Auto insurance is a form of security provided by an insurance company to the owner or driver of a car against any damages to others and yourself in the case of an accident. It is essential that you have an insurance policy that properly protects you and that is up-to-date.
Without a valid auto insurance, you may face headaches that come with hefty repair bills, where you will have to fork out your own money to cover the costs of the damages to the other party as well as your vehicle. This may get even worse if there are any injuries sustained in the accident to either yourself or the other party. In the interest of safety, you should not be driving your vehicle without a valid auto insurance policy.
Malaysian law also requires all vehicles to have insurance coverage even before the road tax can be purchased or renewed. Thus, it is a mandatory requirement that all cars are insured, at least with the basic third party coverage.
But what is the difference between third-party and first-party insurance? And what do "first party” and “third party" actually mean?
In the auto insurance world, "first party" is basically you and "third party" is everyone else.
For a better understanding of this, we have created a table which should help to paint a clearer picture.
|Cover||Third Party Cover||Third Party, Fire and Theft Cover||First Party
|Liabilities to third party for: Injury, Death, Property Loss/Damage||Yes||Yes||Yes|
|Loss/ Damage to your own vehicle due to accidental, fire/theft||No||Yes||Yes|
|Loss/Damage to your own vehicle due to accident||No||No||Yes|
|Liabilities to the driver & passenger(s) of your own vehicle (bodily injury, death)||No||No||Yes|
As an example, under a third-party insurance plan, your own losses will not be covered if you hit someone - but the person you hit will be. This is vice versa for everyone on the road, as the person at fault will be the one using their insurance to pay for damages caused to the other person or their property.
What this basically means is that a third party will be claiming compensation from your insurance for damages caused to the third party. You will have to pay for your damages out of your own pocket, as there is no compensation if the vehicle is badly damaged or considered a total loss.
Third-Party Coverage with Fire and Theft
If, however, you choose the third party insurance with fire and theft cover, then you will be compensated if your vehicle incurs fire damage as well as theft of your car. Please do note that this is an additional clause under third-party insurance that you can request for which gives you better protection than the mandatory basic third-party coverage.
First-Party Coverage (comprehensive)
Under a first-party insurance plan, you and the person involved in the accident will be covered whether you are in the right or in the wrong. First party car insurance allows you to claim even if the accident was your fault.
Not only does it cover you for an accident that has just happened in front of your very eyes, but it also covers you for accidents that happen when you are not around. As an example, you return to your car to find that someone has hit it and driven off without leaving their contact details. Luckily you have first-party cover which should compensate you for any damages incurred.
One of the best things about first-party insurance is that there is compensation for total loss, where your insurer will pay you the fair market value of your car as of the day of the accident.
Despite every vehicle on the road having the requirement to at least have third-party cover, it is better to have a comprehensive auto insurance policy as it gives you total peace of mind, no matter what type of incident you find yourself in.
If you’re looking for extensive first-party insurance for your vehicle, why not try RHB’s Private Car Insurance, as not only do you get free towing as part of the policy, but you also get inclusive legal representation and coverage for legal costs. Furthermore, renew or purchase RHB car insurance online to enjoy a 10% discount!