If you are a car owner in India, you would know that buying third-party Car Insurance is mandatory. The primary objective of the Car Insurance policy is to get protection against the damages that may occur to your vehicle or the third-party’s vehicle in an accident.
But, when you start looking for a Car Insurance policy, with the sheer number of options available, choosing the right plan can be overwhelming. There are several factors you must consider like the amount of coverage you want, do you need any add-on covers, but most importantly, you must determine the type of Car Insurance policy you want.
Types of car insurance policy
In India, Car Insurance policy is broadly classified into two types – based on the coverage they offer and the purpose of use.
Based on the coverage offered, Car Insurance policies are further classified into the following types:
Third-Party Insurance Policy
Third-party Car Insurance is mandated by law. It is a basic type of Insurance coverage that protects against the damages you may cause to the third-party car or property. It also compensates for the third-party’s physical injuries.
One of the significant features of a third-party Car Insurance policy is that the premium for this policy is much cheaper than the comprehensive policy. Also, with third-party Insurance, you cannot customise your plan; you cannot purchase add-ons. Additionally, third-party Car Insurance does not protect you from the damages or theft of your car.
Comprehensive Car Insurance Policy
This type of Insurance policy provides complete protection. It covers both third-party liabilities as well as damages to your vehicle. Also, with a comprehensive cover, you can get compensation if the accident results in your death; the family members will receive the benefit. Although the premium for the comprehensive policy is higher than the third-party Insurance, the coverage you get provides complete financial protection against all unforeseen risks.
Additionally, with a comprehensive Insurance policy, you can widen the scope of your policy coverage by purchasing add-ons. Add-ons or Riders are additional coverage that you can buy at an additional premium to get protection against risks that are not covered under your basic policy. The Insurance companies offer a variety of add-ons to suit the varying needs of the policyholders. Some of the most common add-ons that most people buy include:
1. Zero-Depreciation Cover
In the event of an accident, if any of your car parts get damaged and you need to replace the same, Insurance companies do not pay for the entire replacement cost, they deduct the depreciation. But, with a zero-depreciation add-on cover, you can get full compensation for the replacement of parts. However, you must know that you can buy this cover only if your car is less than three years old.
2. Roadside Assistance Cover
Breakdown of a vehicle is a common problem, and it sometimes can put you in a difficult situation. In the event of any emergency like a flat tyre, battery issues or mechanical failure, the roadside assistance cover can help you get immediate help even if you are stranded in a remote area.
3. NCB Protection Cover
The NCB or No Claim Bonus is a reward to all policyholders who do not file for a claim in a policy year. The NCB can help you get a significant discount on the premium upon renewal of the policy. Some insurers offer NCB by increasing the sum insured upon renewal. However, if you claim a couple of years, you may lose the accrued NCB benefits. This is where buying an NCB protection cover can be useful. As the name suggests, this type of add-on cover does not nullify the NCB benefits in the event of a claim.
4. Key Replacement Cover
Often people tend to lose their car keys or misplace them. In such a situation, you may not be able to use your vehicle, and getting an original replacement key from the car manufacturer can be highly expensive. If you have a key replacement cover, the insurer will offer reimbursement for getting a substitute key.
How many types of Car Insurance are available?
In India, there are two types of Car Insurance policies – Third-party Insurance and Comprehensive Insurance.
Third-party Insurance is a mandatory requirement by law. It covers only damages to the third-party. Under third-party Insurance, you do not get compensation for the damages to your car.
A comprehensive Car Insurance policy, on the other hand, covers both third-party liability and damage to your car.
So, if you are looking for a basic plan with an affordable premium, a third-party liability plan would be an ideal choice. But, if you drive a luxury car, it is better to purchase a comprehensive cover, as it will help reduce financial liabilities in the event of an accident.
10 factors to consider before buying a Car Insurance policy
Car Insurance is an Insurance plan that offers the needful financial cover to the vehicle against different forms of damages, theft, stolen and the third party liability as well. While having a valid car policy is a must, one should be mindful before buying it.
Here are key factors to consider before buying a Car Insurance policy:
- Coverage
Different Insurance products offer different coverage. Hence, one must carefully study the coverage before opting for a plan.
- Premium Amount
It is important to understand the car’s needs and probability of risks well in advance. This will help the customer in the process of finding the right premium amount.
“Also, comparing the quotes of various insurers online will help them in taking the right choice as per the needs and affordability,”
- Insured Declared Value (IDV)
The car’s current market value calculated by eliminating the depreciation amount is termed as Insured Declared Value (IDV). It is vital to consider this factor, as it is critical in deciding the compensation amount.
- State’s Guidelines
There are certain additional Insurance guidelines along with the general guidelines, which differ from state-to-state. This factor should be taken into consideration before one is opting for a Car Insurance policy.
- No Claim Bonus (NCB)
No claim bonus (NCB) is available at the time of renewal of the new policy and is a percentage that is offered for every claim-free year with certain limits.
This kind of bonus is applicable only for new cars; the used cars do not come with such benefits owing to the change in the ownership. One must consider this before buying a plan, as it may help in reducing the total renewed premium.
- Brand Reputation
Another important factor is to check the insurer’s market image from whom the customers are planning to buy the Insurance plan. This research will help customers in understanding the reliability of the company and acquaint them with the insurer’s claim settlement background.
- Exclusions
Exclusions are specific factors/situations that are not covered under Insurance plan. It is important to go through the policy documents well in advance before buying one, to avoid any unpleasant surprise during the claim process.
Some of the common exclusions are breakdowns, consequential loss, wear and tear, the loss incurred while driving under the influence of alcohol, etc.
- Add-On Coverage
customers should also look for add-on coverages which can protect car owner against any financial loss.
“In case of any mishap or any unforeseen event, additional benefits such as zero dep coverage, consumables, engine protection, key and tyre protection, and RTI (return to invoice) can be considered,” he added.
- Claim Settlement Ratio (CSR)
Customers should also check the company’s record and claim settlement ratio. CSR is defined as the percentage of Insurance claims settled by an insurer compared to the total number of claims received.
“An Insurance company with a bad claims ratio is not advisable when buying a vehicle Insurance policy,”
10) Network Garages
The aim of buying a Car Insurance policy is to protect customers from any financial emergency in case of any damage/loss of vehicle.
“Most online companies provide cashless services only if the vehicle was repaired in a network garage. Therefore, look for insurers with maximum network garages present in their list”
FAQs
- Is Car Insurance mandatory in india?
Motor vehicle Insurance is mandatory in India for a number of reasons. It becomes all the more important considering the high number of motor vehicle accidents that take place in India, and the mounting number of accidents is a figure to be concerned about.
In India, as per the Motor Vehicles Act, it is mandatory that all vehicles that operate in any public space must have a motor vehicle Insurance cover. Policyholders must have at least ‘third party liability’ motor Insurance cover even when opting for the basic Insurance plans.
The third-party cover is essential in the event of an accident caused by the vehicle owner or another person driving the other vehicle. It is important to note that vehicle Insurance coverage may or may not cover damages caused by the owner.
- Which type of Insurance is best for cars in India?
Taking a comprehensive Car Insurance cover is always advisable as it provides complete protection of not only someone else’s car like a Third-Party Car Insurance, but also the Own damages to your car, as well as any injury to the owner driver.
Also, with a comprehensive cover, the service benefits are a great addon.
- How many types of car insurance are available?
There are broadly two types of car insurance available- Third-party Insurance and Comprehensive Insurance.