If you’ve seen an action movie in…well, forever, then you know it’s the innocent passer-by’s car that’s number one on the list of collateral damage. While life is not an action movie (as much as you might secretly wish it was), the threat to your precious four-wheeler is real. Especially, when road accidents are at an all-time high.
In the last two decades, the number of registered vehicles in India has grown by about 158%, while road network in the country has grown by 39%. With a constant increase in the number of vehicles on roads, there is a higher chance of congestion and road fatalities. How are you supposed to prepare for such scenarios that are mostly out of your control?
With the right car insurance policy!
Unfortunately, traffic rules and car insurance policy details are not exactly dinner table conversation. So, most of us pick up our first driving lesson without paying much attention to anything else other than the thrill of driving a car. But we’re here to help you out when it comes to the details of a car insurance plan.
If you’re driving a car in India, here’s what you should know to get the best car insurance policy.
Key Takeaways
- There are three types of car insurance policies in India, out of which third-party car insurance is mandatory for all car owners.
- Common exclusions across all types of car insurance policies include normal wear and tear, fraudulent claims, consequential damage, and more.
- Your driving record affects the car insurance premium, among other factors.
- The car insurance claim amount payable is calculated based on Insured Declared Value (IDV).
How Does Car Insurance Work?
Like any other insurance plan, car insurance is meant to provide financial protection against uncertain circumstances. When you get one for your car, this means that the policy will protect your financial well-being and your car in case of an accident, theft, or other unforeseen events.
Depending on the insurance provider, there may be certain restrictions to your policy. But most policies give you coverage for vehicle repairs, medical costs, and any damages or injuries you cause to another motorist.
How Many Types of Car Insurance Policies are Available in India?
If you’ve recently brought home the four-wheeler of your dreams, then you need to know how to best protect it. Now, there are many things you’ll need to know but let’s put it together in simple terms, so you don’t miss out on anything.
We’ll look at what Akash, a 28-year-old man did once he brought a shiny new SUV home. At the car dealership, he found out that there’s something called third-party car insurance policy which is mandatory in India. Under the Motor Vehicle Act of 1988, every car owner in India must have this insurance policy, also known as liability car insurance.
He looks it up and finds out that this car policy is meant to protect him against liabilities that may arise from a third-party injury or damage to their property. As the name suggests, there are three-parties involved in a third-party policy.
- First Party – the policyholder i.e., Akash
- Second Party – Akash’s car insurance provider
- Third Party – anyone who has suffered injuries or damages to their property by Akash’s insured car.
In case of an accident that results in injury to the third party or their property because of Akash’s vehicle, the second party (insurance provider) will provide financial compensation to the third party.
He briefly wonders why does he need to get insurance for another person’s injuries? Well, the answer is simple. If it’s mandatory, then everyone driving on the road is covered against potential risks. So, it’s a win-win situation.
Once he’s got the mandatory stuff down, Akash finds out about two other kinds of car insurance policies online.
Own-Damage Car Insurance
Under this car policy, Akash can get financial coverage for his four-wheeler against accidental damages, natural/man-made calamities, fire, explosion, theft, or any other mishap. The Insurance Regulatory and Development Authority of India (IRDAI) launched the standalone Own-Damage car insurance policy in September 2019.
So, if God forbid, he is in a traffic accident, the cost of repairing his car will be covered by this car insurance policy. In case of a total loss due to fire or explosion or theft, he will be reimbursed according to the Insured Declared Value (IDV) of his car.
Car Insurance with Comprehensive Coverage
A comprehensive car insurance policy is essentially a 360-degree vehicle safety plan. With this policy, Akash can get the benefits of both third-party and own-damage car insurance. It covers all the same things that standalone own damage insurance does.
Apart from this, Akash can also choose to add riders to this car policy such as zero depreciation, roadside assistance, personal accident cover, and more by paying an additional premium.
| Common Exclusions in all Car Insurance Policies |
| Consequential damage, meaning if the engine’s gear oil is leaking and yet you keep driving resulting in the failure of the gearbox, it’ll cause further damage which will not be compensated. Normal wear and tear of the car and of consumables like tyres and tubes. Damage to the car caused by a driver who does not have a valid driver’s licence or who is under the influence of drugs or alcohol. Vehicles used for purposes other than those specified in the insurance certificate. This one’s a no-brainer. If you deliberately damage your car, it will most definitely not be covered and would count as fraud. |
Exclusions in car insurance policy can be difficult to understand. If you have any questions about the policy wordings, you should speak with your insurer to ensure that nothing is misinterpreted.
Most Important Car Policy Records
No one ever tells you the boring parts about owning a car, do they? Keeping track of your financial paperwork can be tiresome but hey, if you learnt how to parallel park, this’ll be a piece of cake.
We’ll tell you about which car insurance documents you need to keep but we’ll do you one better. We’ll tell you how long you need to keep it around.
Before we do that, here’s a cardinal rule about financial records: Always store them where they are easily accessible. Whether they’re hard copies or online documents, keep it somewhere safe where you can access it at any time, especially if authorities want it.
| Policy Document | How Long Should I Keep It? |
| Car Insurance Policy Certificate | From the start of the policy through the end. You can keep the expired policy document for claims related purposes as well. |
| Claims related emails | Until the claim is resolved, and you are compensated according to the policy’s terms and conditions. You should keep claim-related documentation for a few years just in case. |
| Payment receipt notifications | As per need |
| Renewal email notifications | As per need |
| Communication emails from insurer | As per need |
| First Information Report (FIR) | In case FIR is registered for accident-related claims, you should retain a copy of it for future reference. |
| Non-Traceable Certificate (NTC) | In case of vehicle theft claims, you may want to retain a copy of the NTC for future reference. |
Did You Know?
India has only 1% of the world’s vehicles but 11% of the global deaths from road accidents occur here, according to a report by the World Bank released in 2021.
Source: https://www.aa.com.tr/en/asia-pacific/india-tops-world-in-road-deaths-injuries/2425908
About Car Insurance Premium
When it comes to a car insurance policy, your driving record plays a huge role. The amount of premium you pay for the car insurance policy is determined by your driving history. Yes, an insurance provider can obtain a summary of your driving history to assess the risk of insuring your vehicle.
If you have a poor driving record, you are likely to pay a higher premium for a car policy. As a result, having a clean driving record not only lowers car insurance policy prices, but it also helps when filing a claim. It’s even easier to obtain a better deal when you get a car policy online.
But you need to be careful and not fall into the sales-trap of low premium car insurance policies. It can be tempting but in the long run, it won’t be the best financial decision for more reasons than one.
For starters, low premium means high deductibles in most situations. This means, in case of an accident, you will have to bear most of the costs for the damages to your car. Here’s how it deductibles would affect your car insurance premium!
Suppose our buddy Aakash chooses to buy a car insurance plan with low premium rates. The policy would come with higher deductibles i.e, the share of the claim that he has to pay at the time of claim settlement would be higher. The higher the deductible amount, the more financial burden on Aakash. Kind of defeats the purpose of having a vehicle insurance policy in the first place, doesn’t it?
Top Reasons for Rejected Car Insurance Claims
Buying a car insurance policy is all about trust and transparency, whether it is the mandatory third-party car insurance or comprehensive car insurance. Insurance companies earn a bad rep sometimes because of denied claims but its more complicated than that.
Your car insurance claim can be rejected on certain grounds which you should know about. Here are some of them:
- Driving without a valid license
- Lapsed policy
- Using private car for commercial purposes
- Providing incorrect information or non-disclosure of information
- Delay in raising claim
- Driving outside the specified geographical area
- Missing car insurance renewal
- Making fraudulent claims
- Driving a modified car without intimation
- Negligence
Word to Remember
Insured Declared Value (IDV)
Insured Declared Value , or IDV, is the estimated current value of your vehicle. IDV is also one of the most important variables in determining a Comprehensive policy’s vehicle insurance price.
Ready? Set Go!
Being a good driver, especially in some parts of India (looking at you, Kolkata & Mumbai) is nothing short of an achievement. While it does make for some fun anecdotes, it can quickly turn into a financial nightmare. So, make sure you’ve got enough security and coverage with the best car insurance policy.
FAQs
In most cases, the amount of claims you can make under your motor insurance policy in a year is unrestricted. However, keep in mind that motor insurance claim has an impact on the NCB (No Claim Bonus).
No, you can only add riders to your comprehensive car insurance policy.
Yes, owners of electric automobiles or cars that run on CNG/LPG must have a valid motor insurance policy. The premium charged, however, may be slightly higher.
IDV stands for Insured Declared Value, and it is the maximum sum assured set by the insurer in the event of a vehicle’s theft or total loss. In a nutshell, IDV refers to your vehicle’s current market worth. It’s normally calculated using the manufacturer’s suggested retail price for the model and version of the vehicle (including optional equipment) at the start of the car policy.
Purchasing a comprehensive car insurance policy is always a good idea. It gives you additional coverage that might not be covered under the third-party insurance plan. Moreover, you’ll get adequate coverage for financial losses which can sometimes go to a great extent.
