What is Car Insurance?
Car insurance policy is the smartest way of securing your car financially. In today’s world, where there is a constant increase in the number of cars on roads, rash drivers and poor infrastructure, it becomes tough to protect your car from any unwanted mishap. Car insurance provides financial assistance to cover your loss due to natural or human-made disasters, either due to accidents or theft or third-party liability. The insurance policy gives you legal, financial and physical security for your vehicle. The third-party insurance policy covers those losses that you cause to another person or property. The terms and conditions on the car insurance policy may vary in different parts of the country according to the legal rules. Car Insurance is primarily used to provide financial protection against any physical damage or any bodily injury, which resulted due to any traffic collisions. It also protects against any liability which arises due to an incident in a vehicle. It is a contract between the insured and insurance company to safeguard insured, against any financial loss due to accident, theft or natural calamity.
The premium on car insurance is dependent on various parameters which includes the value of the car, vehicle type, type of coverage of car insurance plan, voluntary expenses, etc.
Why is Car Insurance required?
As per the Motor Vehicles Act, 1988, it is essential for every car owner to have a valid car insurance policy associated with the vehicle. Refraining from doing so will not only leave you vulnerable to hefty fines but also removes the safety net you would have had in case your vehicle met with an accident. Car Insurance is mandatory in India irrespective of a personal or a commercial vehicle.
However, it is necessary for a policyholder always to carry insurance certificate while driving. Car insurance is essential as it gives you the confidence to drive on the road peacefully. At times of emergencies, it acts like a boon to the policyholder.
To prevent financial setback in car repairs and costly hospital bills to treat accidental injury, it is a smart move to opt for four-wheeler insurance and stay protected at all times. As such, valid four-wheeler insurance will keep you safe from monetary hassles and get your car and the third- party car repaired without burning a hole in your pocket.
Types of Car Insurance Plans in India:
- Comprehensive Car Insurance Plan
- Third-Party (TP Only) Insurance Plan
Comprehensive Car Insurance Plan
Comprehensive car insurance policy, just like its name, covers the loss or damage to the insured vehicle, personal accident as well as the third-party liability caused by either natural or human-made calamities such as theft, accident, damage due to earthquake, fire, etc. Under this policy, the personal accident is also covered. Any loss or damage happened to the driver and car, along with the passengers sitting in the car is covered. This policy is extremely popular as its offers end to end coverage to the policyholder and you need not to pay from your own pocket.
Comprehensive Car Insurance Coverage:
Comprehensive Car Insurance Coverage: Comprehensive car insurance policy is one of the most valuable types of car insurance. It covers both third party liabilities as well as expenses of damages to your vehicle. In India, the comprehensive car insurance policy provides coverage of glass damage, damage from hitting a bird or animal, floods, fire, and so on. Having a Comprehensive Car Insurance Policy gives you the following benefits.
It covers the loss or damage incurred to your vehicle in case of natural as well as human-made calamities.
It covers the damage or loss that you might cause to a third party in terms of life or property.
Some policies also cover you for personal accident.
Third-Party Insurance Plan
Third-Party Insurance is one of the most common types of car insurance. A contract between an insurer and the insured is called an insurance policy. Whereas in the case of car insurance, there is a third party who is neither an insurer nor insured. Third-party is a person who gets affected in an accident caused by the insured. They are mainly the people in the vehicle like passengers, driver or the owner of the other car, and sometimes the pedestrians also. So, there are mainly three parties involved in a third-party liability insurance policy:
The first one is the insured person, or we can say the policyholders.
The second one is the insurance company that issues the policy to the policyholders.
The third one is the person who claims the loss or damage from the insurance company for being injured by the insured.
As per the Third-Party car insurance policy, the insurer signs a contract with the insured person or the policyholder to indemnify the owner from the court of law. It incudes the loss or damage or injuries or death of a third-party or any damage to third party’s property which is hit by the insured vehicle. In such case the insurance company will compensate for the liabilities such as bodily injury, vehicle damage or third -party death. In case of injury or death, the liability is unlimited. Having third-party liability insurance is mandatory by law. If any vehicle is affected in the accident by you, having third-party car insurance will help you to reimburse all the expenses caused to the car that you have dashed into. In third- party Insurance, the other party will receive the compensation amount for the damage and protect you from a financial catastrophe.
The coverage offered by third-party insurance is very cost-effective and the premium rates in Third-party are low. Every year, IRDAI defines the price of the product.
Third-Party Car Insurance Coverage:
Third-Party Car Insurance covers the following:
Death of Third Party:
The insurance policy covers the death of the third party due to the accident with the insured vehicle. The death case will be directly reported to the MACT (Motor Accident Claims Tribunal) and the claims have no limits. It is necessary to include driver’s license number and the name and details of the witnesses while lodging the FIR.
Damage to the property:
TPL (Third-Party Liability) insurance also covers the property damage of third party. In this case, the insurer will pay for any kind of damage to the property of third party by the insured.
Loss or damage to third-party leading to disability:
The policy covers the loss or damage to the third party which causes any kind of disability by the insured vehicle. The compensation is different in terms of any partial disability or total disability.
It also covers owner of the vehicle who drives the car in case of an accident. This is a compulsory cover with any third-party insurance policy.
Inclusions under the Car Insurance Policy
The insurance company will insure the policyholder for the loss or damage to the vehicle in respect of the following:
Fire, explosion and self-ignition or lightning
Burglary or theft
Riot and strike
Accidental external means
While in transit by rail, road, air, inland waterways/ lift elevator
Landslide or rockslide
Flood, typhoon, hurricane, tempest, inundation, storm, frost, cyclone, hailstorm
Exclusions under the Car Insurance Policy:
The insurance company will not be liable to make any payment in respect of the following:
Significant loss, wear and tear, mechanical or electrical breakdown, depreciation, failures or breakages not for damage caused by overloading or strain nor for loss or damage to accessories by burglary, housebreaking or theft unless the vehicle is stolen at the same time.
Damage to tyres or tube unless the vehicle is simultaneously damaged. Liability will be 50% of the cost of replacement
Any accidental loss or damage when the insured is under the influence of alcohol or drugs.
Consequential loss or damage to the vehicle
If a private car is used for the commercial purpose.
Driver without a valid driving license.
Damage to the car due to nuclear war, radiation, etc.
Any loss or damage when the policy is not in force.
Know the Add-ons in Car Insurance Plans:
According to the Motor Vehicles Act, 1988, you are mandatorily required to protect your car with an insurance policy. When you buy a car insurance policy, various insurance companies offer a wide range of add-on covers. Add-on covers make the insurance policies work even better. An add-on cover gives wider protection for any chances of mishaps or any unfortunate events in the future.
The add-on covers are offered from insurer to insurer and are decided according to various factors. Let us take you to the add-on covers that can be availed while purchasing or renewal of car insurance:
Let us take you to the add-on covers that can avail while purchasing or renewal of car insurance:
Zero Depreciation Cover- Zero Depreciation Cover is one of the most popular covers that you must consider. Zero Depreciation plays an important role in reimbursements of policy as well as claim settlements. It allows the policyholder to claim the entire amount for any replaced car parts that was damaged in the accident. This add-on cover offers full claim amount to the policyholder without any deduction made for depreciation. Zero depreciation add-on cover exempts the insured from the liability of paying the total cost of depreciation during claim settlement of the car. It helps you to get a higher claim. The NIL Depreciation add-on cover requires additional premium payment and it depends on the Insured’s Declared Value (IDV) and age of your vehicle.
No-Claim Bonus protector cover- No-claim bonus is a discount that is offered on premiums for every claim-free year. However, the bonus cannot be claimed if you file a single own- damage claim during the policy period. Thus, No-claim bonus protection add-on cover helps to retain the no claim bonus discount even if you make an own-damage claim during the period of the policy. No-claim Bonus protector cover is a beneficial add-on cover that should be considered by you when you are buying an insurance policy. No Claim Bonus protector cover is a reward cover that a policyholder receives when he/she does not make any claim in the preceding/ previous years. This No-claim bonus can be availed during the renewal of the insurance policy. It offers you a discount of up to 50% at the time of renewal of the insurance policy depending upon the number of unclaimed years. Thus, this cover is a type of coverage that provides you the benefit to save your hard-earned no-claim bonus.
Engine Protection Cover- Going by the name of the add-on cover, it protects your engine in case of any incident as the engine is heart and soul of the car. If any damage is caused to the car or any negligence is made towards its repair then it may lead to serious issues. Thus, Engine Protection Cover provides is worth buying as it helps you to compensates for the cost of repairing in case of any engine damage. Thus, you must add engine protection cover to your car insurance policy as it will ensure proper safety of your car engine.
Fixing Vehicle Sum Insured on Reinstatement Value Basis (RVB) Cover- It is an invoice price cover, that allows to get full market price (except registration charges and road tax) of the car if there is a Constructive Total Loss or theft of the insured car. This add-on cover also offers for the waiver of reduction in the depreciation amount by 100%.
Road Tax and Registration Charges add-on cover- This add-on cover ensure you to get reimbursement of the total residual amount paid by you towards road tax as well as registration charges of the insured car if you suffer total loss of the insured car. This add-on covers if coupled with the Reinstatement Value Basis add-on cover then you can gets the complete market price of the car if there is Constructive Total Loss (CTL) to the car or theft of the insured car.
Insurance Cost add-on cover- Under this, if your vehicle which is insured along with this add-on cover suffers Constructive Total Loss (CTL), then the total insurance cost of the new vehicle shall be paid by the insurer of the policy if the premium are paid on time.
Consumables add-on cover- In this cover, the compensation for the damages of consumables will be paid to you. The consumables include engine oil, nut and bolt, grease, screw, oil filter, washers, etc, which are not covered under the standard comprehensive car insurance plan.
Key add-on cover- Under this add-on cover you get a reimbursement for the cost paid for obtaining a duplicate key of the car if the original key of the car is lost.
Registration Certificate (RC) add-on cover- This Add-on cover provides you compensation up to Rs 2,000 for obtaining a duplicate Registration certificate when your original registration certificate of the car is lost.
Monthly Instalment add-on cover- If you are unable to pay the monthly instalments of the car to the financier of the car loan due to an accident, then with this add on cover the insurer will pay the instalments on your behalf to the financier of the car loan. Hence, Monthly Instalment add-on cover helps you to clear you EMI on time. But the benefit of this add-on cover can be claimed by paying an additional premium and it can be availed by you only if the damaged car is repaired in any of the network workshops of the insurer.
Policy Auto Extension cover- If you buy this add-on cover you will get extension on your existing policy coverage further to 30 days after the expiry of the insurance policy by making a payment of 20% extra premium. The extra premium to be paid will be charged on a pro-data basis.
Personal Belongings add-on cover- Under this cover, you will get reimbursement for any loss of your personal belongings. Personal belongings include clothes and any other items of personal use. Compensation amount for the loss will be equal to current market value of the item lost. You can make a maximum of 2 claims during tenure of the insurance policy.
Permit add-on Cover- It covers a fixed compensation of Rs 2,000 when you obtain a duplicate permit in case you lose your original document.
Penalty add-on Cover- This add-on cover gives you compensation for the penalty imposed on you. In case a penalty is charged by a customer for delay delivery of goods or any caused damage to the goods due to an accident, the insurer will provide compensation to the policyholder.
License loss add-on cover- The insured will receive a compensation of Rs 500. The compensation is offered for obtaining a duplicate license of the vehicle if the original license is lost. Only 1 claim can be made during the tenure of the policy.
Add-on cover for discount for repairing the vehicle in any preferred Workshop- A discount of 5% is offered on total own damage premiums maximum up to Rs 500 to the policyholder in case the insured vehicle is repaired in the preferred workshops of the insurer company.
Wrong Fuelling Add-on cover- This cover provides compensation for removing the wrong type of fuel filled at the petrol pump and also offers reimbursement for damaged part replacement because of the same.
Franchise Benefit add-on cover- This cover provides a discount on premiums for making an agreement with a franchise of up to Rs 10,000/- for each claim. However, for claims of over Rs 10,000 you will have to follow the standard terms of the policy.
Disabled Vehicle add-on cover- In this add-on cover you are allowed to get indemnification for the protection expenses and extraction of the vehicle. It also includes indemnification for removal of disabled vehicle. You need to have a prior consultation as well as approval from the insurer company before taking assistance from an agency.
Hydro-static Lock add-on cover- The insurer company will pay compensation to the insured for any damages to the engine, any differential part or gearbox which is caused due to the ingress of water in the car or due to an oil peril. Your claim will be accepted only if the damage is incurred to the vehicle because it was submerged or was stranded in a waterlogged area.
Key Replacement add-on cover- This cover provides compensation not only for the loss of the key but also for any damage done to the car and includes any damage caused to the key mechanism including the car keys. The maximum compensation that can be paid is dependent on the amount of additional amount of premium paid by you to the company.
Consumables Plus add on cover- This cover is a premium version of the consumables cover. It enables the insured to receive compensation for any losses/ damages of items which are used specifically. Such items include nuts, bolts, washers, oil filter, bearings, screw, clips, grease, fuel filter, wheel balancing, wheel bearings, engine oil, distilled water, gear-box oil, power steering oil, battery electrolyte, AC gas oil, and many others consumables items.
EMI add-on Cover- If you pay an additional premium then the company will pay your EMIs on the insured vehicle to the financer of the loan of the vehicle as recorded in the insurer’s book, if there is any accident involving the vehicle which is insured.
Daily Cash Add-on cover- In this case if the insured vehicle is unavailable during the process of claim due to repairing of the same because of any partial loss, then the insurer company will pay you a daily allowance in order to commute, which may be Rs 500 or Rs 1,000, as dependent upon the amount of premium paid.
Conveyance Allowance add-on cover- The insurer in this cover will pay a specific amount as an allowance if there is any damage or loss caused to the insured vehicle. The compensation will be dependent upon the payment of extra premium by the insured.
Vehicle Replacement add-on Cover- By payment of extra premiums, you will get compensation for the replacement cost value by the insurer.
You can add any of the add-on above cover as per your requirement as every add-on cover has its features and benefits. Each provides coverage for a variety of needs of the insured owner of the car.
How to save on insurance premium while choosing one for your car:
Those who own a car are always advised to drive with the relevant documents. There are several ways of saving car insurance premium. As mentioned above, one way could be the installation of safety devices in your car. Another way can be an online price comparison. Earlier, we used to approach the insurance agent to get insurance for our vehicle. In this technological era, we can easily get options available with multiple insurance companies to compare and choose the one suitable for our needs. All you need to do is fill in a few details, compare various quotes and pick the best available insurance for your car.
In case if the policy insurance is lapsed:
In the case of lapsed policy, you will lose all the benefits and discounts for which you were eligible. Though companies give a grace period of one week, once your policy lapses, but after that, you are in risk of driving a car. Hence, it is advisable always to make sure that you renew your car insurance plan before it gets lapsed.
Car Insurance FAQ’s
Why should I insure my Car
It is mandated by the Motor Vehicle Act 1988 to carry insurance document while driving. Insurance mitigates the cost involved while making a claim.
What are the different types of Car Insurance?
There are two types of car insurance available: Comprehensive Insurance and Third-Party Insurance.
What are the factors one should look at while choosing car insurance?
- Always go for comprehensive insurance and opt for an add-on plan for wider coverage.
- Look at car value that needs to be insured. Most insurers use standard formulas – also called Insured Declared Value. Insurance is given on the IDV of car which is decided by the insurance company after depreciation.
- The actual Premium varies from company to company. The coverages remain standard irrespective of insurance companies. One must always compare and select the best, as per the requirement.
- Some of our customers are particular about adequate cashless garages in their locality that every insurer has a tie-up with. One can always check the number of garages; insurance company has a tie-up with in case of claim if occurs.
What are the key factors that affect your car insurance Premium?
Make and model of the car
Purpose of car
List of safety devices installed inside
No claim bonus (NCB)
Click here to read in detail.
What is Zero Depreciation Insurance Cover?
A zero-depreciation car insurance cover offers complete coverage without factoring the depreciation value of your car. Which means, if you have opted for a Zero-dep Insurance cover and in case your car gets damaged in an accident, the insurance company will give you the total amount of your car.
What is "No Claim Bonus" in car insurance?
The discount that you receive on renewal of your car insurance policy, for not claiming during a policy year is termed as No Claim Bonus (NCB). It depends on the driving skills of the person and can be transferred to another car if he/she switches. The discount is given on the premium which starts from 20% and goes till 50%. It is a reward which is given to the driver for excellent driving skills.
Is my No Claim Bonus (NCB) transferred if I change my insurance company?
Yes! Absolutely. Your No-Claim Bonus is transferable even if you switch to another insurance company.
What are the measures that I can take to get discounts on my car insurance premium?
There are many ways that helps you to lower your car insurance premium-
Installation of ARAI approved anti-theft devices in your car. Like: satellite tracking system, vehicle alarm, electronic immobilizer
Installation of locks for the steering wheel and gears can help you lower your premium
Do not violate any traffic rules and drive safe
Drive safe and avail as much NCB as you can
What is depreciation in a car insurance?
Any asset comes up with a depreciation value as they age. As the age of car grows, the value of car lowers down. Similarly, any car when comes out from a showroom loss its original value. The depreciation value of a car is calculated based on kms it’s been driven, wear and tear costs etc.
Can I change details in my existing policy?
Yes, any modification like change in spelling of name or surname, modification in address, change in vehicle details etc can be done. Any changes that are done needs to be informed to the insurance company. There is a specific term used for any changes that we do in our insurance document, “endorsement’’. Some endorsements may require you to pay an additional premium.
Can I transfer my vehicle insurance?
Yes, the insurance can be transferred to the buyer of the vehicle, provided the seller informs in writing of such transfer to the insurance company. A new proposal form needs to be filled in. And there is a nominal fee charged. It needs to be done within 14 days of the change of ownership.
It is hereby concluded that you have all the required information before you go for car insurance which is a must. RenewBuy provides you with best information to enable you to make an informed and easy decision. Now when you have all the necessary information for car insurance, choose one as per your needs and go ahead to get one for yourself.