Insurance Coverage: 1st Party vs 3rd Party Insurance

Before renewing your car insurance, it is important to understand what your policy actually covers.

In Malaysia, the main types of motor insurance are:

• Comprehensive insurance
• Third-party, fire and theft insurance
• Third-party insurance

This article focuses on the difference between 1st party (comprehensive) insurance and 3rd party insurance.

What Is 1st Party Insurance?

Comprehensive insurance provides broader protection for your vehicle.

Depending on the policy, comprehensive insurance can cover:

• Accidental damage to your own car
• Fire
• Theft
• Third-party bodily injury or death
• Third-party property damage

You can also add optional protection, such as windscreen or special perils coverage, if offered by your insurer.

Examples of 1st Party Insurance Claims

Here are some common situations:

1. Your car hits a traffic pole.

You may make an Own Damage claim if your policy covers the damage. An Own Damage claim may affect your NCD.

2. Your car hits a wild animal.

You may be able to make an Own Damage claim, depending on the circumstances and policy terms. Your NCD may be affected if the claim is made under your own policy.

3. Your windscreen is damaged.

If you do not have separate windscreen coverage, a claim may be treated under the terms of your comprehensive policy and can affect your NCD.

4. You have additional windscreen coverage.

If your policy includes windscreen coverage, you can generally claim within the windscreen benefit without affecting your NCD, subject to the policy terms.

5. Your car catches fire.

Comprehensive insurance may cover fire damage, subject to the policy terms and cause of the fire.

6. Your car is stolen.

Comprehensive insurance can provide theft coverage, subject to the policy terms and claim requirements.

7. You cause an accident involving another vehicle.

The third party may claim against your policy for their losses. You may also be able to claim for your own vehicle damage if your comprehensive policy covers it. However, an Own Damage claim may affect your NCD.

8. Another driver hits your car.

If the other driver is at fault, you may have options such as a third-party claim or Own Damage Knock-for-Knock (OD-KFK), depending on the circumstances and whether you meet the relevant conditions.

What Is 3rd Party Insurance?

Third-party insurance is the most basic type of motor insurance.

It mainly protects you against your legal liability to third parties, including certain claims involving:

• Death or bodily injury to another person
• Damage to another person’s property

It does not cover damage to your own car caused by an accident that is your responsibility.

For example:

1. You hit a traffic pole and damage your car.

You cannot claim the damage to your own car under a third-party policy.

2. You hit a wild animal.

Damage to your own vehicle is generally not covered under a third-party-only policy.

3. Your car catches fire.

A third-party-only policy does not cover your own vehicle’s fire damage.

4. Your car is stolen.

A third-party-only policy does not cover the theft of your own vehicle.

5. You cause an accident and damage your own car.

You cannot claim your own vehicle damage under a third-party-only policy.

6. You cause an accident and damage another vehicle.

The affected third party may make a claim against your motor insurance, subject to the policy and circumstances.

1st Party vs 3rd Party Insurance: What’s the Difference?

The easiest way to understand the difference is to look at who and what the policy protects.

Coverage	1st Party / Comprehensive	3rd Party
Damage to your own vehicle	✓	❌
Fire damage to your own vehicle	✓	❌
Theft of your own vehicle	✓	❌
Third-party property damage	✓	✓
Third-party bodily injury or death	✓	✓
Towing or roadside assistance	Depends on policy	Depends on policy
Windscreen coverage	May be available as an add-on	Generally not available under third-party-only cover
Special perils	May be available as an add-on	Generally not available under third-party-only cover
Premium	Usually higher	Usually lower

Important: The exact benefits can vary between insurers. Always check your policy wording and Product Disclosure Sheet before buying.

Which Insurance Should You Choose?

There is no single answer for every car owner.

Comprehensive insurance may suit you if:

• You want protection for your own vehicle
• Your car is relatively new or valuable
• You want the option to add protection such as windscreen or special perils
• You prefer broader coverage

Third-party insurance may suit you if:

• You mainly want basic third-party liability protection
• Your vehicle is older and you are comfortable paying for your own vehicle repairs
• You want a lower-cost insurance option

However, a lower premium also means less protection for your own vehicle.

Is Comprehensive Insurance Compulsory?

Not every vehicle owner is required to buy comprehensive insurance.

The coverage you need depends on your circumstances, the vehicle and any financing requirements.

For example, a bank financing a vehicle may impose its own insurance requirements during the financing period. If you are unsure, check your hire-purchase agreement and ask your bank.

The age of a vehicle also does not automatically mean that it must have third-party insurance. Insurers may have their own eligibility rules for different types of coverage.

What About NCD?

Your No Claim Discount (NCD) is a discount applied to the applicable motor insurance premium when you meet the relevant claim-free requirements.

If you make an Own Damage claim, your NCD may be affected.

However, not every claim has the same impact.

For example, certain claims such as eligible windscreen claims under separate windscreen coverage may not affect NCD. If you are not at fault in an accident, an eligible OD-KFK claim may also allow you to protect your NCD, subject to the applicable conditions.

Before making a claim, check with your insurer if you are unsure how it may affect your NCD.

Can You Add Extra Protection?

Yes, if the insurer offers the relevant add-on.

Depending on the policy, you may be able to add protection such as:

• Windscreen coverage
• Special perils, including certain natural disasters
• Personal accident benefits
• Other optional benefits

The available add-ons, limits and premiums vary between insurers.

So, do not assume that every comprehensive policy automatically includes the same benefits.

How Much Does Car Insurance Cost?

The price depends on several factors, including:

• Vehicle model and age
• Sum insured or vehicle value
• NCD
• Driver and vehicle risk factors
• Type of coverage
• Optional add-ons
• Insurer’s pricing

You can learn more about how car insurance premiums are calculated.

Get the Right Car Insurance Coverage

The main difference is simple:

1st party/comprehensive insurance protects your own vehicle as well as providing third-party liability cover, subject to the policy.

3rd party insurance mainly protects you against covered liability to other people and their property. It does not cover damage to your own vehicle.

Before renewing, compare the coverage, exclusions, NCD impact, add-ons and premium instead of looking at price alone.

You can also visit Bjak’s car insurance page to explore your available options.