Comprehensive insurance vs Third-party insurance
The world of insurance can be so confusing with terminology that can be hard to understand. For example, you’d often see different car insurance packages, one offering comprehensive insurance and the other third-party insurance. So, what makes these options different? Who is this third party? And how do you know which one to choose? Let’s look at these two options available to you, to see what it is that will suit your needs.
Comprehensive insurance, like the name suggests, is an insurance option that covers your car against accidents, fire, theft and other insured events, as well as claims from third parties, windscreen and glass repairs. Some insurers may also offer add-ons like medical cover, cash back schemes for no claims as well as car hire as an option when your car goes in for repairs after an accident or loss. So, all in all, this option makes sure that you are covered for most unfortunate situations relating to your car.
However, as it covers a variety of events, comprehensive car insurance is an expensive insurance option, and you may be operating on a tight budget. It often happens that car owners then opt for a lesser form of cover, the most popular of these being third-party cover. This can be a great option for you if your car is an older model with a significantly decreased value or your car is not used often.
When processing a claim, the third party is the person suffering a loss because of your actions, and they will seek to settle their claim against you, the insured party. This may be the individual driving the car you may have crashed into, or even a business, if you crash into a fleet vehicle or cause damage to a business building. The second party will be your insurance company. So, if you have taken out third-party insurance, it means that in the case of another person claiming from you, you will be covered for their damages. It’s important to note though, that you yourself will not be covered, only the third party.
Insurers are aware that an accident isn’t always completely one or the other party’s fault, and in a case like this they may apply the Apportionment of Damages principles. This takes into account the role each party played in the accident and then calculates the amount payable for each party.
In short, a third-party insurance policy will only cover the other person’s damages, while comprehensive cover will cover both yourself and the other person (and possibly more, depending on your policy structure). It’s therefore extremely important to make an informed decision when deciding which structure will work the best for your individual needs.
Article with thanks to Hollard.