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What is Car Insurance?

Car Insurance is an agreement between the insurance company and the insured which aims at safeguarding the policyholder against any monetary loss in case of theft of the vehicle or an accident. This policy also extends coverage for loss or damage affected to your car. As far as India is concerned, it is mandated to buy car insurance or all vehicle types.

The Parliament in India has passed the amendments to the Motor Vehicle Act, is effective from September 1, 2019, has proved to be not a great sign for the car owners since the various driving errors are making a significant dent in their regular budget. The Insured Declared Value or IDV of the vehicle decides the premium amount for the car insurance. Thus, IDV is directly proportional to the car insurance premium amount. It is prudent in the part of the policyholder to compare various available car insurance in the market before deciding one.

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Third-party liability car insurance is a mandate in India under the Motor Vehicles Act, 1988 and it protects you from any legal liability when your own car is involved in an accident. Your insurance provider compensates you for disability, injury, death or property damage to any third-party. Thus, it protects you from the financial liability towards any third-party.

Comprehensive Car Insurance

A comprehensive car insurance policy provides protection and coverage for both the third party liability as well as damages caused to your own car in case of an accident, collision, theft, amongst others. A comprehensive car insurance policy, as compared to the third party liability car insurance, offers wide-ranging coverage, additional benefits and thus is most popular with the policyholders as it provides end-to-end coverage. A comprehensive policy has the option of further extension by opting for add-ons like accessories cover, zero depreciation cover, engine protector, medical expenses, and so on.

Key Benefits of Car Insurance

The car insurance plan offers the following benefits:

  • Protection against loss or damage to the insured vehicle
  • Protection against loss or damage to your vehicle that are caused by accident, explosion, theft, fire, self-ignition, riots, lightning strikes or act of terrorism, natural calamities.
  • Protection against financial liability initiated by the injury/death of a third party or damage to the property.
  • Personal accidental insurance cover

I pay for homeowner's insurance, I pay for car insurance, I pay for health insurance. -Elizabeth Warren


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FAQs

Third party liability does not cover you or damages caused to your vehicle. It only provides coverage for the damage caused to the third party vehicle, damage to property and medical costs for the person affected.

The major exclusions of a comprehensive motor insurance are:

  • Accident taking place beyond geographical limits i.e. outside India
  • Driving under the influence of drugs and alcohol
  • Electrical / mechanical breakdowns
  • Vehicle used for unlawful purposes
  • Loss /Damage attributable to War /Mutiny / Nuclear risks

A comprehensive motor insurance policy can be enhanced by opting Add-ons. Some of the common Add-ons and their benefits are:

  • Zero Depreciation/ Depreciation Waiver Cover : Maintains the value of your vehicle thereby allowing you to maximize claim amount without worrying about depreciation.
  • No Claim Bonus Cover (NCB) : Allows NCB even after making a claim in the previous year.
  • Personal Accident Cover : Covers you or your driver in case of injury or death due to accident.
  • Engine and Electronic Circuit Cover : Expenses towards engine and the inner circuits are covered.
  • Daily Cash Allowance : Your insurer will pay you a certain allowance for the days while your vehicle is being repaired in a network garage, or provide a standby vehicle
  • Roadside Assistance : This cover comes in extremely handy if your vehicle breaks-down and you need assistance like reaching out to a mechanic, arranging a tow-truck, helping in case of lost keys or medical aid if an accident occurred.
  • Key Replacement : Covers the expenses towards replacing a lost key.
  • Return to Invoice : In case of total damage within the 1st year of your vehicle, it covers you for the entire value of the vehicle.
  • Loss of Personal Belongings : If due to theft or burglary your personal belongings and valuables in your locked car are lost, you can claim for their value.

Car insurance premium is calculated based on the following factors:

  • Vehicle Model and Manufacturer
  • State/ Region where the vehicle is registered
  • Age of the vehicle
  • Insured’s Declared Value (IDV)
  • Availability of No Claim Bonus (NCB)
  • Add-on covers opted

Yes, installation of anti-theft or alarm locking systems are encouraged by insurance companies and makes you eligible for discounts. In case you install an anti-theft device mid-policy, you will be eligible for discount as per the remaining policy term, proportionately. You would be also eligible for the discount if you are a member of the Automobile Association of India.

Insured Declared Value (IDV) is the fixed maximum amount the insurer will reimburse in case of damages or loss of the vehicle. IDV is calculated as the current market value of the vehicle, as listed by the manufacturer and installed accessories, if any, less the depreciation value of the vehicle.

Several untoward incidents can lead to a motor insurance claim. In case you need to file one, follow these general instructions:

  • If your vehicle has been involved in an accident:
  • Note the number of the other vehicle/s
  • Note the contact details of the witnesses (if any)
  • Contact your insurance provider on their toll free number and inform them about the incident
  • Based on the case, the insurance advisor will swing into action and help you with the list of documents required and the next step
  • Based on the nature of the incident, you might be required to file an FIR at the nearest police station

Some of the common reasons for claim rejection are:

  • Lapsed policy
  • Inordinate delay in intimation of claim to the insurance company and police
  • Providing incorrect claim information due to oversight by customer
  • Any mis-selling of policies that may have taken place at the time of buying a policy
  • Deliberate damage
  • Use of private vehicle for commercial purposes
  • Driving under influence of drugs or alcohol
  • Unauthorised modifications to the vehicle
  • Also Read: What can Prevent Rejection of Motor Insurance Claims?

If the driver is a valid license holder, and the vehicle has comprehensive insurance, you can register a claim. However, to avail compensation for medical care of the driver, a personal accident rider must be availed.