CAR INSURANCE IN INDIA PART 1

Car insurance in India is a mandatory requirement for all vehicles plying on public roads as per the Motor Vehicles Act, 1988. It provides financial protection against damages or losses caused by an insured vehicle to a third party, as well as coverage for the insured vehicle itself. Here's a glance at car insurance in India.

Today, everyone wants to own a car. We spend so much of our precious time finding the best car with the jazziest colors and with top-notch features. However, do we really spend even a little of our time on finding the right car insurance for our safety? Most probably, the answer would be ‘No’. Have you ever wondered why the government has made it compulsory for every car owner to at least have third-party car insurance? Why do they emphasize so much on this?

When you buy a car and the moment you take it out from the showroom, you and your car both are at risk of any accidents or damage. These accidents are not welcomed and one cannot escape from them wishfully, no matter how good a driver you are. Any mishappening might put you and the third party involved in a bad financial situation. So, why risk our lives while driving even though we know there will be mishaps on the road. You cannot be gutsy enough to hope that no misfortune will happen to you or your car.

Here, car insurance comes as a savior. Car insurance is generally a contract between you and an insurance company wherein you decide to pay premiums in exchange for financial protection against financial losses resulting from an accident or any other car damage.

As a result, for the safety of its citizens, the Indian government made it compulsory for car owners to have at least Third-Party Car Insurance.

Types of Car Insurance Policies:

a. Third-Party Liability Insurance: This is the minimum legal requirement. It covers liability for injury, death, or property damage caused to a third party by the insured vehicle.

b. Comprehensive Insurance: This provides coverage for both third-party liability as well as damages to the insured vehicle due to accidents, theft, fire, natural disasters, etc.

Is third-party car insurance enough

Third-party car insurance is the basic insurance that only covers damages to a third party’s vehicle or property, physical injuries, disability, and death. Third-party insurance will only cover claims for losses caused to the third party, regardless of whether you are driving, a member of your family is driving, or you hired a driver. Unfortunately, according to the terms of your third-party insurance policy, you are not covered for damages to your car.

Therefore, it is often suggested to go for comprehensive car insurance. A comprehensive car insurance plan is a detailed insurance policy that covers both third-party and personal damages. It also offers policyholders to extend their coverage with a few add-on covers. Due to its comprehensive coverage, it is also the most suggested.

Coverage:

a. Third-Party Liability Coverage: Covers legal liabilities arising due to injury, death, or property damage to a third party.

b. Own Damage Coverage: Covers damages to the insured vehicle due to accidents, theft, fire, natural calamities, etc.

c. Personal Accident Cover: Provides compensation for accidental injuries or death of the owner/driver of the insured vehicle.

Add-On Covers: Insurers offer additional coverage options that can be purchased along with the base policy, such as zero depreciation cover, engine protection, roadside assistance, consumables cover, etc.

No Claim Bonus (NCB): Insured individuals receive a discount on the premium if they do not make any claims during the policy period. The NCB can accumulate over time and result in significant savings.

Premium Calculation: The car insurance premium is calculated based on factors like the car's make, model, age, engine capacity, location, IDV (Insured Declared Value), and the chosen coverage.

Policy Duration: Car insurance policies are typically issued for one year. However, some insurers also offer long-term policies for two or three years.

Online Renewal: Car insurance policies can be easily renewed online through the insurer's website or various insurance aggregators.

Mandatory Documents: While purchasing or renewing car insurance, you will need documents like vehicle registration certificate, previous policy details (if any), personal identification proof, etc.

Third-Party Motor Insurance Premium Rates: The Insurance Regulatory and Development Authority of India (IRDAI) sets the premium rates for third-party liability coverage annually.

Penalties for Non-Compliance: Driving a vehicle without valid insurance is an offense. It can lead to penalties, fines, suspension of driving license, or even imprisonment.

It's important to thoroughly understand the terms and conditions of the car insurance policy, compare quotes from different insurers, and choose a policy that suits your requirements before making a decision.

Steps to Calculate Car Insurance Premium

Car insurance price is decided based on several factors. It is also easy to find out the four wheeler insurance premium using an online car insurance calculator. However, the insurance provider takes into consideration the following parameters before fixing the car insurance price:

• IDV (Insured Declared Value) of the vehicle

• Age and Type of Car

• Engine’s Cubic Capacity

• Geographical zone

Car’s IDV Calculation Formula:

• IDV = Car’s Showroom price + Accessories cost – depreciation value

• Thus, the formula to calculate OD premium amount is:

• Own Damage premium calculation formula:

• Insured Declared Value X [Car Premium as per the insurer)] + [ Optional Benefits] – [NCB/Discount etc.]

What is covered

Checkout the inclusions and exclusions of both third party insurance and comprehensive vehicle insurance policy. Only buy third party insurance if you can bear your own damage expenses.

Incurred Claim Ratio

Higher ICR, indicate satisfied customers and more the chances of your claim being settled.

Add-on Covers

It is always recommended to buy a comprehensive car policy with additional benefits like roadside assistance, zero depreciation, flat tyre assistance, etc.

What’s Covered in Car Insurance Policy?

The four wheeler insurance policy covers the following:

• Loss or damage to the insured vehicle.

• Loss or damage to your vehicle caused by accident, theft, fire, explosion, self-ignition, lightning, riots, strikes or act of terrorism, natural calamities.

• Financial liability caused by the injury/death of a third party or damage to the property.

• Personal accidental insurance cover.

For further clarifications & Doubt;

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