Friday, 30 March 2018

Types of Motor Insurance in India

Types of Motor Insurance in India: Motor insurance protects your vehicle against losses arising from unforeseen risks. It basically covers financial losses arising from accidents, theft and other natural calamities. Motor insurance is a contract for an automobile in which the insurance company agrees to pay for your financial loss resulting from a said specified event.

Types of Motor Insurance

  1. Third Party Insurance
    This insurance is mandatory by law. It protects a policyholder against losses which arise due to bodily injury/death to a third party or any damage to property. Here the third party includes people travelling with you or whom the insured person injures and claims damages at the time of the accident. But this insurance does not protect you, your vehicle and co-passengers against losses which arise due to bodily injury/death.
  2. Comprehensive Insurance 
    In addition to third-party coverage, this policy covers you, your car and co-passengers against damages /losses arising from unforeseen calamities, hence it is prudent to purchase this policy.

Why Motor Insurance

In India, nearly 4 lakh people meet with accidents every month. Fatalities in road accidents in India are moving up at a compounded annual rate of four percent. Considering the high number and the poor state of roads, Motor insurance is a necessary requirement. By law, Motor Insurance is mandatory. Motor Insurance provides financial cover not only to you but also covers damages to the third party (people travelling with you). Motor Insurance also protects you from losses arising from natural calamities like cyclone, earthquake etc.

1. Who should buy Motor Insurance?

Both individual owners, as well as corporate entities, should buy Motor Insurance. All vehicles, be it for personal or commercial use should be insured.

2. Is Motor Insurance Mandatory?

Motor insurance is mandatory for all vehicles under the provision of Motor Vehicles Act 1988, be it for commercial or personal use. It is compulsory to have a valid Motor insurance policy before you can start driving your vehicle. Motor insurance comes with unique plans for four-wheelers, two-wheelers and commercial vehicles.

3. What are the benefits of Motor Insurance?

It is a financial safety net that can help you offset the cost of

  • Bodily injuries to yourself or others
  • Lost wages due to injury
  • Benefits to survivors when an accident results in death
  • Lawsuits brought against you as the result of an accident
  • Repairs made to your car due to damage caused in an accident

4. What is the cover level of Motor Insurance?

The cover level of Motor insurance can be the insured party, the insured vehicle, third parties (car and people). The premium of the insurance is dependent on certain parameters like gender, age, vehicle classification, etc.

5. What does Motor Insurance not cover?

Motor Insurance does not cover loss due to wear and tear, breakdown, accidents due to drunken driving and war perils. The insurance also does not cover failure or breakage when the vehicle is used outside the geographical area.

6. What is IDV?

IDV is the short form of Insured declared value. It is the value of Sum Assured that can be taken on your vehicle. It is calculated on the depreciated value of your vehicle or on the showroom price of the vehicle depending on the Insurance carrier

7. Why do premiums vary between different insurance companies?

Insurance companies work with different statistics and use different methods to calculate premiums. Some companies are specialized in certain areas or types and so are prepared to give discounts in those areas. This adds to the complexity as various companies yield varied prices.

8. What are the factors that determine the premium amount?

  • Make and Model of the Vehicle
  • Year of Manufacture
  • Place of Registration
  • Current Showroom price of the vehicle
  • Whether Client is Individual or Corporate
  • The principal insurance amount and its subsequent premium also vary according to the price of the vehicle.

9. What is Third Party?

The third party would include all people other than the primary insured. They would include people travelling in the vehicle or pedestrians or people involved in the accident.

10. Which type of policy is better and why?

A comprehensive motor loan is better, as it also covers you against losses arising from theft, natural calamities, vandalism etc. This will have a deductible attached to the policy.


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