Enter, car insurance. This handy insurance policy covers you against the uncertainties that could befall your cherished vehicle and protects you against the probable financial losses.
| What is it? | Car insurance is essentially a policy purchased by the car owner to mitigate costs incurred due to an accident that damages the vehicle or to protect against car theft. Car owners pay premiums towards a policy with an insurance company. At the time of an accident, the company reimburses the cost of the damages incurred. |
| Where do I get it? | Car insurance is usually very easy to purchase, to renew, and a number of reputed insurance companies and wealth managers count this as one of the premier products in their arsenal. You can buy car insurance online and get attractive premium discounts! |
| How much should I pay for it? | The premium amount payable towards car insurance is decided by factors such as type of car, age of the vehicle, age of the insured, Insured Declared Value, etc. |
| How much coverage should I buy? | It is advisable to buy comprehensive car insurance coverage*. However, if you are cost-conscious, you can buy a third-party liability standalone cover. |
Why Do We Need Car Insurance?
This is a very good question. Why bother with the chicken when you are a Vegan, right? Primarily, the following five reasons should answer your query:
1. It’s the Law
Under the provisions of the Motor Vehicles Act of India, all vehicles that operate in public places must have a car insurance policy as a mandatory document. At the very least, the policy must cover ‘third-party liability’, that is, a cover in scenarios where your vehicle was the cause of an accident that resulted in injury, loss of property and/or death of a third party.
2. Pay Little Today, Save Big Tomorrow
According to recent estimates, every 6th car crash in the world happens in India. This is staggering odds and a likely indication that your car could very well end up on the side of the road one of these days, after a brutal crash that could have resulted in injury, death and of course, massive losses in terms of repairs and replacements for your car. At that instance, the compensation and charges could run into several thousand or lakhs of rupees that may not be immediately available. However, with Car Insurance, there is complete peace of mind – paying a nominal premium today, to be tension-free when an unforeseen accident happens at a later date.
3. Saving Time When Accidents Happen
Accidents are stressful on their own without having to deal with the question of ‘What next?’ With your car insurance, comes your insurer’s expertise in handling these tense situations. Walking you through the claims process, helping you find a good garage and settling your claim on time – things that you will be thankful for when dealing with the aftermath of an unfortunate road accident.
4. A Supplement for your Health Insurance
Most Car Insurance policies offer coverage for injuries that might be sustained by you and your fellow passengers as a result of your vehicle’s accident. If not, personal injury protection can be purchased as an add-on feature. This acts as a powerful supplement to your health insurance – additionally covering for items that might not be covered by your health policy, including specialist care for accident-related injuries, dental repairs, funeral costs etc.
5. Sustained Peace of Mind
Just imagine, cruising on an open highway or wriggling through rush hour traffic without overtly worrying about the consequences (mostly financial) of a freak accident or an ‘innocent’ brush-up with an adjoining vehicle. Not having to pay for the mistakes of others. That’s mental peace – in it’s purest form!
Why is it Important to have Car Insurance in India
There are several reasons why it is important to have an auto insurance for your vehicle including:
- Third-party insurance is a necessity in India as per Section 146 of the Motor Vehicle Act, 1988.
- The rate of vehicular accidents is high in India due to improper roads, especially during the monsoon.
- Manmade disasters such as riots and theft or natural disasters such as floods and earthquakes cannot be predicted or controlled. Under such scenarios, an auto insurance provides you with financial assistance at your hour of need.
- In the case of a death or disability, the family is burdened with financial needs such as medical costs, vehicle repair costs, third-party liabilities and so on. In such a case, an auto insurance comes in handy wherein you receive financial protection during your hour of need.
- Whether it is a car part replacement or repair, the cost is very high. In addition to providing coverage against vehicle damage, some insurance companies offer roadside assistance and cashless garage facility to make life easier for you.
Types of Car Insurance Policies in India
When choosing a Car Insurance plan, car owners must compare car insurance policies across all insurance providers to get a suitable policy and the lowest premium possible. There are 2 types of auto insurance plans available in India:
- Comprehensive insurance: This type of insurance will cover third party liabilities as well as damages caused to you and your car. You will receive financial protection against liabilities arising from natural disasters, theft, and accidents. Comprehensive insurance plans include third-party premium and own-damage premium. Own-damage premium is determined based on the age of the car, make and model of the car, geographical location, and engine capacity.The comprehensive car insurance policy offers Personal Accident cover for the owner-driver. In case you require Personal Accident cover for the passengers, you will have to take that coverage separately after paying extra premium. The Personal Accident cover is very useful, as it compensates you in the following manner:
Type of Injury Compensation Death 100% Loss of sight of both eyes, loss of two limbs, or loss of one limb and the sight of one eye 100% Loss of sight in one eye or loss of one limb 50% Permanent total disability from injuries other than the ones indicated above 100% - Third-party insurance: The most common type of insurance found in India is third-party insurance as it is mandatory for all running vehicles on Indian roads. This type of auto insurance will cover damages caused to a third party in the event of a vehicular accident. The base premium is calculated based on the Cubic Capacity of your car engine. The revised third-party insurance rates by the Insurance Regulatory and Development Authority of India (IRDAI) are as follows:
| Engine Capacity | Premium Rate |
| Less than 1,000cc | Rs.2,055 |
| Above 1,000cc but less than 1,500cc | Rs.2,863 |
| More than 1,500cc |
What Terms are Usually Covered by a Car Insurance Policy?
1. Loss or damage to your vehicle:
The average car insurance policy covers the loss or damage endured by your vehicle due to the following reasons:
- Natural disasters: Fire, explosion, self-ignition or lightning, earthquake, flood, typhoon, hurricane, storm, tempest, inundation, cyclone, hailstorm, frost, landslide, rockslide, etc.
- Man-made mishaps: Burglary, theft, riot, strike, malicious act, accident by external means, terrorist activity, any damage in transit by road, rail, inland waterway, lift, elevator, or air, etc.
2. Personal accident cover:
As part of the overall car insurance, most insurers provide personal accident cover to protect you against an unfortunate accident while driving. This accident cover can also be extended to passengers, whose numbers must usually equal the maximum permissible occupancy in the vehicle, as stipulated by the vehicle manufacturer.
3. Third-party legal liability:
The policy also provides for scenarios wherein your vehicle might have been the cause of/ been part of an accident that resulted in the injury, disability, or death of an individual (not directly related to you) or caused damages to a third-party property.
| What is covered | What is not covered |
| Liability for injury or death of third party | Injury to self, i.e., the driver of the insured car |
| Liability for damage to property of third party | Damages to the insured car |
4. Additional covers:
Most policies also include provisions to add additional protection for the various secondary components of the vehicle, including electrical/non-electrical accessories, fog lights, stereo system, mats and seat cover, etc. Implementation of bi-fuel injection systems, such as CNG or LPG, can also be covered. Some of the riders that can be added to car insurance policies are:
- Zero depreciation cover
- Engine protect cover
- Return to invoice cover
- Loss of personal belongings cover
- NCB protect cover
- Roadside assistance cover
- Personal accident cover for passengers
- Daily allowance
- Consumables cover
- Key replacement cover
The following instances are not covered under a standard car insurance policy:
- Losses due to normal wear and tear of the vehicle/vehicle parts.
- Mechanical or electrical breakdown of the car
- Accident coverage for the passengers
- Nuclear risks, hostilities, invasion, and war
- Usage of alcohol or other intoxicants by the driver
- Consequential damages, such as an oil leak leading to gearbox failure
- Loss that has been staged deliberately
- Fraudulent activities or acts of malicious nature
- Using a private vehicle for commercial purposes
Documents Required for Car Insurance
The documentation process is minimal in car insurance compared to other insurance policies. Anyone who owns a car and is above 18 years of age can purchase an auto insurance. You have to submit a copy of the Registration Certificate (RC) and duly-filled proposal form to obtain an auto insurance. In the case of a car insurance renewal, you have to submit the previous insurance policy documents along with the RC and proposal form. Ensure the details provided by you are correct or the company can terminate your policy at any time on the basis of misrepresentation.
How Premiums are Determined for Car Insurance Policies?
There are several factors that an insurance provider will take into account to calculate your car insurance premium such as:
| Insured Declared Value (IDV) | The insurance provider will consider the IDV of the make and model of your car. The IDV changes annually after adjusting the depreciation value of the car. |
| No Claim Bonus (NCB) | You are entitled to a NCB if you haven’t made any insurance claims in the previous year. |
| Discounts or offers | If the car contains additional accessories that are not included in the selling price of the car or a part of the manufacturer’s catalogue, then the premium for those accessories will be calculated separately. |
| Age of the car | The entry of new models of cars can reduce the value of the older models. |
| Geographical location | India is divided into Zone A and Zone B. Zone A includes all the major cities in the country (Bangalore, Ahmedabad, Chennai, Mumbai, Kolkata, Pune, and New Delhi) where the accident risk is considered to be high, therefore the insurance premium is higher than in Zone B (the rest of the country). |
| Add-ons | Facilities like roadside assistance, lock and key replacement, and loss of personal belongings will add to the insurance premium cost. |