What is 1st, 2nd and 3rd Party in Bike Insurance?
While researching two-wheeler insurance before you purchase, you will likely encounter terms such as 1st party, 2nd party and 3rd party insurance. These terms are important as they outline all the stakeholder’s duties and responsibilities in an insurance contract.
This piece will define each of these parties and their relevance in the context of bike insurance.
1st Party Bike Insurance: The Policyholder
The first party is the policy buyer, or in other words, the policyholder. In motor insurance, the first party is the two-wheeler owner who wants to protect his vehicle and himself.
Example of 1st Party
The 1st party refers to the two-wheeler owner who buys the insurance for their two-wheeler or the 1st automobile.
Coverage
In insurance, the 1st party is accorded total compensation for any losses they may incur due to an accident, theft, fire, natural disaster or act of vandalism to their vehicle. It guarantees that the policyholder (you) is financially protected in case something happens to your two-wheeler or you in the event of an accident.
Benefits of 1st Party Bike Insurance
Accident coverage: Helps with compensation for any harm to your two-wheeler resulting from an accident.
Natural disaster protection: Aids in settling claims from floods, storms or earthquakes.
Theft coverage: Pay for losses just in case your two-wheeler is stolen.
2nd Party Bike Insurance: The Insurance Company
The second party is the insurer—the company responsible for offering the insurance policy to the first party. Under any insurance policy, the second party is obligated to compensate the first party financially according to the policy's provisions.
Example of 2nd Party
If you purchase insurance from GoDigit, the insurance company will be the second party.
Role
The 2nd party (Insurance Company) accepts to pay for losses, damages, or liabilities incurred by the 1st party as stated in the policy contract.
3rd Party Bike Insurance: Liability Coverage
The third party refers to anyone other than the first party and the insurer. This ensures the first party is protected from legal consequences in case it harms, injures, or causes damage to the third party.
The third party bike insurance is compulsory for all vehicles plying on the roads in India as per the Motor Vehicles Act 1988 provisions.
Example of 3rd Party
If you have an accident with a pedestrian or with another vehicle on the road, a pedestrian or the vehicle's owner is the third party.
Coverage
3rd party insurance covers legal liabilities, including:
Injury or death of a third party: If you have caused an accident that leads to the death or injury of another person, compensation will be paid to that person through the policy.
Damage to third-party property: If you are held responsible for damage to other people’s property, such as cars, fences, or buildings, the policy will also address this.
Key Features of 3rd Party Insurance
Mandatory by law: Every vehicle owner in India must have at least third-party insurance.
No coverage for your vehicle: This policy does not include the policyholder’s two-wheeler or injuries to the policyholder but covers damages to the 3rd party.
Difference Between 1st 2nd, and 3rd Party Two-wheeler Insurance
As we have explored the definitions and roles of the 1st, 2nd, and 3rd parties in an insurance contract, now let's examine the differences between these types of insurances.
Aspect | 1st party insurance | 2nd party insurance | 3rd party insurance |
Who is covered | The Policyholder (you) | The insurance company | A third party affected by the action of 1st party |
What is covered | Damages to your vehicle, personal injuries (under comprehensive insurance). | Fulfilling the policy terms | Legal liabilities for injury or damage to other’s property. |
Requirement | Optional, but recommended (Comprehensive policy) | Mandatory to issue insurance contracts | Mandatory by law for all motor vehicles |
Coverage examples | Accident damage, theft, fire, natural disasters | Claim settlements and compensation | Injuries to others, damage to someone else’s property |
Which Insurance Should You Choose?
The right choice of bike insurance depends on the person and their situation. For instance, third-party insurance is cheaper than fully comprehensive policies since it only pays for the damages to other vehicles, not your own.
If you want complete protection for your vehicle, specifically from accidents, theft, or both, as well as from natural disasters, then comprehensive insurance is for you.
To choose the right cover for your bike or scooter, it is crucial to understand the first, second, and third-party insurance. Although third-party insurance is mandatory, it is recommended to look for a more extensive cover that would cover not only the two-wheeler but also the legal responsibility of the owner.
All these insurance forms are very important for the safety of all people on the road. Thus, understanding how each insurance party functions can help you make the right decision for you and your safety while driving.