Everything you Need to Know about Motor Insurance in India

Have you ever wondered- what is motor insurance? If yes, then you have come to the right place. Even if you haven’t, and you have a car, read on. This article will help you ensure your financial safety as well as the safety of your car. In this day and age, a car is considered as an indispensable mode of transportation for people living in urban as well as rural areas. Hands down, nothing matches the ease of commuting offered by a car.

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Now, some people might think that a bike offers better ease of commuting. It is partially correct and here’s why:

Distance- A bike is considered as a preferred mode of commuting for short distance. For long distance, commuting on a car is a safer option.

Weather Conditions- A bike won’t protect the rider/pillion rider against harsh weather conditions be it scorching heat or spine chilling cold. On the other hand, commuting in a car protects the driver/passengers against the outside weather conditions.  

When your car protects you against such extreme weather conditions, you need to protect your car against various risks with the help of a motor insurance policy.

You know why?

It fulfils your legal liability of buying mandatory car insurance in India.

What is Motor Insurance?

Let’s understand what car insurance is:

A car insurance policy protects the vehicle owner against the covered financial loss(es) due to damage/theft of the insured vehicle (as per the applicable terms and conditions).

Why Should you Buy Car Insurance in India?

As per law, it is mandatory for car owners to buy car insurance for their vehicles plying on the Indian roads. Car insurance fulfils vehicle owner’s legal liability arising due to bodily injury/ loss or damage caused to third-party/ property.

Type of Car Insurance 

In India, two types of car insurance plans are offered:

  • Third-Party Insurance- Third-party insurance is a basic vehicle insurance As per applicable terms and conditions, it covers bodily injuries/ damage(s) or losses caused to any third-party vehicle/property by the insured vehicle.
  • Comprehensive Insurance- True to its name, the comprehensive vehicle insurance policy provides enhanced insurance coverage. It covers third-party liability as well as own damage to the insured vehicle.

While having a comprehensive insurance policy is optional; having a third-party vehicle insurance policy is mandatory.

Note- The policyholder can opt for additional riders and avail customized insurance coverage.

Car Insurance Add-ons

In case the offered car insurance coverage doesn’t fulfil your insurance expectations, you can opt for car insurance add-ons offered by car insurance providers. It will enhance the offered car insurance coverage and will fulfil your individual insurance expectations.

Car insurance add-ons are also known as car insurance riders or car insurance additional riders. 

While add-ons come at a nominal premium, they increase the scope of insurance coverage as per the insurance expectations of the insurance buyer. Keep in the mind that generally these additional riders are offered for the cars that are not more than 5 years old.  

Mentioned below are a few of many car insurance add-ons:

  • Nil Depreciation Cover-As vehicle ages, its value depreciates.When a policyholder files a claim, (as per applicable terms and conditions) it is processed after deducting the applicable depreciation. If the policyholder opts for a nil depreciation cover, no depreciation is
  • Engine Protection Cover-In case the damage is caused to the engine, the repair/ replacement expenses will be covered by the insurance provider.
    • Return to Invoice Cover- In case of total damage, the cover entitles the policyholder to get the original on-road cost of the insured car.
    • NCB Protect Cover- In case a policyholder files a claim in a policy year, he isn’t entitled to get. Opting for this cover helps the policyholder to be eligible for No Claim Bonus even if they filed a claim.
    • Consumables Cover- There are a few consumable parts/ components/ substances such as nuts, bolts, ball-bearings, engine oil, AC gas, coolant, grease that are not covered under the car insurance policy. With this add-on, the insurance coverage is extended to consumables.

Note- Be it a third-party insurance plan or a comprehensive insurance plan, always know motor insurance details of your opted plan. It will help you to get a clear understanding of policy coverage and will leave no room for doubts/ assumptions. Additionally, you will be able to decide whether you want to opt for the add-on(s) or not. If yes, it will help you decide which one to opt for.

When it comes to paying attention to motor insurance details, some insurance buyers turn a blind eye. Unfortunately, it ends up getting their claims rejected.

Now that you have the answer to the question- What is motor insurance- let’s move to what is covered by car insurance and what isn’t covered by car insurance.

Inclusions of Comprehensive Car Insurance Plan

Generally, the comprehensive car insurance plan provides the following coverage:

  • Damages caused due to accident, riots, strikes, malicious acts, earthquake, flood, storm etc.
  • Loss or theft of the insured vehicle
  • Third-party liability
  • Personal accident cover for the driver

Exclusions of Comprehensive Car Insurance Coverage

Generally, the comprehensive car (motor vehicle) insurance plan doesn’t provide the following coverage:

  • Ageing, wear and tear of the vehicle
  • Mechanical or electrical breakdown
  • Damage causes under the influence of alcohol, drugs and any other intoxicating substance
  • Damage caused by driver driving without a valid driving license
  • Consequential loss
  • Loss damage outside the geographical boundary of India

Note- Some exclusion might cease to exist in case the policyholder ops for specific additional riders.

Factors that Affect Motor Insurance Policy Premium

The motor insurance policy premium is affected by many factors. Here are a few of them:

  • Type of Insurance Premium- Since comprehensive car insurance, offers comprehensive insurance coverage, it attracts a higher insurance premium. As third-party insurance offers basic insurance coverage, it attracts basic insurance premium.
  • Car Model, Make, and Variant- As it differentiates one car from the other, based on the differences, the insurance premium is charged.
  • RTO- Car registration RTO influences the insurance In our country, car insurance premiums are computed on the basis of the location of vehicle registration. The locations are categorized as the following:
    • Zone A
    • Zone B

While Mumbai, Delhi, Chennai, Bangalore, Kolkata, Pune, Ahmedabad and Hyderabad, falls under Zone A, the rest of India falls under Zone B.

For the vehicles registered under Zone A, higher premiums compared to vehicles cars registered under Zone B.

  • Insured Declared Value- It is the market value of the vehicle. If it is high, the insurance premium will be high and vice-versa.
  • Age-With age one becomes responsible and is more likely to drive responsibly. A higher premium is charged from young drivers as compared to the older drivers. It is because the insurance companies assume that young drivers are more likely to engage in rash driving and old drivers are more likely to practice cautiousness while driving.
  • Claim History- If the applicant doesn’t file any claim during the policy year, they will be rewarded as bonus known as No Claim Bonus up to 50%. The discount is rewarded for their safe driving.

How to Reduce Premium for Motor Insurance Policy?

This question pops up in the mind of various insurance buyers/ renewers.

Everyone wants to reduce the insurance premium. Here’s the catch- Less insurance premium means less insurance coverage. When it comes to the reduced insurance premium, insurance experts recommend to not compromise on coverage.

If you compromise on coverage, you might save a few pennies on insurance premium but in case of a claim, you might end up spending more from your pocket. It will nullify the basic need of having car insurance in the first place i.e. financial safety of the car buyer.

Here is how you can reduce the premium for a motor insurance policy without compromising on the insurance coverage:

  • Install Safety Device(s)- When you install safety device(s) in your vehicle, you enhance the vehicle’s security and diminish the risk of vehicle theft. This, in turn, reduces the risk associated with your vehicle. As a result, the insurance provider offers a discount on the insurance premium.
  • AAI or WIAA Membership- Having membership of Automobile Association of Upper India or Western India Automobile Association has its own perks. The insurance buyers who have AAI or WIAA Membership can avail a discount on their vehicle insurance
  • Refrain from Filing Small Claims- If you keep on filing small claims, you won’t be eligible for No Claims Bonus.As a result, you’ll have to pay a higher insurance premium.
  • Judiciously Opt for Add-ons- Though add-ons provide enhanced insurance coverage, they attract an enhanced insurance premium as well. So, opt for the add-ons that fulfil your insurance expectations. Don’t opt for it just because your friends have opted for it.  

How to buy Motor Insurance Policy in India?

There are two modes of buying motor insurance policy in India:

  • Online Mode- When you buy car insurance online, you can easily skip queues, save your precious time, and buy insurance from the comfort of your home.This is a transparent, hassle-free, economical and time-saving way of buying insurance.Before you zero down on a car insurance plan, make sure to compare car insurance online and then opt for the plan that fulfils your insurance expectations.

Note- You can use car insurance calculator to compare insurance premium of various plans.

  • Offline Mode- This is the traditional mode of buying car insurance. If you opt for buying car insurance from agents directly, you will have to meet them in person as per their availability. On top of that, the commission they will get will be paid from your pocket.Having said that, the plans they will try to sell you will be the ones that will pay them a high-commission. The plans they will tell you about will be good for them, not for you.

Verdict- Nowadays, insurance buyers make the best use of advanced technology and buy motor insurance policy online. In order to ensure absolute transparency, car insurance experts recommend buying car insurance online.  Not just that, they recommend going through the fine print of policy copy to have a clear idea of your car insurance details.

Over to You

Now that you know everything about motor insurance in India, we hope you will be able to make an informed insurance decision. Keep the points mentioned in the article at the time of buying a car new insurance plan or renewing/ porting your existing car insurance plan. When you get the policy copy make sure you take some time out to check vehicle insurance details/ car insurance details. Having knowledge about policy coverage will help you to ensure that you don’t file a baseless claim.

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