Motor insurance protects your vehicle against losses arising from unforeseen risks. It basically covers financial losses arising from accidents, theft and other natural calamities. Motor insurance is a contract for an automobile in which the insurance company agrees to pay for your financial loss resulting from a said specified event.
Why Motor Insurance
In India, nearly 4 lakh people meet with accidents every month. Fatalities in road accidents in India are moving up at a compounded annual rate of four per cent. Considering the high number and the poor state of roads, Motor insurance is a necessary requirement. By law, Motor Insurance is mandatory. Motor Insurance provides financial cover not only to you but also covers damages to third party (people travelling with you). Motor Insurance also protects you from losses arising from natural calamities like cyclone, earthquake etc.
Types of Motor Insurance
Third Party Insurance
This insurance is mandatory by law. It protects a policy holder against losses which arise due to bodily injury/death to a third party or any damage to property. Here third party includes people travelling with you or whom the insured person injures and claims damages at the time of accident. But this insurance does not protect you, your vehicle and co-passengers against losses which arise due to bodily injury/death.
In addition to third party coverage, this policy covers you, your car and co-passengers against damages /losses arising from unforeseen calamities, hence it is prudent to purchase this policy.
1. Who should buy Motor Insurance?
Both individual owners as well as corporate entities should buy Motor Insurance. All vehicles, be it for personal or commercial use should be insured.
2. Is Motor Insurance Mandatory?
Motor insurance is mandatory for all vehicles under the provision of Motor Vehicles Act 1988, be it for commercial or personal use. It is compulsory to have a valid Motor insurance policy before you can start driving your vehicle. Motor insurance comes with unique plans for four wheelers, two wheelers and commercial vehicles.
3. What are the benefits from Motor Insurance?
It is a financial safety net that can help you offset the cost of
Bodily injuries to yourself or others
Lost wages due to injury
Benefits to survivors when an accident results in death
Lawsuits brought against you as the result of an accident
Repairs made to your car due to damage caused in an accident
4. What is the cover level of Motor Insurance?
The cover level of Motor insurance can be the insured party, the insured vehicle, third parties (car and people). The premium of the insurance is dependent on certain parameters like gender, age, vehicle classification, etc.
5. What does Motor Insurance not cover?
Motor Insurance does not cover loss due to wear and tear, breakdown, accidents due to drunken driving and war perils. The insurance also does not cover failure or breakage when the vehicle is used outside the geographical area.
6. What is IDV?
IDV is the short form of Insured declared value. It is the value of Sum Assured that can be taken on your vehicle. It is calculated on the depreciated value of your vehicle or on the showroom price of the vehicle depending on the Insurance carrier
7. Why do premiums vary between different insurance companies?
Insurance companies work with different statistics and use different methods to calculate premiums. Some companies are specialized in certain areas or types and so are prepared to give discounts in those areas. This adds to the complexity as various companies yield varied prices.
8. What are the factors that determine the premium amount?
Make and Model of the Vehicle
Year of Manufacture
Place of Registration
Current Showroom price of the vehicle
Whether Client is Individual or Corporate
The principal insurance amount and its subsequent premium also vary according to the price of the vehicle.
9. What is Third Party?
Third party would include all people other than the primary insured. They would include people travelling in the vehicle or pedestrians or people involved in the accident.
10. Which type of policy is better and why?
A comprehensive motor loan is better, as it also covers you against losses arising from theft, natural calamities, vandalism etc. This will have a deductable attached to the policy.
11. What is a deductable?
When you file a claim with the insurance company, you have to pay a specific amount as mentioned in the policy for the losses incurred. For example, if the deductable is 10% and you file a claim of 5000 rupees, you have to pay 500 rupees. Hence one has to choose the policy carefully depending on the deductable amount.
12. Are there any benefits for no claims?
Yes, there are benefits like ‘no claim’ discount. If you have a claim free period you can avail a discount on the premium when you renew your policy for the next period. There are other specific benefits that insurance companies provide like free maintenance etc??
Tips for buying Motor Insurance
Motor Insurance can be confusing for many people as there is plethora of Motor policies and is an arduous task to choose an Motor policy which you should really carry to protect yourself compared to various coverages available.
Depending on the vehicle you have
Discount & Deductable %
IDV (Insured Declared value)