess the damage.
Cashless claim: Take the car to an authorised network garage. The insurer settles the bill directly. You pay only the deductible.
Reimbursement claim: Pay the repair bill yourself, then submit all invoices and receipts to the insurer for reimbursement.
Tips to Reduce First-Party Car Insurance Premiums
Build your NCB: Each claim-free year earns a progressive discount on the OD premium. Here is the full IRDAI-mandated NCB scale:
Claim-Free Period | NCB Discount on OD Premium |
1st consecutive claim-free year | 20% |
2nd consecutive claim-free year | 25% |
3rd consecutive claim-free year | 35% |
4th consecutive claim-free year | 45% |
5th consecutive claim-free year (and beyond) | 50% |
NCB applies only to the own damage component, not the third-party premium. If you change your insurer, request an NCB certificate from your current insurer to carry the discount forward.
Choose a higher voluntary deductible: Agreeing to pay a larger share out of pocket during claims reduces the premium. Choose an amount you can comfortably afford.
Install approved anti-theft devices: Vehicles fitted with ARAI-approved anti-theft devices may qualify for a small premium discount from some insurers.
Avoid unnecessary add-ons: Select only add-ons that are relevant to your car's age, location, and usage. For cars over 5 years old, zero depreciation may add cost without proportionate benefit.
Compare quotes online: Different insurers price the same coverage differently. Use online premium calculators and comparison platforms to find the best rate.
Conclusion
First-party car insurance is the financial safety net that protects your own vehicle when things go wrong — whether that is an accident, a theft, or storm damage. While it is optional, it is strongly recommended for newer or high-value vehicles where repair and replacement costs can be substantial. Understanding the inclusions, exclusions, how the IDV and NCB work, and what add-ons suit your car helps you choose the right cover at the right price.
Keep your policy active, build your NCB by driving carefully, and review your coverage at every renewal to ensure your IDV remains accurate. The right first-party car insurance policy is one that gives you complete peace of mind without paying for cover you do not need.
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FAQs
Q1: Is First-Party Car Insurance Mandatory in India?
No. First-party (own damage) insurance is optional. Only third-party liability insurance is mandatory under the Motor Vehicles Act, 1988. However, first-party cover is strongly recommended for newer or high-value vehicles.
Q2: Why Is It Called First-Party Car Insurance?
In an insurance contract, you — the policyholder — are the first party and the insurer is the second party. Third parties are other people affected by your vehicle. First-party insurance covers losses to you (the first party) and your own vehicle, while third-party insurance covers liabilities to those outside the contract.
Q3: What Is the Meaning of First-Party Insurance?
It covers damages or losses to the policyholder's own vehicle, as opposed to third-party insurance, which covers liabilities towards others who are injured or whose property is damaged.
Q4: How Is the First-Party Car Insurance Premium Calculated?
The premium depends on the IDV, vehicle age, engine capacity, registration location, chosen add-ons, No Claim Bonus (NCB), voluntary deductible, and applicable GST at 18%. The IDV is the single biggest driver — a higher IDV means a higher premium.
Q5: Can I Buy First-Party Car Insurance Online?
Yes. Most insurers, including Zurich Kotak General Insurance Company (India) Limited, offer online purchase and renewal with instant premium quotes, digital policy issuance, and document delivery to your registered email.
Q6: What Documents Are Needed to File a Claim?
You need your driving licence, Registration Certificate (RC), insurance policy copy, FIR (if applicable), completed claim form, repair estimates, and photographs of the damage.
Q7: What Are Common Add-Ons Available with First-Party Insurance?
Zero depreciation, engine protection, roadside assistance, consumables cover, return to invoice, key replacement cover, and accessories cover are commonly available. Select only those that are relevant to your car's age and usage.
Q8: What Happens If I Do Not Renew My Insurance on Time?
You lose continuous coverage and your accumulated NCB. A lapse of more than 90 days typically requires a fresh vehicle inspection before renewal, and may result in a higher premium. Renew before the policy expiry date to avoid these issues.
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