A Beginner’s Guide to Car Insurance in India: Types, Coverage, and Cost
If you own a car in India, car insurance is something you should not ignore. It is a simple yetRead more
Why Does Car Insurance Even Matter?
Accidents can happen to careful drivers too. And when they do, repairs, hospital expenses, and legal trouble can all be brutal. A valid car insurance means you do not have to pay it all by yourself. Here is how it helps:
- Fulfills legal driving requirements
- Keeps you prepared for unforeseen road emergencies
- Allows you to drive with peace of mind
Car Insurance Basics: How Does it Work?
Let us first clarify some important car insurance terms that will help you understand how it works in India:
| Term |
Definition |
| Policyholder |
Person who buys the policy |
| Insurer |
The entity that issues the policy and provides coverage |
| Coverage |
Protection offered under the policy |
| Premium |
The cost you pay to protect your car |
| Policy Tenure |
Duration for which the coverage remains active |
| Third-Party (TP) Liability |
Loss or damage caused to another person or their property |
| Own-Damages (OD) Cover |
Protection against damages to your own car |
| IDV (Insured Declared Value) |
The maximum compensation the insurer provides in case of theft or total loss of the insured car |
| Claim |
A request you make to your insurer to receive money for any loss or damage to your car. |
| No-Claim Bonus (NCB) |
Discount offered for not making claims |
| Deductible |
The amount you pay from your own pocket before the insurer covers the rest during a claim |
How Does Car Insurance Cover Accident Repair Costs?
Take a look at this simple example to understand how car insurance works in case of accidental damage:
- Repair cost = Rs. 50,000
- Deductibles = Rs. 5,000
- Amount you pay = Rs. 5,000
- Amount insurer pays = Rs. 40,000
Now, the car insurance company will settle this claim amount either through a cashless process or by providing you reimbursement. The final decision depends on your policy terms.
How Does Car Insurance Work in Theft Cases?
Here is how car insurance protects you if your car is stolen:
- Your car's IDV (at the time of theft) = Rs. 7 Lakh
- Car recovered by the police = No
In this case, if your car is stolen and the police cannot recover it, your insurer will offer compensation based on your car's IDV when it was stolen, which is Rs. 7 Lakh.
Remember, the payout will be made only after the successful police & claim verification depending on your policy terms and applicable deductions.
Which Car Insurance Plan Should You Opt for?
It is important to know the different car insurance options available so you can choose a policy based on the specific coverage requirements of your car:
Third-Party Liability Only
It is the most basic type of car insurance policy. The Indian Motor Vehicles Act of 1988 mandates every car owner to have third-party insurance to drive on public roads legally.
What it covers:
- Damages to another person's car, fences, buildings, or other structures
- Injury or death of another person
What it does not cover: Damage to your own car
Comprehensive Car Insurance
A comprehensive insurance plan offers more exhaustive coverage than the basic third party policy.
What it covers:
- Third-party liabilities
- Accidental damage
- Losses from fire, explosion
- Theft of your car
- Damages from natural calamities (floods, earthquakes) or man-made disasters
Own Damage Cover
This policy covers only your insured car against damages from accidents or natural or man-made disasters, theft, fire, etc.
Some Car Insurance Add-ons Worth Knowing About
Car insurance add-ons are optional benefits that cover situations not included in the basic policy. You can add them to your comprehensive or own-damage policy to extend your base coverage by paying a nominal extra premium. Some of the most useful add-ons include:
- Zero Depreciation Cover: Complete claim amount without any deduction for wear & tear on your car's parts.
- Roadside Assistance: 24x7 help for car breakdowns, flat tyres, empty fuel, tyre punctures, towing, etc.
- Return to Invoice (Invoice Protect) Cover: Get the original invoice value in case of car theft or total loss.
- Engine Protect Cover: Covers engine repair or replacement costs if damaged due to waterlogging, oil leakage, or hydrostatic lock.
- Consumables Cover: Covers the replacement costs of nuts, bolts, engine oil, coolant, and other small items in case of accidental damage.
How is Your Car Insurance Cost Decided?
Car insurance prices are not the same for every vehicle owner. The amount you pay for your policy coverage depends on various factors, as mentioned below:
- Age and model of your car
- Your car's IDV (current market value)
- City of registration
- Type of policy selected
- Your claim history
Common Mistakes People Make While Buying Car Insurance
While buying or renewing car insurance, many car owners make some mistakes, which may result in claim issues or inadequate coverage:
- Selecting the cheapest plan without comparing coverage
- Ignoring important policy details and exclusions
- Choosing an IDV that is too low or too high
- Delaying policy renewal
- Not understanding deductibles
Remember, always review your policy terms & conditions carefully to avoid any complications in the car insurance claim process.
A Simple Guide to Purchasing a Car Insurance Policy
There are two ways to buy car insurance or renew it: online and offline. When you choose the offline method, you meet insurance agents in person, which often leads to additional costs because of high commissions. However, buying online allows you to secure a car policy at a much lower price and from the comfort of your home.
- Compare Quotes Online: Visit online portals like Policybazaar.com to check and compare policy prices from different car insurance companies.
- Check Network Garages: Look for an insurer with a wide network of cashless repair garages so you do not pay for repairs from your pocket.
- Read Reviews: Check the claim settlement ratio (CSR) of insurers to see how fast they can settle claims. A higher CSR means quicker settlements.
Cashless and Reimbursement Claims
Car insurance companies settle claims through cashless or reimbursement processes. Here is how they both differ:
- Cashless Claims (Recommended): Your insurance company pays the garage directly for repairs.
- Reimbursement Claims: You pay for repairs upfront and get your money back from your insurer later.
- Documents Required: Car insurance policy copy, driving licence, RC copy, damage photos/videos, FIR (for theft and third-party claims)
Conclusion
Car insurance doesn't have to be complicated. Before picking a policy, know your coverage requirements and carefully understand the terms and conditions. A little homework now can keep you prepared for unexpected situations on the road.
