What is Third Party Car Insurance?
In the earlier post, we have learnt about the most common car insurance available - the comprehensive. If you have not seen it, you may want to read up about it here.
Here, we’ll look at the other type of car insurance – the 3rd party car insurance. Recycling from the previous comprehensive insurance article, here’s what 3rd party insurance is;
“3rd party car insurance covers losses & damages caused by an authorized driver driving your car for 3rd party properties or people involved”
Still don’t get it? Perhaps this will help. Let’s rephrase it as 3rd party ONLY insurance. Easy-peasy, isn’t it? So 3rd party car insurance covers 3rd party properties or people. It just does not cover your car.
3rd party vs Comprehensive
You may have pondered, why would we buy third party car insurance when there’s comprehensive car insurance that covers your car as well? It all boils down to two reasons - age of car and price of the insurance premium.
When your car exceeds 15 years of age, you are no longer eligible to protect it with a comprehensive and as a result, you will have no choice but to go with the 3rd party.
But why? That’s because after 15 years of age, your car is deemed too risky by insurers. Break-downs will be too often to bear. Vital parts such as brakes, absorbers, etc will start to dysfunction and that may cause more accidents. Most of all, the market value or sum insured that greatly affects the premium value is too low. Let’s put it in an equation.
Lower sum insured + Higher risk due to age of car = Too risky
The other factor to affect your judgement between the two is that 3rd party insurance is significantly cheaper. But here’s the thing, is it worth it? Losing out the protection of your car with only 3rd party will be an excruciatingly painful experience to your wallet if anything should happen.
I love my old car. I still want it covered
Photo credit: https://avto.goodfon.ru/download/vaz-2101-kopeyka-zhiguli-lada-116/1280x800/
There’s an extension to add fire & theft for your car in a 3rd party car insurance policy. However, that’s typically for cars with high second hand value because let’s face it, if your old junk isn’t worth much, why opt in for fire & theft? There really isn’t much to lose and (almost) nobody will even think of stealing your car.
On the flip-side, what if your old faithful is say, a 16-year-old Bentley with second-hand market value of a whopping RM300,000? In such instance, you may want to consider getting a 3rd party insurance with fire & theft because there’s something to claim for if it is totaled.
In any case, for 3rd party insurance with fire & theft, under no circumstances will your car ever be covered in a regular fender-bender that DOES NOT INVOLVE THE TOTAL LOSS of your car by fire or theft. If it still moves, sorry – it is not covered.
I am not worried about my new car. Can I opt for 3rd party?
Photo credit: https://www.autoevolution.com/cars/perodua-axia-2014.html#agal_2
This may probably come as a surprise to you but did you know that you can opt for 3rd party insurance instead of a comprehensive one for your new car?
As mentioned earlier, 3rd party insurance is a lot cheaper. Perhaps this will come in handy if you’re running low on cash and/or you feel that the repairs are cheaper than a comprehensive premium at average. Perhaps even you feel that you're lucky and it will never happen to you.
The question to yourself is, is third party insurance worth the risk? The risk is quantifiable. Let’s put it in a common real-life scenario. Imagine you are driving your brand new Vios in the rain rather carefully at 50 kilometers per hour on the LDP, albeit with poor visibility, heart is calm as a cucumber, mind is sharp, hands are steady as a horse, eyes on the road and just as you thought things are in control, suddenly in a glimpse, another car appears before you, literally. “Bam!” and your mind goes blank. You’re in shock & maybe shaken. Some may take some time. Some’s just cool. But at some point, you’ll be aware that you have just been in an accident. Body check, passenger check and everything’s alright.
Next, the car and damages. Loh-and-behold, at a mere 50kmph hitting a stationery object, your entire front is smashed (bumper, lights, front part of the exterior), your radiator is beyond recognition and yup you guessed it right, you just can’t start your car.
If you have a comprehensive, you are blessed. If you only have 3rd party, you can say goodbye to your new ride or be prepared to fork out a the very least RM5,000 for a case like this. Maybe RM10,000 or even more, depending on extent of damages. Just how much is the comprehensive car insurance for a Vios? It is only about RM800 per annum after deducting 55% NCD. From here, you can probably weigh in to buy comprehensive.
While most accidents are not life-threatening, at the very least we should do as much as we can to protect your precious ride and have peace of mind.