Insurance

Third party insurance vs. comprehensive insurance: what you should know

Are you in the market for car insurance but don’t know where to start? Between comprehensive and third-party insurance, you’re confused. But not for long. Keep reading this article to learn everything you need to know about these two insurance types and how to choose which is best for you.

What Is Third Party Insurance?

Third-party insurance only covers you against third-party damages and losses. It’s the most basic form of auto insurance.

As the name suggests, it doesn’t cover you from your own damages. It also doesn’t include coverage for drunk driving claims or driving without a valid driver’s license.

Benefits of Third Party Insurance

The Nigerian Insurance Act requires drivers to have at least third-party insurance, so buying this is necessary. It will protect you from further complications with the law during an accident.

The purpose of third-party insurance is to cover you from damages and liabilities you cause to a third party. For example, if you bump into another car or damage someone’s personal property, your third-party insurance will cover these losses.

It also covers bodily injury or an accidental death you cause.

Because third-party insurance is the most basic form of auto insurance, it comes with lower premiums.

Some third-party insurance companies offer hybrid plans that include more coverage than the basics. For instance, at Leadway Assurance, we have a Third Party Auto Base plan that includes damages to your own vehicle up to ₦250,000.

What Is Comprehensive Insurance?

Comprehensive car insurance covers you for third-party and your own damages. Moreso, comprehensive coverage includes things like:

  • Civil disturbance such as a riot
  • Damage by animals
  • Falling objects like hail
  • Fire
  • Natural disasters
  • Theft
  • Vandalism

Experts advise vehicle owners to buy comprehensive insurance since it offers more broad coverage. In fact, if you’re financing or leasing your car, your lender may require you to have comprehensive coverage rather than just third-party coverage.

But with more coverage comes higher premiums and deductibles.

Remember, a premium is how much you pay monthly for your auto policy. A deductible is how much you need to pay out-of-pocket before your policy kicks in.

For example, you have a ₦10,000 deductible, and there’s a fire to your car causing ₦25,000 in damages. You will need to pay ₦10,000, and the insurance will cover the remaining ₦15,000.

If later in the year your car is vandalized, you won’t have to pay anything since you already met your deductible.

Choosing a higher deductible usually means you pay lower premiums month to month. Therefore, this is a good option for cautious drivers because it helps save money.

Benefits of Comprehensive Insurance

Of course, the most significant advantage to comprehensive insurance is more coverage. This means you face less financial responsibility for an accident.

You can rest assured knowing that your policy protects you and your car. But, it also protects you from losses if you damage someone else’s person or property.

Often, comprehensive insurance comes with add-ons for even more coverage. One example is engine protection. You may also be able to get breakdown assistance.

Breakdowns don’t count as a claim, but you will receive help if you have a breakdown somewhere. All in all, comprehensive insurance allows for more customization of your policy.

Further, sometimes comprehensive coverage comes with a “No Claim Bonus.” This means if you don’t make a claim for the year, you receive a discount when you review your policy for the following year.

Exclusions to Comprehensive Insurance Coverage

Comprehensive auto insurance covers many damages, but there are some things it doesn’t cover:

  • Damage to your car from a wreck
  • Damage to another person’s car from a wreck
  • Your medical expenses or loss of income after a calamity
  • Your passengers’ medical expenses or loss of income after a calamity
  • It also won’t cover damages due to a car’s everyday wear and tear. The policy doesn’t fully cover fibre and rubber auto parts either.

Similar to third-party insurance, comprehensive insurance doesn’t cover instances of drunk driving or driving without a license.

Additionally, comprehensive policies come with a limit. A limit is the maximum amount your policy will pay toward a covered claim. The limit of your policy is usually the actual cash value of your vehicle.

Which Insurance Should I Buy?

Evaluate your car’s condition. If you drive a relatively new or expensive car, comprehensive insurance is better. Since the limit is the value of your vehicle, your limit will be higher and cover most accidents.

On the other hand, if you drive an old car, consider third-party insurance. You don’t want to overpay to cover a vehicle that doesn’t have as high of a value.

Also, consider your driving skills. Third-party insurance is better if you don’t drive a lot.

Get Insured Today

Whether you choose comprehensive or third-party insurance, always make sure you have some insurance coverage at all times while driving. Not only does the law require it, but it could save you from financial or physical hardship if an accident occurs.

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