Insurance · 8 min read
Own damage vs third party car insurance, in plain English
What the legally required cover actually protects, what it does not, and how IDV, depreciation and no claim bonus decide what you are really paid.
Krish Dalal
Founder and editor, PaisaExpert. Master's in Business Management, SP Jain School of Global Management, London. · Last updated 2026-09-04
The confusion is worth clearing up because a great many people believe they are insured, and are, but only against a claim from somebody else. The morning their own car is damaged is a poor moment to discover the distinction.
Third party
Required under the Motor Vehicles Act. It covers injury or death caused to another person, and damage you cause to another person's property. Driving without it is an offence. It is cheap because the pricing is regulated, and it is genuinely important, because the liability for serious injury can be far larger than the value of your car.
Own damage
Optional, and this is the part that pays when your own car is dented, stolen or written off. It is priced on the car, its age, and where it is registered. This is also where the interesting fine print lives.
IDV is the ceiling on what you can be paid
The Insured Declared Value is the current market value of your car after depreciation, and it is the maximum the insurer will pay in a total loss or theft. A lower IDV means a lower premium and a lower payout. Choosing the lowest IDV on offer to save a few hundred rupees is a false economy if the car is stolen.
Depreciation is deducted from parts, unless you buy it out
On a normal claim the insurer does not pay the full price of a new part to replace an old one. Rubber, plastic and nylon parts are typically settled at half their cost, and metal parts are depreciated by the age of the car. A zero depreciation add-on removes that deduction, costs more, and is usually worth it for the first few years of a car's life when a bumper is expensive and the depreciation bite is largest.
No claim bonus is worth real money
Every claim free year earns a discount on the own damage part of your next premium, and it accumulates.
| Claim free years | Discount on own damage premium |
|---|---|
| 1 | 20 percent |
| 2 | 25 percent |
| 3 | 35 percent |
| 4 | 45 percent |
| 5 or more | 50 percent |
The no claim bonus belongs to you, not to the car. If you sell the car and buy another, you can carry the accumulated discount across, and you should ask for it explicitly because it will not always be applied for you.
Add-ons worth considering, and one that usually is not
- Zero depreciation. Worth it on a newer car, and the single add-on that changes claim outcomes most.
- Roadside assistance. Cheap, and genuinely useful if you drive between cities.
- Engine protection. Worth it if you park or drive anywhere that floods, because water damage to an engine is commonly excluded from the base cover.
- Return to invoice. Pays the original invoice price rather than the depreciated IDV in a total loss. Valuable in the first two or three years, much less so after.
- Consumables cover. Pays for oils and coolants on a claim. The amounts are small and it is rarely the thing that decides a policy.
What to do next
- Find your current policy and check whether it is third party only or comprehensive. Many people do not know.
- Check the IDV against what your car would honestly sell for.
- Before any small claim, work out the no claim bonus you would forfeit across the next two renewals.