insurance

Third Party Motor Insurance or Comprehensive Motor Insurance?

You just bought a new car, probably your first car. You love the car and want to give it your best. Everything about must be perfect. You want to secure and protect it against loss or accident. For that reason, you approach an insurance agent. But, you are not clear which type of Insurance Cover to go for. For the first time in your life you heard about – Third Party Motor Insurance or Comprehensive Motor Insurance and was to choose one. You wanted the best for your car, then the agent told you that Comprehensive Insurance is the best. You wanted to settle for it but when he told you the cost, you demanded to know about the Third Party Cover.
 
Now the question is which is the best? You must make a choice within a week so that you can start driving your car around. Since it is illegal to drive a car within insurance. Which would you rather choose? This will help people in such kind of situation to make the best choice.
There are four types of motor insurance cover available for vehicles. From the least cover to the highest here are the four:
  • Act Only Policy
  • Third Party Motor Policy
  • Third Party Fire & Theft Policy
  • Comprehensive Motor Policy
For the purpose of this post only Third Party Policy and Comprehensive Policy is reviewed.

Third Party Only Motor Insurance

This is a least type of insurance and most popular among motorists/car owners. It provides indemnity to the policyholder for death or injury to third parties arising from the use of the motor vehicle as well as for damage to property of third parties. It covers only Third Parties, hence the name, ‘Third Party Only Cover.’
In details, this policy covers:
(a) Insured’s legal liability to third parties in respect of any damages to the property of such third parties and for any injury or death to third parties from the use of the motor vehicle.
(b) Solicitors fees for the legal representation of the insured or his driver an any judicial proceeding arising from an accident which may give rise to a claim under the policy and any other expenses of the insured authorized by the insurer.

Comprehensive Motor Insurance

This is the widest form of insurance cover available for motor vehicles. It combines all the cover granted by all the other forms of insurance and further covers loss or damage to the motor vehicle occasioned by any form of accidental damage or collision including cover for own damage (i.e. accidental damage of one’s own vehicle). Medical expenses, personal effects etc are also covered. This is the highest form of cover, hence the name ‘Comprehensive.’ It attracts the highest premium.
In details, the policy protects against the following:
(a) Loss of or damage to the insured vehicle and/or its accessories while thereon:
(i) By accidental collision or overturning consequent upon mechanical breakdown or wear and tear
(ii) By fire, external explosion, self-ignition or lightning or burglary, house breaking or theft
(iii) While in transit (including the process of loading or offloading incidental to such transit) by road, rail, inland waterways, lifts or elevators
(iv) By malicious act
(b) The insured’s legal liability for death or bodily injury to or damage to property of third parties arising out of the usage of the insured vehicle
(c) Medical expenses of the insured, his driver or any occupant of the insured vehicle at the time of the accident. This cover is in respect of private cars only.
(d) Solicitors’ fees for the legal representation of the insured or his driver at any judicial proceeding arising from any accident which may give rise to a claim under the policy and any other expenses of insured authorized by the insurer. This includes representation at any inquest or fatal injury inquiry.

Third Party Only and Comprehensive, which should I buy?

To answer the we need to do a scenario analysis. For one to make an informed decision, it is more than just looking at both at face value. We have to take a deep look at each and determine limitation of both viz-a-viz the cost implication then from them draw a conclusion.

Scenario Analysis

To analyze the scenario, we will put both cover together and see how the compare.
 
From the above analysis, it is up to you to choose what cover suits you best. But, you must base your judgement on the value of the car and your ability to pay the premium. The former is the most important because the premium payable is nothing compared to the value of the car or the value at risk. Value at risk mean the value of your property exposed to loss or damage as result of an accident. For instance, if your car is new, it is best to insure it under comprehensive. Also if the car is expensive, do not joke with the insurance. People with G-Wagon and other exotic cars insure their vehicles on comprehensive basis. It is careless to insure a costly car on Third Party as against Comprehensive.
Furthermore, if the value of the car has depreciated so much, your best bet is Third Party Only cover. Some insurers do not insure vehicles below N500,000 under Comprehensive. They would insure such under Third Party Only.
Now, if you want your car insured but you think you do not need all the cover under Comprehensive and you don’t want Third Party Only, you can opt for Third Party Fire & Theft. (Watch out for Third Party Fire & Theft in our subsequent post).

Bottom Line

From the foregoing, you have now discovered that both policies are important, which ever you choose depends on your preference, budget and value of your vehicle.
Weigh your options carefully.
Main Image: https://www.nextinsurance.co.ke
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