Buying a car or a bike is futile if you are not aware of motor insurance. Not only is it mandatory for a vehicle running on Indian roads, but it also offers unsurpassed protection in the event of an accident or mishap. Motor insurance promises a financial cover in case your vehicle is damaged due to an accident or a natural or man made calamity. It also covers third party damages or medical costs for injury caused to them due to an accident involving your insured vehicle.
The type of motor insurance you must get depends on the category your vehicle belongs to:
Private car insurance policy
This is applicable for different models of personal cars and covers the economy to premium category and imported cars. However, the owner should utilise the car for personal commuting purposes only. The coverage includes damage to own car as well as any loss to a third party.
Commercial vehicle insurance
This category of insurance covers all types of vehicles that are used for commercial purposes, such as trucks, buses, heavy, light and multi-utility vehicles. Taxis, ambulances, auto-rickshaws, and two-wheelers used for home delivery of products or ferrying individuals also come under this category.
Personal two-wheeler policy
This policy covers all two-wheelers such as geared and gearless scooters and motorcycles. Two-wheelers have individual ownership, and the owners must utilise them for personal use only.
Based on the extent of coverage, there are three types of vehicle insurance policy—the mandatory third-party policy, optional own damage policy and optional comprehensive policy. Though they differ in terms of the type of coverage they offer, they still provide financial benefits in case of loss or damage to your vehicle or a third party due to your insured vehicle. Read on to know more about these different types of policies.
Third-party car insurance
It is mandatory to have third-party insurance for all types of vehicles in India. Not having car insurance or having expired or invalid insurance can result in heavy fines, imprisonment, or both, depending on the situation. Accidents are unpredictable, and your car may get involved in an accident in which a third-party individual gets injured, or their property or car is damaged. In case of a claim made by a third-party related to their medical expenses or property damage, your insurer would pay them the monetary compensation. If there is any legal issue against you after an accident, the insurer would also take care to settle that. So, you are basically free of any liability. In the absence of an insurance cover, you will have to bear the entire burden—monetary and otherwise.
The premium, taxes and charges for third-party insurance are fixed by the Insurance Regulatory and Development Authority of India (IRDAI). The insurance companies do not have any control over the policy premium or terms.
Own-damage (OD) policy
An own-damage policy is optional and covers damages to your vehicle due to accidents or non-accidental reasons. The coverage is up to a certain limit, depending on the situation and time of damage or loss. An OD cover includes:
- Damage to your car due to an accident or collision.
- Damage due to natural calamities such as floods, earthquakes, and landslides. The policy will protect you financially during the repair or replacement of the damaged car or bike parts.
- Theft of your car or bike: If your vehicle gets stolen, your insurer will pay an amount equal to the IDV (Insured Declared Value) mentioned in the policy.
- Manmade hazards: The insurance will cover you from damages caused by manmade disasters such as riots, conflicts, stone pelting, and torching.
- Total loss or damage beyond repair: For damage beyond repair, your insurer will give the claim amount equal to the IDV mentioned in the policy document.
- Package or comprehensive policy
This is an optional cover and provides the most extensive coverage among the different types of motor insurance policies. The premium amount would also be the highest compared to other policies. The features of this policy comprise components of both third-party and own-damage policies. The third-party component has a mandatory policy term of three years, while the own-damage component is valid for one year. It provides financial protection against damage to your car due to accidental or non-accidental causes such as natural disasters and manmade calamities. You can get the entire sum insured (SI) in case of car theft or damage beyond repair.
The OD and comprehensive policies are suitable for new cars or premium category cars that require high maintenance. You may buy only a third-party policy for old vehicles or those you are planning to sell. The insurers decide the premiums, so they vary between different insurers based on policy terms and premium amounts. Nowadays, you can buy, renew and claim motor insurance online, making them easy, convenient and time-saving processes. There is no need to submit hard copies, physically visit the insurer, or involve insurance agents to buy or renew policies anymore.
Apart from the above standard policies, you can get additional coverage by paying an extra premium for add-ons. The premium amount and features of add-ons can differ between insurance companies. Some of the popular add-on covers are:
- Outstation emergency cover
- Engine and gear box protection cover
- Roadside assistance cover
- Personal accident cover for extra passengers
- Cover for personal belongings
- Consumables cover
- Key replacement cover
- No claim bonus protection
- Zero depreciation cover
- Downtime protection cover
- Loss of baggage cover
- Windshield glass cover
- Enhanced personal accident cover
Now that you know about the different types of motor insurance policies, you can choose the one that meets your needs and fits your budget the best. The comprehensive policy, though expensive, promises the most extensive coverage. Also, you can buy add-on covers as per your requirements and budget. For an old car that you are planning to resell, a basic third-party policy would be adequate.