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Should I purchase the Comprehensive Insurance policy or the Third Party Only policy?

It is better to go for the comprehensive insurance policy rather than the third party only policy.

Apnainsurance.com Research Bureau

27 Nov 2007

Let's resolve this confusion of choosing between a Third Party (also called Act Only) and Comprehensive
car insurance policy using the following example:

Mr. X, due to the bad traffic on the city roads, employs a driver. One day, after dropping Mr. X at the office, the driver collides with another car on the highway and dies on the spot.

As an employer, Mr. X is liable to compensate the driver's demise as the driver was in the vehicle in the course of his job. Now, as the Motor Vehicles Act has made it mandatory to insure liabilities under the Workmen's Compensation Act, the driver's son files an application to the Labor Commissioner and is awarded Rs.1,50,000. Mr. X has a Third Party policy - he approaches the insurance company, who in turn compensates the claim.

The liability for compensation as per the Workmen's Compensation Act depends on the wages of the employee and his age, and largely represents the loss of earnings.

Other losses such as mental pain and agony for the family, loss of consortium, future expenses of dependents, and loss of prospective earnings are not accommodated. The driver's son now approaches the Motor Accident Claims Tribunal, demanding a compensation of Rs.1,00,000 towards these losses. The Tribunal awards him Rs. 50,000.

Mr. X's Third Party policy does not cover the second award, from the Motor Accidents Claims Tribunal. As a result, he has to pay the Tribunal award of Rs. 50,000 from his own pocket. If Mr. X had purchased the Comprehensive policy with additional personal accident cover for passengers and drivers, the insurance company would have paid the additional compensation.

Moral of the story: It is always advisable to purchase the Comprehensive policy covering additional liabilities.

See also:

Motor Insurance Policy A or Third Party Policy or Act Only Policy or Liability Only Policy

Motor Insurance Policy B or Comprehensive Policy or Own Damage Losses Policy or Act Liability Policy

Are there extensions that can be added to the Comprehensive policy?

What are the risks covered by the Third Party policy?

What are the risks covered by the Comprehensive policy?

What are the different types of Personal Accident Covers available for drivers and passengers?

Third Party, Fare-Paying Passengers, and Non-Fare Paying Passengers

What is Malus?

What is No Claim Bonus?

Motor Insurance FAQs on Claims

Motor Insurance FAQs on Coverage

Motor Insurance FAQs on Cost, Premiums, Bonus, Discounts, Renewals