Motor Vehicle Insurance: Understanding India's Auto Coverage

Motor vehicle insurance in India is a mandatory insurance policy for private and commercial vehicles plying on Indian roads. This includes bikes, cars, trucks, and auto-rickshaws. The insurance offers coverage against accidental damages to the insured vehicle and third-party liabilities. Third-party insurance is a legal requirement, and driving without it in a public place is a punishable offence under the Motor Vehicles Act of 1988.

Motor insurance in India can be broadly classified into two types: third-party insurance and comprehensive insurance. Third-party insurance covers the insured against any injury, damage, or loss caused to a third party, while comprehensive insurance covers both third-party liabilities and damages to the insured vehicle.

The premium of a motor insurance policy depends on various factors, such as the vehicle's make and model, age, engine type, location, and claim history.

Motor insurance in India: types and features

Motor insurance is a mandatory insurance policy in India for private and commercial vehicles plying on the roads. This includes two-wheelers, cars, trucks, and auto-rickshaws. The insurance provides coverage against third-party liabilities and accidental damage to the insured vehicle. Third-party insurance is mandatory as per Indian motor laws.

Features of Motor Insurance

Motor insurance has several features that benefit the policyholder. Some of these include:

• The ability to purchase and renew motor insurance online.
• The option to add or remove add-ons to enhance coverage.
• Coverage for theft, natural calamities, fire damage, vandalism, and man-made disasters, in addition to accidental damage.
• Cashless claim assistance.
• A No Claim Bonus feature, where the insurer provides a discount on the renewal premium if no claim is made during the policy tenure.

Types of Motor Insurance

Motor insurance can be classified into three main types:

• Third-Party Insurance Cover: This is a mandatory policy that covers injury, death, and property damage to a third party in an accident involving the insured vehicle. It does not provide direct benefits to the policyholder's vehicle.
• Standalone Own Damage Cover: Introduced recently, this policy protects the insured vehicle against damage or loss arising from accidents, theft, or fire. It can be purchased along with a third-party cover for enhanced protection.
• Comprehensive Insurance Cover: This is an add-on to the third-party insurance plan, providing wider coverage. It protects against financial losses due to damage or theft of the insured vehicle and also includes third-party coverage. Comprehensive insurance carries a higher premium.

Comprehensive Motor Insurance Coverage

A comprehensive motor insurance policy covers losses, including damage to the insured vehicle due to various perils:

• Fire, explosion, lightning, and spontaneous combustion.
• Burglary, housebreaking, and theft.
• Natural calamities such as floods, storms, cyclones, hurricanes, and landslides.
• Accidental external means, including collisions.
• Damage during transport by rail, road, inland waterways, lift, elevator, or air.
• Landslides and rockslides.

Act Liability Insurance

Act liability insurance, or third-party insurance, is a legal requirement in India. It covers the vehicle owner's liability for injury, property damage, or death caused by the vehicle to a third party. The Motor Vehicles Act, 1988, mandates that every motor vehicle on the road must be insured, and proof of insurance must be kept in the vehicle. Driving without insurance is a punishable offence.

Why motor insurance is mandatory in India

Motor insurance is mandatory in India to protect vehicle owners from unforeseen events and unplanned liabilities. The Motor Vehicles Act of 1988 mandates that every motor vehicle on the road must be insured, with at least third-party insurance being compulsory. This is because a motor vehicle in a public place can be a dangerous and lethal instrument, even when it is not in motion. Therefore, it is required by law to be insured with respect to the user's liability for death, injury, or damage to the property of a third party.

The probability of mishaps has risen due to the increase in the number of cars and other vehicles on Indian roads, and these accidents can be devastating for those involved, leaving them financially strained. Motor insurance provides financial protection in such cases, not only to the vehicle owner but also to third parties. It covers damages caused by accidents, theft, natural calamities, fire damage, vandalism, and man-made disasters.

Additionally, India has recorded a high number of road deaths, and the poor condition of roads adds to the risk. Therefore, the government has made it mandatory for vehicle owners to buy at least third-party insurance to ensure that victims of road accidents receive compensation. This is especially important when the driver at fault is a person of small means, and the injured person may otherwise not receive adequate compensation.

Furthermore, long-term third-party vehicle insurance has been made mandatory for two-wheelers and four-wheelers by the Supreme Court, with a three-year policy for four-wheelers and a five-year policy for two-wheelers. Driving without insurance is a punishable offence, and failure to have insurance can result in suspension of one's driving license, legal proceedings, heavy traffic fines, and lack of financial protection in the event of an accident.

Motor insurance: what's covered and what's not

Motor insurance in India is mandatory for all vehicles plying on public roads. It covers motorcycles, cars, jeeps, commercial vehicles, etc. The premium you pay yearly is a small sum compared to the benefits offered in case of a mishap.

What's Covered:

Motor insurance can be broadly classified into two types:

• Third-Party Insurance: This is a basic, mandatory insurance policy that covers injuries, damages, or losses caused to a third-party person, vehicle, or property. It does not provide any direct benefit to the policyholder's car.
• Comprehensive Insurance: This policy covers both third-party liabilities and damages to the insured vehicle. It provides wider coverage and carries a higher premium.

Motor insurance covers damages caused by accidents, fire, natural disasters, theft, vandalism, and man-made disasters. It also includes personal accident cover for the driver and passengers.

What's Not Covered:

The following are generally excluded from motor insurance coverage:

• Regular wear and tear of the vehicle
• Damage caused while driving without a valid license or under the influence of drugs or alcohol
• Using a personal vehicle for commercial purposes
• Violation of traffic rules, such as drunk driving or jumping red lights
• Driving without mandatory documents like a valid license, registration certificate, or insurance
• Non-renewal of the insurance policy
• Modification of the vehicle without informing the insurer
• Consumables like oil, lubricants, nuts and bolts, and gases and water

Add-ons:

Motor insurance policies also offer add-ons or riders, which are optional covers that enhance the basic coverage. These include:

• Nil Depreciation Cover: This ensures that the value of your vehicle remains the same as the day you bought it, and depreciation is not considered during the final settlement.
• Engine Protection Cover: This covers financial protection for damages caused to the vehicle's engine.
• Return to Invoice Cover: In case of theft or total damage, this add-on provides the benefit of getting back the complete invoice value of the vehicle.
• No Claim Bonus: If no claim is made during the policy tenure, the insurer provides a specified discount on the renewal premium.

Factors that affect motor insurance policy premiums

Motor insurance is a mandatory insurance policy in India for private and commercial vehicles. It offers coverage against accidental damage and third-party liabilities. The premium of a motor insurance policy is determined by several factors. Here are some of the key factors that affect the premium:

• Make and Model: The premium depends on the vehicle's make, model, cubic capacity, and variant. Sports cars and vehicles with higher cubic capacity tend to have higher premiums.
• Age: The depreciation value and insured declared value (IDV) depend on the age of the vehicle. Older vehicles have higher depreciation and lower IDV, resulting in lower premiums.
• Engine Type: Vehicles with diesel engines generally have higher premiums than those with petrol engines due to the higher cost of diesel vehicles, which impacts the IDV.
• Location: The premium is higher for vehicles in metro cities or areas with a high risk of accidents or car theft.
• Add-ons: The premium increases with additional coverage options, such as zero-depreciation cover, roadside assistance, and enhanced third-party liability.
• No Claim Bonus (NCB): If no claims are made during the policy period, insurance providers offer a discount on the premium for the following year.
• Anti-theft Devices: Installing anti-theft devices certified by the Automotive Research Association of India (ARAI) may result in a discount on the premium.
• Digital Insurance: Digital-first insurers often offer comprehensive policies at lower prices due to reduced operational costs.
• Gender and Age: Statistically, young men are more likely to be involved in accidents, resulting in higher premiums compared to young women.
• Safety Fittings: Vehicles equipped with safety features such as gear lock, GPS, and airbags have lower premiums as they reduce the risk of theft and accidents.
• Frequency of Claims: The premium may increase if there is a history of frequent claims.
• Engine Capacity: Higher engine capacity can lead to a higher premium as it increases the vehicle's value and potential for damage.
• Vehicle Type: Premium rates can vary depending on whether the vehicle is Indian or imported.
• Driving Habits, Profession, and Age: These factors can influence the premium, with higher-risk profiles resulting in higher premiums.
• Accessories: The cost of insuring additional accessories, such as electronic or electrical fittings, may increase the premium.

How to buy motor insurance in India

Motor insurance is mandatory for all vehicles plying on the roads of India. The Motor Vehicles Act of 1988 makes it compulsory for all car owners to have at least a third-party insurance cover. This type of insurance provides coverage for injuries or damages caused to other people and their property. However, if you want to get coverage for the losses or damages caused to your own vehicle, you can buy a comprehensive motor insurance plan.

Step 1: Choose the Type of Insurance Cover

You can choose between a third-party insurance cover, a comprehensive insurance cover, and a standalone own-damage cover. A third-party insurance cover is mandatory and provides coverage for injuries or damages caused to a third party. A comprehensive insurance cover provides coverage for third-party liabilities as well as own damages. A standalone own-damage cover provides coverage only for the damages sustained by your vehicle.

Step 2: Compare Insurance Plans Online

It is important to compare insurance plans online to find the most suitable plan within your budget. You can use a comparison website like Policybazaar to compare plans from multiple insurers. This will help you understand the additional services offered by each plan, such as a free pick-up and drop facility, 3-day repair assistance, cashless assurance, and self-video claims.

Step 3: Check the Insurer's Credibility

Before buying an insurance plan, check the insurer's credibility by going through customer reviews, claim settlement ratio, and incurred claim ratio.

Step 4: Buy the Insurance Plan

Once you have compared different insurance plans and selected the most suitable one, you can proceed to buy the plan online. Simply visit the insurer's website, fill in the required details, and make the payment using a credit card, debit card, or net banking. The insurer will then send the policy document to your registered email ID and home address.

Step 5: Renew the Insurance Plan Before its Expiry

Remember to renew your insurance plan before its expiry date to avoid legal consequences and a loss of your No Claim Bonus (NCB) benefit. You can renew your plan online by visiting the insurer's website and providing the necessary details.

Step 6: File a Claim When Needed

In case of an accident or damage to your vehicle, you can file a claim with your insurer. Inform the insurance company immediately and submit the necessary documents, such as a copy of the insurance policy, driving license, and repair estimates. The insurer will then send a surveyor to assess the damage, after which you can send your vehicle for repair to a network or non-network garage, depending on your claim type (cashless or reimbursement).

Frequently asked questions