Car insurance or motor insurance is the insurance you purchase to protect your car from physical damage caused by accidental and external means. Car insurance policies come in various forms with benefits varying from policy to policy. There are essentially two types of car insurance policies available in India- comprehensive coverage and third party liability policy. Of these, the third-party liability policy is mandatory for all vehicles driven in India. To find the best car insurance policy for you, it is important to research the options available before you choose. Be sure to read the fine print and understand the terms and conditions of the policy before you purchase as well.
You buy your new car after a lot of consideration. You research the models, the cost of each brand, the color choices available, engine power, and so on. While choosing car insurance too, you need to have this attention to detail and research the various car insurance policies available before you can choose one. But first, it is important to understand car insurance and all that it includes.
What Is Car Insurance?
Car insurance is essentially a contract between your general insurance company and you (the policyholder), that promises to protect your car against damage caused by an accident or other external means like theft, natural disasters, etc., for an annual premium.
There are two types of car insurance available in India:
#1 Comprehensive Cover: This type of car insurance covers your own damage and protects your vehicle. Comprehensive car insurance covers usually come with many added benefits like no claim bonuses, cashless garage services, 24X7 roadside assistance, and so on.
#2 Third Party Insurance: Third party insurance is mandatory for all cars driven in India. It helps in paying for the damages to a third party involved in an accident.
The car insurance premium is calculated based on the insured declared value (IDV) of your vehicle. The IDV roughly equals the market price of your car when it’s new, but it changes with every passing year due to depreciation. In fact, the IDV is calculated by reducing the depreciation from the manufacturer’s listing price. Thus,
IDV= Manufacturer’s listing price – Depreciation
Remember to quote a price higher than the market price though, so that you may claim higher as well when you need to make a claim. Additionally, be sure to renew your policy on time, otherwise, it will cost you more.
What Does Car Insurance Cover?
Though the benefits and coverage vary from policy to policy, generally car insurance covers the following:
#1 Bodily Injury: Car insurance covers bodily injury caused to the driver in an accident.
#2 Property Damage: Most car insurance coverage includes property damage to third parties, like another’s car.
#3 Medical Payments: Car insurance covers generally include hospitalization of driver or co-passengers due to an accident as well.
#4 Personal Accident Cover: Car insurance generally offers a personal accident cover that allows your family some financial respite in the event of your death or permanent disability due to an accident.
It is as important (if not more) to know what car insurance does not cover. The exceptions are usually written in fine print in the policy document and need to be read and understood before buying. This too varies from policy to policy, however, there are a few exceptions that are common to all. They include:
- Accidents caused under the influence of drugs and/ or alcohol
- Deliberate damage or loss of property
- When the car is being driven by someone else
- When driven by an unlicensed person
- Damage due to war or nuclear risk
- Mechanical and electrical breakdown
- Your possessions inside your car unless it’s attached to it (like a radio)
- Normal wear and tear on the vehicle due to aging
Choosing Car Insurance
It is possible to buy car insurance online both directly from the general insurance company or through non-banking financial corporations (NBFC) like Bajaj Finserv. The latter gives you an option of comparing and choosing the best car insurance for you. Online car insurance is often cheaper as well, and it is easier to renew the policies online.