One thing that 2020 has taught us humans is the uncertainty of life. No matter how carefree we are, life can take a sudden turn at any time. Therefore the best way for us to be secured is by taking precautions and being prepared for the worst. While everything in life is pretty uncertain, roads are one place where anything can happen within seconds. From accidents to car theft, things can really go haywire anytime, anywhere. Therefore when it comes to owning your car, being prepared for mishappenings is something one shouldn’t ignore. And the best possible way to do that is to opt-in for suitable car insurance in India.
Car insurance is one of the most important coverages you need to have when you drive your car. There are hefty fines to pay if you are found driving without vehicular insurance coverage. If you are buying your first car or you’re applying for your first car insurance, then this article has everything you need to know.
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What is motor vehicle insurance?
Motor vehicle insurance policy is much like any other insurance policy, with the only difference being that it is mandatory. As the name suggests, a motor insurance policy insures all types of motor vehicles ranging from private vehicles to commercial vehicles. The main objective of a motor insurance policy is to provide financial protection against damages that may occur due to accidents and other threats. Depending upon your usage, a motor vehicle insurance policy can either be a private insurance policy or a commercial insurance policy.
Why is car insurance important?
The importance of a vehicle insurance policy is evident from the fact that having a car insurance policy (third party cover) is made compulsory by law in order to lawfully drive a vehicle. Therefore, the first and foremost reason to get your vehicle insured is being able to lawfully drive your vehicle and avoid hefty fines and penalties that you might face when you drive an uninsured vehicle.
Moreover, the objective of a car insurance policy is to provide financial protection against damages that may occur due to accidents and other threats. Thus, even if you opt-in for a third party plan, you will be protected from legal liabilities that arise from an accident caused by your vehicle. Thus, a car insurance policy can reduce your liability during accidents and pay for damage repair and other expenses incurred by you for your vehicle or in respect of a third party.
A vehicle insurance policy also covers your medical expenses such as hospital bills in an unfortunate situation of an accident. Car insurance policies also compensate your family in cases where the accident results in death. Thus having a vehicle insurance policy is a must when purchasing your next vehicle.
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What are the various types of car insurance?
Choosing the correct type of car insurance can prove to be quite useful in the long run for both you and your vehicle. This is why you should be aware of the various types of insurance policies which you can pick. These include:
Third Party Car Insurance Policy
A third party car insurance policy is a mandatory policy which every car must have in order to legally drive the Indian roads. Without a third party policy, driving on the Indian roads is considered to be unlawful and can result in hefty fines and penalties. A third party car insurance cover is a basic plan that offers coverage against legal liability caused towards a third party due to your vehicle. In basic terms, Third Party insurance covers injury or death caused to a third party (person) by your vehicle along with monetary damages caused to the person’s property. As this kind of insurance covers only the liability owed towards a third party, it excludes damage caused to your own vehicle, and hence a Third Party Car Insurance Policy attracts a lower premium as compared to any other car insurance policy.
Benefits of Third Party Car Insurance Cover
- The premium for third party cover is very low and it depends on the engine capacity of your car. It does not depend on the car’s age and remains fixed.
- For any third party injury or property damage, one can get coverage for up to ₹7.5 lakh. In case of death, there is no limit to the coverage.
Limitations of a Third Party Car Insurance Cover
While a third party car insurance policy has benefits, it has limitations too.
- The policy does not cover damages suffered by your car.
- If you suffer an accidental death or disablement, there is no medical coverage for you. However, in some plans, there might be a personal accident cover of ₹2 lakhs for the owner/driver of the car.
- Third party coverage policies aren’t eligible for add-on covers and bonuses.
Comprehensive Car Insurance Policy
As the name suggests, a comprehensive car insurance policy covers both third party liability and damages to your own vehicle. It is therefore the most valuable car insurance policy that offers end-to-end protection for you and your vehicle. The special feature of comprehensive insurance is that it covers theft of the car in addition to the accidental damage. Comprehensive insurances also cover a number of perils such as vandalism, floods, fire damage, damage due to natural calamities storm, wind, glass breakage (e.g. windshield), due to falling objects and so on.
One can also amplify the protection offered by a comprehensive policy with add-on covers such as personal accident cover, electrical components cover, zero depreciation cover and much more. Since a comprehensive car insurance policy offers holistic protection, its premium is higher than third party car insurance policies.
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Benefits of a comprehensive policy
A comprehensive car insurance policy has many benefits.
- In a comprehensive policy, coverage is given for both third party liability and damages faced by you.
- Compensation is also paid when your car is involved in a collision with a car or object.
- Moreover, a comprehensive policy is also eligible for add-on coverage and NCBs
Limitations of a comprehensive policy
- Even though comprehensive policies are in-depth and holistic the main limitation of a comprehensive policy is that the premiums are higher owing to the scope of the insurance.
- The premium further increases when add-ons are selected making a comprehensive policy more expensive to own and renew.
Insurance for new cars
Whenever you plan to purchase a new vehicle for yourself, it is highly advised to plan your insurance policy beforehand. Since a new vehicle is more susceptible to theft, it is advisable to choose a comprehensive car insurance policy rather than just a third party liability coverage.
Opting for a few additional add-ons can also prove to be handy since you don’t want anything to happen to your new car. Add-ons such as zero depreciation can be useful for negating depreciation claims when it comes to settlement. Since a zero-depreciation add-on is only available for newer vehicles it is highly advisable to opt for it. Additional add-ons such as engine protection, gearbox cover, smart-key cover and more can be quite useful owing to the fact that new vehicles come with expensive equipment and technologies that can be expensive to repair if not covered in your comprehensive plan.
The premium of a brand new car will thus be on a higher side owing to comprehensive plans and add-ons. Moreover, the Insured Declared Value (IDV) of a brand new vehicle will also be higher as compared to older vehicles directly translating to a higher premium. Nonetheless, it is always advised to go for comprehensive plans for your brand new vehicles.
Insurance for Used Cars
Whether you buy a brand new vehicle or a pre-owned car, judiciously choosing your insurance policy is a must. When it comes to used cars, your insurance choice may vary depending upon certain factors. Insurance premiums associated with pre-owned cars are usually lower when compared to brand new vehicles. This is due to the age of the car and a lower IDV among other reasons.
However, since older vehicles aren’t equipped with sophisticated anti-theft systems, they are usually prone to theft. This is why choosing a comprehensive plan for your pre-owned vehicle can be an intelligent choice. Another add-on that is advisable to opt for your used car is roadside assistance cover for any unforeseen breakdowns. Nonetheless, the premium associated with insuring a used car will be a lot more affordable, making add-ons more attractive for car owners.
Renewal of Car Insurance
A typical insurance plan is valid for a period of 1 year from the date of insurance. Upon the expiry of the insurance plan, a policyholder must apply for car insurance renewal, as a lapsed insurance policy is of no use and will not provide any kind of financial security to you or the third-party. Moreover, you may also lose the accumulated No Claim Bonus (NCB) if you fail to renew your policy on time. Thus, it is important for you to remember the expiry date of your car insurance policy for smoother renewal and hassle free driving.
Important Points for Renewing Car Insurance
- Take note of the NCB accumulated on your policy. If you do not raise any claim through the year, you can get a discount as high as 50% when it’s time to renew your car insurance.
- It is advisable to compare car insurance policies to get the best premium rates and the highest IDV for your vehicle. Choosing the right car insurance plan will keep you safe at affordable prices.
- Ensure your NCB, deductibles, and add-ons are transferred to your new car insurance provider.
Common FAQs
What is IDV in car insurance?
IDV or Insured Declared Value is the maximum claim amount your car insurance provider will pay if your car is damaged. The IDV of your car is dependent on the current market value and the age of the car.
What is EP in car insurance?
EP or Engine Protection is an add-on to your car insurance that covers against any damage to the engine or its components. EP covers the cost of repairs incurred due to the damage.
How to claim car insurance?
Claiming your car insurance involves informing your car insurance provider and providing valid proofs supporting the claim. Once your insurance provider validates your claim, your insurance amount will be disbursed.
I hope more readers like me will benefit from the information present on the website. Thanks to the writer.