WHAT ARE THE DIFFERENCES BETWEEN 1ST PARTY INSURANCE AND 3RD PARTY INSURANCE: MOTOR INSURANCE BUYING TIPS
Navigating motor insurance in 2026 requires more than just knowing the law. With the surge in Electric Vehicles (EVs), AI-driven premium pricing, and paperless claims, understanding the difference between First-Party and Third-Party coverage is essential to protect your investment
Is Motor Insurance Still Mandatory?
Yes. Under Section 146 of the Motor Vehicles Act, it remains illegal to drive any vehicle in a public space without at least Third-Party (TP) insurance.1 While TP is the legal minimum, the IRDAI (Insurance Regulatory and Development Authority of India) now encourages “Bundled Policies” for new vehicles—typically 3 years of TP and 1 year of Own Damage (OD) for cars.
1st Party vs. 3rd Party: The Key Differences
| Feature | First-Party (Own Damage/Comprehensive) | Third-Party (Liability Only) |
| Who is covered? | You (the owner) and your vehicle. | The “other” person (victim) and their property. |
| Legal Status | Optional (but highly recommended). | Mandatory by law. |
| Coverage Scope | Theft, accidents, fire, natural disasters, and EV battery damage. | Legal liability for injury, death, or property damage to others. |
| Premium Cost | Higher (based on vehicle value/IDV). | Lower (fixed by IRDAI based on engine/motor capacity). |
| No Claim Bonus | You earn discounts for every claim-free year. | Not applicable. |
2026 Motor Insurance Buying Tips
The insurance landscape has evolved. Here is how to buy smart this year:
1. Account for Technology & EVs
If you drive an Electric Vehicle or a Hybrid, a standard policy isn’t enough.
Battery Protection Add-on: In 2026, EV batteries make up nearly 40% of a car’s value. Ensure you have a specific cover for battery damage or short circuits.
Smart Key Protection: Replacing high-tech sensor keys can now cost upwards of ₹15,000. This add-on is a lifesaver.
2. Understand Your IDV (Insured Declared Value)
Your IDV is the maximum sum the insurer will pay if your car is stolen or totaled.2
Tip: Don’t intentionally lower your IDV to save on premiums.3 In the event of a total loss, you will receive significantly less than the car’s market value.
3. Look for “Pay-As-You-Drive” Models
Many insurers now offer usage-based insurance (UBI).4 If you work from home or use your car infrequently, you can opt for a “Pay-As-You-Drive” policy, which can reduce your 1st-party premium by up to 25%.
4. Zero Depreciation is a Must
For vehicles under 5 years old, a Zero-Dep (Nil Depreciation) cover ensures the insurer pays the full cost of replacement parts (like plastic, fiber, or rubber) without deducting for wear and tear.5
Filing Claims in the Digital Era
First-Party Claims (Your Damage)
In 2026, most claims are “Video-First.”
Instant Notification: Use the insurer’s app to upload a 360-degree video of the accident spot.
AI Assessment: Many companies now use AI to estimate repair costs within minutes of your upload.
Cashless Garages: Stick to the insurer’s authorized network to ensure the bill is settled directly between the workshop and the company.
Third-Party Claims (Damage to Others)
Third-party claims still involve the MACT (Motor Accident Claims Tribunal).6
Limit: Property damage is usually capped at ₹7.5 Lakh, while compensation for bodily injury or death is determined by the court based on the victim’s age and income.7
The Burden: If you only have TP insurance and your car is damaged, you must pay for your own repairs out of pocket.8
Final Verdict: Which should you choose?
While Third-Party insurance keeps you on the right side of the law, it leaves you financially vulnerable. For 2026, especially with the high cost of vehicle repairs and electronics, a Comprehensive (First-Party) policy with Battery/Engine Protection and Zero-Depreciation is the gold standard for peace of mind.
WELFIN INSIGHT
“The right insurance amount is not the cheapest or the highest it’s the one that fits your life.”
