Understanding Auto Insurance In India: A Comprehensive Guide

Car insurance is a necessity in India, and it's essential to understand how it works to ensure you're adequately protected on the roads. There are two main types of car insurance policies in India: Third-Party Liability Coverage and Comprehensive Coverage. Third-Party Liability Coverage is the minimum legal requirement and covers damages to a third party by the insured vehicle, including bodily injury, death, and property damage. Comprehensive Coverage, on the other hand, offers broader protection, including third-party liability and damage to the insured vehicle due to natural calamities, theft, fire, and accidents. It also allows for add-ons like zero depreciation cover and engine protection. When it comes to renewal, it's crucial to act timely and compare policies from different insurers. Additionally, taking advantage of the No Claim Bonus (NCB) can reduce your premium if you haven't made any claims during the previous policy period. Understanding car insurance and staying insured are critical for a safe driving experience in India.

Third-party liability insurance

• Lower premium rates: As the most basic type of car insurance policy, it is available at a low premium rate, making it a cost-effective option.
• Liability coverage: Third-party insurance covers third-party bodily injuries and property damage caused by the insured car.
• Limited coverage: It is important to note that third-party insurance will not compensate for any damages incurred by the policyholder's vehicle.
• Simple purchase process: As the basic and standard insurance plan, the process of purchasing third-party insurance is simple, with minimal documentation requirements.
• Legal requirement: According to the Indian Motor Vehicles Act of 1988, every motor vehicle in India needs to have a third-party insurance plan. You may be charged penalties, including a fine of Rs 2,000 or imprisonment of up to three months, if you do not have valid insurance.
• Coverage for third-party liabilities: This type of insurance covers third-party injuries, death, or property damage caused by the insured car.
• Safety net: It provides financial security in the event of unforeseen accidents caused by the insured car.

To give you an idea of the cost, the third-party car insurance premium rates for 2023 in India for private cars with an engine capacity of 1000 to 1500 cc are Rs. 2,094 for a one-year single premium and Rs. 6,135 for a three-year single premium.

Comprehensive insurance

Comprehensive car insurance is an extensive policy that covers both third-party liabilities and own damage to the insured vehicle. It is not mandatory to have this type of insurance in India, but it is highly desirable for all-round coverage. Comprehensive insurance covers damage to the insured car due to unforeseen incidents, such as fire, theft, accidents, vandalism, and natural disasters like floods and earthquakes. It also covers third-party injuries, deaths, and property damage.

The owner-driver of the insured car can also get a Personal Accident Cover of up to 15 Lakh INR under this policy. The comprehensive coverage can be enhanced by selecting additional covers, such as engine protector, accessories cover, medical expenses, and zero depreciation cover.

The premium for comprehensive insurance is higher than for third-party insurance but is based on several factors, including the make and model of the car, the city in which it is driven, and any additional riders chosen. The premium is also influenced by the insured declared value (IDV) of the vehicle, which is the market value of the car.

Add-ons and riders

• Roadside Assistance Cover: This add-on provides access to 24x7 emergency roadside assistance, including towing services during breakdowns.
• No Claim Bonus (NCB) Protection: The NCB Protection add-on keeps the NCB discount intact even if you make a claim. With this add-on, you can raise a claim and still get an NCB discount of up to 50% on car insurance renewals.
• Engine Protection Cover: This covers the cost of repairing or replacing the engine, gearbox, and differential assembly due to water ingression, hydrostatic lock, or leakage of coolant/lubricating oil.
• Consumables Add-on: Covers the cost of consumable items such as engine oil, coolant, nuts and bolts, etc., which are not typically covered by comprehensive car insurance.
• Personal Accident Cover for Passengers: This add-on insures the passengers in your car in case of accidents leading to permanent disability or death, with a sum insured of up to Rs. 1 lakh per passenger.
• Paid Driver Protection: This covers your paid driver financially in the event of serious injuries or death in an accident while they are employed by you.
• Zero Depreciation Cover: This add-on provides coverage for 100% of the cost of car parts if they need to be replaced during repair, without considering the depreciation cost.
• Outstation Emergency Cover: Provides assistance if your two-wheeler breaks down or meets with an accident outside a 100 km radius of your residence.
• Key Protect Cover: Covers the cost of replacing your bike key if it's lost, damaged, or stolen, as well as expenses for repairing or replacing the lockset in case of theft.
• Engine Protect Cover: Covers the costs involved in repairing or replacing engine parts, as the comprehensive policy does not usually cover engine damages.
• Consumables Cover: Covers the expenses of consumable items used during the repair or service of your two-wheeler, such as engine oil, coolant, nuts and bolts, etc.
• Zero Depreciation Cover: Covers the cost of repairing or replacing components without deducting the depreciation value, which is usually deducted from the claim amount.
• Roadside Assistance Cover: Provides assistance if you are stranded on the road, including technical support for issues like a flat tyre or running out of fuel, as well as tow services if needed.

Claim settlement process

The claim settlement process for car insurance in India can be stressful, so it is important to be well-informed about the steps involved. Here is a detailed, step-by-step guide on how to file a car accident insurance claim:

Step 1: Inform the Insurer Immediately:

After the accident, contact your insurance provider immediately to report the incident. Most insurers have a toll-free helpline, and some offer 24/7 support for claim intimation.

Step 2: Lodge a First Information Report (FIR):

In the case of significant damage or injuries, visit the nearest police station and file an FIR. This is mandatory in case of third-party claims, thefts, and major accidents involving bodily injury or death. The police report plays a vital role in the claim settlement process.

Step 3: Document the Incident:

Collect the names and contact details of eyewitnesses, take photographs of the accident scene, damages to the vehicle, and injuries (if any). Also, take note of the particulars of the accident and the details of the third-party involved (if applicable).

Step 4: Complete the Claim Form:

Fill out the insurance claim form provided by your insurer, either online or in a physical format. Attach all required documents, including the insurance policy document, driving license, registration certificate (RC), medical receipts (if applicable), and repair bills/invoices. Ensure that the information provided is accurate to avoid claim rejection.

Step 5: Survey and Assessment:

The insurance company will appoint a surveyor to assess the extent of the damages. Cooperate with the surveyor and provide any additional information or documentation they request. The surveyor will investigate, quantify, and validate the loss, providing an unbiased assessment within a stipulated time frame.

Step 6: Claim Settlement:

Once the survey is complete and the claim is approved, the insurer will settle the claim amount. Depending on your policy type, the payment may go directly to the repair garage, or you might need to pay for the repairs first and then seek reimbursement from the insurance company.

Documents Required for Car Accident Insurance Claim:

• Insurance Policy Document
• First Information Report (FIR)
• Driving License
• Registration Certificate (RC)
• Medical Receipts (if applicable)
• Repair Bills and Invoices
• Photographs of the damaged vehicle, accident site, and injuries (if any)

Things to Remember While Filing a Car Insurance Claim:

• Check yourself and your car after an accident to determine the extent of any injuries or damage.
• Inform your insurer as soon as possible, ideally within 24 to 48 hours of the accident.
• In case of an accident involving another vehicle, try to note the vehicle's number for further verification.
• Do not provide misleading or false information when filing a claim, as this will result in the denial of your claim.
• If there is damage to a third party, do not engage in any physical or verbal abuse. Inform a police official immediately.
• Keep all the necessary documents readily available to ensure a smooth claim process.

Reasons for Claim Rejections:

It is important to note that not all car insurance claims will be settled. Some common reasons for claim rejections include:

• Incorrect or misrepresentation of information while raising a claim.
• Claims raised against damage that is not covered by the policy.
• Getting your car repaired before or without informing the insurance company.
• Claims raised after the car insurance policy has expired.
• Not disclosing information such as modifications to the insured car.
• Unreasonable delay in raising the claim request.
• Driving the insured car without a valid driving license.
• The insurance of the car is still under the previous owner's name.
• The car is used for purposes other than those mentioned in the policy.
• False claims made with untruthful information (fraudulent claims).
• Driving under the influence of alcohol or other intoxicating substances at the time of the accident.
• Damages due to carelessness, such as starting the engine of a water-logged car.
• The repair fee is higher than the depreciated value of the car.

Tips to Avoid Claim Rejections:

To reduce the chances of claim rejection, it is advisable to follow these practices:

• Drive with a valid driving license and always follow traffic rules.
• Do not drink and drive.
• Read the policy document carefully, including the coverage and exclusions.
• Understand the claim process thoroughly.

Car insurance premiums

The premium is also affected by the car's specifics, such as its model, make, variant, fuel type, and age. The location of registration, known as the RTO, also matters; certain cities like Mumbai, Delhi, and Bangalore are categorized as Zone A and have higher premiums than Zone B areas.

The Insured Declared Value (IDV), or the car's market value, is another critical factor. A higher IDV leads to a higher premium. Additionally, safety features like anti-theft devices certified by the Automotive Research Association of India (ARAI) can lower the premium.

No Claim Bonus (NCB) is a significant factor in reducing premiums. If no claim is made during the policy year, insurance companies offer a discount of up to 50% as a bonus for safe driving. However, raising even small claims can result in the loss of this bonus.

To reduce premiums without compromising on coverage, it is recommended to install safety devices, become a member of automobile associations, and refrain from filing small claims. Choosing add-ons judiciously is also essential, as they increase both coverage and premium.

Frequently asked questions