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An insurance contract is a contract between the first and second party wherein the second party or the insurer promises to pay or compensate the first party for his losses that might arise due to accidents or other loss-triggering events.
The motor and vehicle laws all across the world have made it mandatory for an individual to insure their car before getting it on the road. Multiple types of insurance categories vary as per the laws of the land. Before getting into the other details, you must first know what is first-party insurance and who is referred to as the first party.
The owner of the car is the first party. To simply put it, the first party in insurance is the person who is paying for the insurance policy. The purchaser of the policy is known as the first party. He/she is the individual who is going to receive all the benefits (compensation) whenever there has been a triggering event.
In this category of insurance, the first party can make the insurer liable for the losses that he/she has incurred in case of theft, damage, accident, etc. This insurance also covers the third-party losses that may arise due to the damage caused by the car owner. For example- Body injury during an accident, etc.
A First-Party insurance claim can be initiated by the responsible policyholder. Claims can also be made by the immediate nominee specified in the insurance contract upon the death of the legal policyholder. The following method must be followed to successfully file a first-party insurance claim:
After the completion of the filing procedure, a thorough investigation is conducted by the insurance company followed by a complete analysis of the documents submitted. Based on the evidence collected, the insurance firm will approve or reject the claim filed.
In the case of first-party insurance, the beneficiary is the owner of the vehicle. Whereas, in the case of third-party insurance, the compensation and benefits are availed by the other individual who might have suffered in the accident.
First-party insurance covers the losses of the vehicle owner up to the amount decided in the policy. On the other hand, in the case of third-party insurance compensation is paid depending upon the losses suffered by the third party.
Before purchasing your insurance policy. You should always check for these laws. It will help you to purchase the policy as per the rules of the country and will also safeguard the various penalties that you may have to incur because of non-compliance.