Understanding Motor Insurance: A Comprehensive Guide

Motor insurance is mandatory for all vehicle owners in India. Whether  you own a car, truck, tractor, or two-wheeler, each vehicle should have  its own insurance policy. This requirement ensures that owners take  responsibility for potential risks and provides financial protection in  case of accidents or unforeseen events. Motor insurance allows vehicle  owners to drive with confidence, knowing they have coverage to mitigate  losses and protect themselves and others on the road. 

 

What is Motor Insurance?

Motor insurance is obligatory for all vehicle owners in India, regardless of whether they possess cars, trucks, tractors, or two-wheelers. Each vehicle must be covered by its insurance policy, ensuring that owners bear the responsibility for potential risks and offering financial protection in the event of accidents or unexpected circumstances. With motor insurance in place, vehicle owners can drive with confidence, knowing that they have coverage to minimize losses and safeguard themselves and others on the road.

 

A vehicle insurance policy offers various advantageous features for the policyholder. Here are some key features you should be aware of:

  • Hassle-free online purchase: You can easily purchase motor insurance online by comparing quotes from leading insurance companies, ensuring a convenient and streamlined process.
  • Online renewal: The motor insurance plan can be easily renewed online from the comfort of your home, eliminating the need for tedious paperwork and saving time.
  • Customizable add-ons: You can add or remove specific add-ons based on your requirements. These optional covers enhance the coverage of your motor insurance policy and can be selected during the purchase or renewal process.
  • Comprehensive coverage: Motor insurance not only covers damages caused by accidents but also provides protection against theft, natural calamities, fire damage, vandalism, and manmade disasters, offering comprehensive coverage for various risks.
  • Cashless claim assistance: In case of accidents or theft, you can benefit from cashless claim assistance by providing sufficient evidence, making the claim process more convenient and efficient.
  • No Claim Bonus (NCB): Motor insurance policies often include a No Claim Bonus feature. If you do not file any claims during the policy period, you are eligible for a specified discount on the renewal premium as a reward for your claim-free record.
  • Improved coverage and assistance: Insurance companies regularly introduce new plans and add-ons to provide better coverage and assistance, ensuring you have support in case of difficulties during the claim process.

By understanding these features, you can make informed decisions while purchasing and renewing your motor insurance policy, obtaining comprehensive coverage and valuable benefits.

 

Types of Motor Insurance

Motor insurance encompasses various categories, providing coverage for different types of vehicles. Here are the main types of motor insurance:

Car insurance provides coverage against accidental loss or damage to your vehicle and third-party liabilities caused by your insured car. When selecting a car insurance policy, comparing premiums offered by different insurers to obtain the best deal is crucial. Premium amounts are determined by the car’s make, value, manufacturing year, and the state where it is registered.

Two-wheeler insurance, also known as bike insurance, offers financial and legal protection for motorcycles and scooters. It covers two-wheeler vehicles against their damages and any accidental loss caused to third-party property or individuals. Like car insurance, the premium for two-wheeler policies depends on factors such as the age of the bike, make, model, registration year, and more.

  • Commercial Vehicle Insurance:

Commercial vehicle insurance is designed to assist commercial vehicle drivers in mitigating losses resulting from damage to their vehicles. It covers unforeseen damages such as theft, fire, collisions, and third-party liabilities. This type of insurance applies to commercial vehicles used for business purposes, such as goods-carrying vehicles and trucks.

By understanding the different types of motor insurance available, individuals can choose the appropriate coverage based on their vehicle type and specific needs. It is recommended to compare policies from various insurers to find the most suitable and cost-effective option.

 

Types of Motor Insurance Coverage in India

In India, three primary types of motor insurance policies are available to vehicle owners. Let’s explore each of these coverage options:

  • Third-Party Insurance Cover: 

This mandatory policy provides coverage for injuries, death, and property damage to a third party involved in an accident with your vehicle. It compensates the affected party and ensures financial protection for the insured. As per the regulations of the Insurance Regulatory and Development Authority of India (IRDAI), no insurer can decline to underwrite third-party insurance.

  • Standalone Own Damage (OD) Cover: 

Introduced recently by the IRDAI, the standalone own damage cover is designed to protect the insured vehicle against damages resulting from unforeseen incidents such as accidents, theft, fire, etc. This policy can be purchased if you already have a third-party cover and want to provide additional coverage for your vehicle against financial losses.

  • Comprehensive Insurance Cover: 

Comprehensive insurance coverage is an add-on to the third-party insurance plan. It protects the insured vehicle against damages and theft and provides third-party coverage. This type of coverage is available for cars, bikes, scooters, and trucks. Comprehensive motor insurance provides a broader scope of coverage but may come with a higher premium than other types of coverage.

Understanding the different types of motor insurance coverage options in India allows vehicle owners to make informed decisions and select the most suitable policy based on their specific needs and budget.

 

Motor Insurance Coverage: Inclusions and Exclusions

Regarding motor insurance, it’s essential to understand what is covered and what is not. Here are the inclusions and exclusions typically found in motor insurance policies:

Inclusions:

  1. Damages due to terrorist acts, riots, and strikes: Motor insurance covers damages sustained by the insured vehicle due to these events.
  2. Fire and self-ignition: Losses caused by fire or self-ignition of the insured vehicle are included in the coverage.
  3. Natural calamities: Damages resulting from natural disasters such as earthquakes, hurricanes, cyclones, landslides, etc., are covered.
  4. Theft and burglary: Any damage or loss to the insured vehicle due to burglary or theft is covered up to the Insured Declared Value (IDV) of the vehicle.
  5. In-transit damages: Claims can be raised for damages the insured motor vehicle sustained during transit.

Exclusions:

  1. Driver under the influence: If the driver is under the influence of drugs or alcohol at the time of an accident, the motor insurance policy will not provide coverage.
  2. Illegal activities: If the car, two-wheeler, or commercial vehicle is used for illegal activities or a purpose not stated in the policy, it will be excluded from coverage.
  3. Invalid driving license: Not having a valid driving license at the time of an accident can result in claim rejection.
  4. Geographical limitations: Any loss or damage occurring outside the specified location mentioned in the policy will not be covered.
  5. Depreciation: Depreciation of the insured motor vehicle is not covered under a motor insurance policy.

It’s important to carefully review the policy terms and conditions to understand your motor insurance coverage’s specific inclusions and exclusions. 

It will help you make informed decisions and ensure appropriate protection for your vehicle.

 

Why Should You Purchase Vehicle Insurance?

Did you know that approximately 400,000 people are involved in road accidents monthly? According to a survey by the World Health Organization, India had the highest number of road deaths in the world in 2012.

Given the high number of accidents and the challenging road conditions in India, motor insurance has become essential for driving on Indian roads. Motor insurance provides financial protection for yourself and covers damages caused to third parties. Moreover, several private insurers offer additional utilities to policyholders, including:

  1. Direct settlement or cashless claims at network garages: This feature allows for hassle-free and convenient claim settlements, where repairs can be carried out at authorized garages without needing upfront payment.
  2. Depreciation Cover: Depreciation can significantly reduce the value of your vehicle over time. With depreciation cover, the insurer compensates for the depreciated value of parts during a claim settlement, ensuring you receive adequate coverage.
  3. Engine Protection Cover: Engine damages can lead to substantial repair costs. Engine protection cover covers damages caused by water ingression, hydrostatic lock, or engine seizure, offering financial security for such unexpected situations.
  4. 24×7 Roadside Assistance: In case of breakdowns or emergencies, 24×7 roadside assistance provides help and support, including services like towing, fuel delivery, battery jump-start, and more.

By purchasing motor insurance, you can drive confidently, knowing you have financial protection against potential accidents and damages. Additionally, the additional utilities offered by some insurers enhance the overall coverage and provide you with valuable support during unforeseen circumstances on the road.

 

Things to Consider When Buying Motor Insurance Online

In India, it is mandatory to have third-party insurance coverage for your vehicle. However, when opting for a comprehensive insurance plan, several important factors must be considered to ensure you make the most out of your coverage. Here are the key aspects to keep in mind when purchasing motor insurance:

  1. Coverage: Evaluate whether the motor insurance plan offers the specific coverage you require. Assess if it includes protection against own damages, theft, natural calamities, and third-party liabilities.
  2. Add-Ons: If you find that the coverage provided by the comprehensive insurance plan is insufficient, consider purchasing additional add-ons offered by your insurer to enhance your coverage according to your needs.
  3. Personal Accident Cover: Check if the motor insurance plan includes personal accident cover for the driver/owner of the vehicle. This coverage provides financial protection in the event of accidental injury or death.
  4. Claim Settlement Ratio: Before finalizing a motor insurance plan, research the claim settlement ratio of your desired insurance provider. This ratio indicates the insurer’s efficiency in settling claims and reflects their reliability.
  5. Network Garages: Ensure the insurance provider has a wide network of authorized garages for cashless repair services. This will enable convenient and hassle-free claim settlements.
  6. No Claim Bonus: Consider the availability and transferability of the no-claim bonus. A good insurance company rewards policyholders with a no-claim bonus for each claim-free year, reducing the premium upon renewal.
  7. Read Terms & Conditions: Carefully read and understand the terms and conditions of the insurance policy before signing any documents. This will ensure you know all the rights, responsibilities, and limitations associated with the coverage.
  8. Zero Depreciation: Opting for the zero depreciation add-on is recommended to maintain the value of your vehicle. It provides coverage without factoring in depreciation, ensuring you receive the maximum claim amount even after the vehicle’s value depreciates.

By considering these factors, you can make an informed decision while purchasing motor insurance online, ensuring that your coverage aligns with your specific requirements and provides optimal financial protection.

 

Factors Affecting Vehicle Insurance Premium

Several factors can influence the premium amount of your vehicle insurance policy. It’s important to understand these parameters that insurers consider when calculating the premium. Here are the key factors:

  1. Make & Model: The premium depends on your vehicle’s make, model, cubic capacity, and variant. High-end or luxury vehicles typically have higher premiums than smaller, less expensive ones.
  2. Age: The age of your vehicle affects the depreciation value and Insured Declared Value (IDV). As the vehicle ages, the IDV decreases, impacting the premium amount.
  3. Engine: The type of engine, whether petrol or diesel, can influence the IDV and, in turn, the premium. Diesel engines often have a higher IDV and may have a higher premium.
  4. Location: The premium amount is also determined by the location where the vehicle is registered or primarily used. The premium may be higher if you reside in a metro city or an area with a high risk of accidents or theft.
  5. Add-ons: Insurance companies offer additional coverage options called add-ons to enhance the standard coverage. Adding add-ons can increase the premium, providing more comprehensive protection based on your specific requirements.
  6. No Claim Bonus: Insurers discount the premium for policy renewals if you haven’t raised any claims during the previous policy term. This is the No Claim Bonus (NCB) and can significantly reduce the premium amount.
  7. Online Purchase: Purchasing the policy online allows for easy comparison of different plans and often offers lower premium rates. It provides a hassle-free experience and the flexibility to choose a policy that suits your requirements and budget.

By considering these parameters, you can better understand the factors that influence your vehicle insurance premium. Evaluating these factors is important, as choosing a policy that provides adequate coverage while being affordable and meeting your needs.

 

Benefits of Renewing Motor Insurance Online

Renewing your motor insurance policy online offers several advantages and convenience. Here are the benefits of renewing your policy online:

  1. Comparison: Online renewal allows you to easily compare different insurance plans from multiple providers, enabling you to make an informed decision based on coverage, features, and premium rates.
  2. Cost-saving: By renewing online, you eliminate the need to pay any fees or commissions to an insurance agent, resulting in potential cost savings.
  3. Add-Ons: Online platforms provide the flexibility to choose from a wide range of add-ons to enhance your coverage. You can customize your policy by adding or removing specific add-ons per your requirements.
  4. Convenience: Renewing your motor insurance online eliminates the need to visit the insurer’s office. You can complete the renewal process from the comfort of your home or office, saving time and effort.
  5. Time-saving: Online renewal is a quick and efficient process. With a few clicks, you can complete the renewal on your computer or through the insurer’s mobile application, saving valuable time.
  6. Secure Payment: Online platforms offer secure payment gateways, ensuring the confidentiality and safety of your financial transactions. You can pay online, eliminating the need for physical payment methods.
  7. Instant Policy Issuance: The insurer issues the updated insurance plan once the online payment is made. This allows you immediate access to the renewed policy documents and coverage.

Renewing your motor insurance online provides convenience, cost savings, and flexibility to tailor your coverage according to your needs. It is a hassle-free process that saves time and allows you to stay updated with continuous protection for your vehicle.

 

IRDAI’s Updates to Motor Vehicle Insurance Rules

The Insurance Regulatory and Development Authority of India (IRDAI) has introduced several updates to the motor insurance rules, aiming to make insurance more affordable and customer-friendly. Here are the key updates made by IRDAI:

  1. Personal Car Sum Insured Calculation: The sum insured amount for personal cars is now determined based on factors such as road tax, on-road price, registration fees, and the value of manufacturer accessories. This ensures a more accurate vehicle value assessment and adequate coverage.
  2. Mismatch in Expiry Dates: If a standalone own damage insurance plan is purchased on a different date from the long-term plan or third-party plan, the expiry dates of these policies will not match. This allows policyholders to have more flexibility in choosing different coverage options.
  3. Premium Calculation Based on Driving Habits: Instead of relying solely on factors like Insured Declared Value (IDV), location, car make and model, and engine capacity, the insurance premium amount now considers the driving habits of the policyholder. This personalized approach to premium calculation encourages safe driving practices.
  4. Standardization of No Claim Bonus (NCB): The IRDAI has standardized the No Claim Bonus, providing a renewal range of 20% to 50%. This ensures consistency across insurance providers and simplifies the calculation of NCB benefits for policyholders.
  5. Discounts for Electric Vehicle Insurance: Electric vehicle owners can enjoy a 15% discount on third-party insurance premium amounts. Additionally, they can transfer long-term insurance coverage from one company to another, offering more choices and competitive pricing.

These updates by IRDAI aim to enhance transparency, affordability, and customer satisfaction in the motor insurance sector. Policyholders can benefit from more accurate premium calculations, standardized NCB, and specific incentives for electric vehicle owners. It is important to stay updated with these changes and choose an insurance policy that aligns with your needs and preferences.

 

How to File a Motor Insurance Claim?

The process of filing a motor insurance claim depends on the type of vehicle and the nature of the loss or damage. Here is a general overview of the steps involved in filing a claim for damage to an owned car, two-wheeler, or commercial vehicle:

  1. Report the Incident: Notify your insurance company about the accident or damage immediately. Provide details of the incident, including the date, time, location, and a brief description.
  2. Document the Loss: Take photographs of the damage to your vehicle as evidence. It will help support your claim and provide visual proof of the extent of the damage.
  3. Contact the Insurance Company: Contact your insurance company’s customer service or claims department. They will guide you through the necessary steps and provide the required claim forms.
  4. Complete the Claim Form: Fill out the claim form accurately and provide all the necessary information, such as your policy details, vehicle information, and a detailed account of the incident.
  5. Submit Supporting Documents: Along with the claim form, you will need to submit supporting documents, which may include:
  • Fitness certificate (for commercial vehicles)
  • Driving license
  • Registration certificate book
  • Final bill from repairers
  • Police First Information Report (FIR) in case of accidents
  • Medical certificate (if applicable)
  1. Survey and Assessment: An independent automobile surveyor, often with an engineering background, will assess the extent of the damage. They will inspect the vehicle and prepare a survey report, which the insurance company will review.
  2. Authorization for Repairs: The insurance company will authorize repairs once the survey report is reviewed. You will receive a letter to submit to the chosen repairer or garage.
  3. Claim Settlement: After completing the repairs, submit the final repair bill and any other requested documents to the insurance company. They will process your claim and settle the amount per your policy’s terms.

It is essential to promptly report the incident and provide accurate information to ensure a smooth claim settlement process. Keep all communication and documentation related to the claim for future reference.

 

Motor Insurance FAQs

Q1: Should I purchase only a comprehensive motor or a third-party insurance plan?

Ans: It is mandatory to have a third-party motor insurance plan for all vehicles on Indian roads. This type of insurance covers injuries or damages caused to other individuals or property. However, if you want coverage for losses or damages to your vehicle, purchasing a comprehensive motor insurance plan is advisable. This type of plan covers third-party liability and protects damages to your insured vehicle, including bikes, scooters, cars, trucks, and more.

 

Q2: How is the motor insurance premium calculated?

Ans: The motor insurance premium is calculated based on several factors, including the insured declared value (IDV), deductibles, seating capacity, cubic capacity, previous insurance history, and more. In the case of comprehensive insurance plans, the premium charges may vary among different insurance providers, depending on the coverage provided. It is recommended to compare insurance premiums on websites like Policybazaar.com to ensure you get the best quote. The Insurance Regulatory and Development Authority (IRDA) determines the premium amounts for third-party insurance.

Q3: What should I do in case of an accident?

Ans: If your vehicle is involved in an accident, there are several steps you should take. Firstly, notify the police and take photographs of the accident scene, including any damages to the vehicles involved. Exchange crucial information with the other driver, such as their insurance and contact information. Contact your insurance provider and file a claim to get coverage for the damages. It’s important to keep your car keys and belongings safe throughout the process.

Q4: What is the duration of a motor insurance policy?

Ans: Typically, a motor insurance policy is valid for one year and needs to be renewed before the expiry date to ensure continuous coverage. It is advisable to pay the premium before the due date to avoid any lapse in the policy. If a comprehensive insurance policy lapses for more than 90 days, the benefit of a No Claim Bonus (NCB) may not be provided.

Q5: What is motor insurance’s No Claim Bonus (NCB)?

Ans: No Claim Bonus (NCB) is a benefit that policyholders receive if they do not file any claims during the policy period. In India, NCB ranges from 20% to 50% for comprehensive insurance plans. However, NCB is not applicable for third-party motor insurance. If a claim is filed, the NCB for that policy period is forfeited. NCB is associated with the policyholder and not the insured vehicle. When a vehicle is transferred, the NCB cannot be transferred. The remaining premium amount is responsible for paying the new vehicle owner.

Q6: Will my No Claim Bonus (NCB) be transferred if I change my motor insurance provider?

Ans: You can avail of the NCB if you change your motor insurance provider during policy renewal. You must provide proof of the earned NCB from your current insurance provider. This can be done by submitting the original copy of your expiring policy and a certificate stating no claim was filed. A renewal notice or a letter stating your entitlement to the NCB from your previous insurance provider can also serve as proof.

Q7: Are there any discounts available to reduce my motor insurance premium?

Ans: Besides the No Claim Bonus (NCB), a few other discounts can help reduce your motor insurance premium. These include:

  • Membership of the Automobile Association of India.
  • Certification of private cars by the Vintage and Classic Car Club of India.
  • Installation of approved anti-theft equipment as recognized by the Automobile Research Association of India (ARAI).
  • Concessions for modified or specially designed vehicles for visually, physically, or mentally challenged individuals.
  • Opting for an additional voluntary deductible.
  • Discounts on third-party property damage for specific limits.

Q8: Is service tax applicable to motor insurance premiums?

Ans: Per prevailing laws, service tax applies to motor insurance premiums.

Q9: What is a deductible in motor insurance?

Ans: A deductible is an amount that the policyholder needs to pay before the insurance company covers the claim. It is the portion of the claim that the policyholder is responsible for. Deductibles vary based on the type of vehicle and insurance policy. For example, two-wheelers may have a standard deductible of around Rs. 50, while private cars and commercial vehicles could have deductibles ranging from Rs. 1,000 to Rs. 2,000.

Q10: How can I make changes to my motor insurance policy?

Ans: If any changes need to be made to your policy, such as an address change or modifications to the vehicle or its usage, you can request an endorsement from your insurance provider. Submit a letter with the necessary proof of changes to obtain the endorsement. Note that some endorsements may


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