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Vehicle insurance (also known as car insurance, motor insurance or auto insurance) is insurance for carstrucksmotorcycles, and other road vehicles. Its primary use is to provide financial protection against physical damage or bodily injury resulting from traffic collisions and against liability that could also arise from incidents in a vehicle. Vehicle insurance may additionally offer financial protection against theft of the vehicle, and against damage to the vehicle sustained from events other than traffic collisions, such as keying, weather or natural disasters, and damage sustained by colliding with stationary objects. The specific terms of vehicle insurance vary with legal regulations in each region.

What is covered in a motor insurance policy?

When you purchase motor insurance, the policy will typically provide you financial protection against the following: 

1. Loss or damage to your vehicle due to natural calamities: This could include fire, explosion, lightning, earthquake, flood, typhoon, hurricane and landslide.

2. Loss or damage to your vehicle due to man-made calamities such as burglary, theft, riot, or a  malicious act.

3. Third Party Legal Liability: Protection against legal liability due to accidental damages resulting in the permanent injury or death of a person, and damage caused to the surrounding property.

In general, auto insurance does not cover depreciation, wear and tear or mechanical breakdown.

What is the amount covered in auto insurance?

All vehicles are insured at a fixed value known as IDV or Insured’s Declared Value. It is calculated based on the manufacturer’s listed selling price plus the cost of any added accessories and deducting the annual depreciation.

What is the Claims process?

If you are involved in an accident involving your car or two-wheeler, contact your insurance company or agent immediately. You will be given a claim number or reference number which you need to refer to at all times.

Note the license plate number of the other vehicle involved in the accident, if any, as well as the names and contact details of any witnesses.

How to apply for motor insurance

You can apply for auto insurance online and enjoy the benefit of minimal paperwork. However, there might be some restrictions regarding what kind of insurance you can buy online (e.g. some companies might limit it to only privately owned cars and two-wheelers). You can also renew your insurance online up to a few months before the date of expiry. Each company will have its own renewal schedule. If your policy has lapsed, your vehicle might have to undergo inspection.

Alternatively, you can also submit your application physically with the requisite documents and payment.

What is a No-Claim Bonus (NCB)?

If you have not made any claim on our auto insurance for the past year, then you are eligible for a No-Claim Bonus, which takes the form of a discount on the following year’s premium payment. The more years that are claim-free, the larger the discount you will get on your premium.

How To Choose The Right Motor Insurance Coverage?

Motor insurance plans are classified into different categories based on the extent of coverage offered and the type of vehicle for which the insurance is sought.

  1. Amount of insurance coverage - Motor insurance plans can be divided into three types based on the amount of insurance protection offered:

    1. Third-party liability insurance - This is the most basic form of car insurance and hence, it is also the cheapest. This insurance scheme is also referred to as liability-only insurance or act-only plan. The Motor Vehicles Act, 1988, mandates that all car owners are in possession of this insurance policy for the protection of their vehicles. In case you drive a car without a minimum of third-party liability insurance cover, you are liable to face penalties.

      1. The coverage offered by this insurance plan includes protection to a third party for incidents such as injuries/death and property damage caused in an accident involving the insured vehicle.

      2. It should be noted that the third-party liability insurance cover does not offer own-damage cover, i.e., coverage for the insured vehicle or the owner-driver.

      3. Some insurance companies offer a personal accident cover for the owner-driver along with the third-party liability insurance plan.

      4. Although there is no upper limit on the amount a third party can receive as compensation for death/disabilities, there is a cap of Rs.7.5 lakh on the maximum amount offered for third-party property damages. However, the final claim amount is decided by the court.

    2. Comprehensive motor insurance - Often referred to as a package policy by some insurers, this plan provides more exhaustive insurance protection, as it encompasses third-party liability coverage and own-damage cover. The detailed coverage of the comprehensive motor insurance plan is as described below:

      Additionally, the comprehensive motor insurance plan offers personal accident cover to the owner-driver.

      1. Own-damage cover - This includes protection for the insured vehicle from the following events:

        • Accidental damages

        • Damages while in transit via rail, road, waterways, lift, etc.

        • Damages caused by natural calamities, such as earthquakes, floods, hurricanes, etc.

        • Damages from man-made disasters such as strikes, riots, vandalism, etc.

        • Theft of the insured vehicle

      2. Third-party liability cover - This part of the comprehensive motor insurance policy protects the policyholder from legal liabilities to a third party from accidental injuries/death or property damage. The maximum amount of coverage under this insurance for injuries/death is unlimited. However, there is a cap of Rs.7.5 lakh on coverage for third-party property damage. The final claim payout for property damage is decided by the court.

    3. Motor insurance add-on plans - Apart from the comprehensive and third-party liability insurance plans detailed above, most motor insurance companies also offer add-on covers that can enhance the coverage of the base policy. These riders should be purchased from the same insurance provider by paying an additional amount. Some of these add-on plans are as described below:

      1. Zero depreciation cover - This is a popular motor insurance add-on plan that offers significant savings at the time of a claim. It is also referred to as nil depreciation cover or bumper to bumper policy. Consider that your vehicle is insured with a comprehensive motor insurance policy. At the time of a claim, you will still have to bear the expenses pertaining to the depreciation of the vehicle parts and excesses. However, if your comprehensive motor insurance plan was reinforced with a nil depreciation cover, the insurer would bear the expenses for the depreciation of vehicle parts.

      2. Engine protect cover - A comprehensive motor insurance plan does not protect the vehicle from mechanical or electrical damages to the engine. Buying an engine protect cover offers your engine the much-needed protection, especially if you reside in an area prone to waterlogging.

      3. Return to Invoice (RTI) cover - This add-on plan protects your vehicle from total loss expenses. In the event of a total loss scenario such as car theft, it provides you the actual invoice value of the vehicle, without accounting for its depreciation with age.

      4. Loss of personal belongings covers - Loss of expensive electronic equipment, laptops, etc. kept in the insured vehicle is offered coverage under this add-on insurance plan.

      5. No Claim Bonus (NCB) protect cover - No Claim Bonus is a significant bonus offered by insurers to drivers who refrain from raising motor insurance claims in a policy year. You can preserve this bonus even after raising a claim if your vehicle insurance has an NCB protect cover.

      6. Personal accident cover for the passengers - The comprehensive car insurance policy can be enhanced to offer protection for the passengers by opting for this rider.

      7. Key replacement cover - Under this cover, the insurance company reimburses the cost of replacement of the vehicle keys if these were lost or misplaced.

      8. Roadside assistance cover - This add-on cover offers 24/7 protection to the policyholder from incidents such as flat tire, fuel depletion, the requirement for expert scrutiny, etc.

      9. Consumables cover - Components that are used in a vehicle such as nuts and bolts, screen washers, engine oil, etc. are collectively referred to as consumables. The insurance company does not bear the cost of these components at the time of a claim. However, if your vehicle insurance was equipped with this rider, you will receive coverage for consumables.

      10. Daily allowance cover - This add-on cover offers reimbursement for the expenses involved in hiring an alternate vehicle when the insured automobile is undergoing repairs at a garage.

  2. Type of vehicle - Motor insurance policies can be classified into two types based on the vehicle for which it is purchased:

    1. Car insurance - This coverage offers insurance protection for all types of cars and SUVs.

    2. Two-wheeler insurance - This insurance plan is availed to protect a two-wheeler from eventualities such as accidents, natural disasters, theft, man-made calamities, etc.

    Apart from the above finance solution, motor insurance is also segregated based on the purpose of use of the vehicle. So, you can opt to buy a private motor insurance policy for your personal vehicle. Along the same lines, a commercial motor insurance plan will offer insurance coverage for the vehicle you will be used for business purposes.

    In conclusion, motor insurance in India can be of several types. It is up to you to understand your unique insurance needs and decide on a policy that suits you best. It is also advisable to buy motor insurance online for the security and convenience that it offers.