Types of Car Insurance in India

In today’s day and age, having a car is more of a necessity for people than a status symbol or a farfetched want. Owning a car not only makes a person independent to move around from one place to another but also helps people climb the social strata and be at par with other people.

Along with the status, owning a car also puts the owner at a risk of being in a road accident which may or may not be because of their own mistake. Other red flags which may cause financial loss can be the theft of the car, tampering of it because of any external reasons; cost incurred on general repairs and day to day wear and tear. These situations may be a constant threat to a person’s sanity while they own a car.

The end to all these woes of uncertainties is car insurance. Car insurance acts as a protective blanket that safeguards the interest of car owners and protects them from a potential financial loss due to any unfortunate happening.

Car insurance can easily be purchased and renewed in case of requirement. At present, there are numerous popular insurance companies which provide various types of car insurance as per the needs of the people buying insurance for their car.

Why is it important to invest in car insurance?

The importance and reason of buying car insurance are the followings

It is mandatory

In India, it is a mandatory practice for all car owners to have car insurance. Under the Motor Vehicles Act of India, it is quintessential to have insurance against accidents, theft, loss of property and uncertainties.

Futuristic approach

It is a well-known fact that India ranks in the top 10 accident prone countries in the world. Thus, it is very important to safeguard the interests of vehicle owners. An uncertainty can range from anything from a car crash to injury of self or others, massive losses due to accidental damages or replacement of vehicle parts. All these situations result in financial loss to an individual. Thus, it is very important to save a person from a probable financial setback.

Helps in efficiently managing time in case of uncertainty

In an event of an accident, the person involved is already under a lot of mental burdens and in a state of turmoil. Having car insurance is a mental relief for a person, as he does not have to worry about having a mental breakdown because of the financial setback he would have to face in case he wasn’t safeguarded.

An additional health insurance blanket

Most car insurance policies these days cover the expenses incurred in case of loss of life, accidental injuries to the insured as well as the fellow passengers. This acts as another security blanket other than health insurance ensuring that the interests of a person are fully protected in times of need. The coverage may include accidental repair charges, funeral charges, dental repairs, specialist treatment. Mostly cosmetic surgeries are excluded from the insurance cover.

Peace of mind

It can be rightly stated, that there is no cost for peace of mind. In case a person does not have vehicle insurance, he will constantly be worried about the repercussions of being involved in an accident. It is unhealthy for an individual to be living in a state of fear in general. Thus, it is very important to get an insurance cover to avoid any financial loss to an individual.

Types of car insurance

In accordance with the various requirements and distinct needs of all individuals, insurance providers have characterized the various car insurance policies under two major categories.

On the basis of utility

An individual can utilize the vehicle for either personal use or get financial gains i.e. to use it commercially.

On the basis of coverage features

All insurance policies have a common basic structure with common features. Along with that, there are specific policies which cater to the special needs of the insurance buyer.

The various distinctions of car insurance on the basis of the purpose of use by the insurance buyer are-

Personal Vehicle

This insurance policy protects the interest of the vehicle which is intended to be utilized by the insurance buyer. In case of accidents, third party liability, accidental cover and damage repair for the vehicle.

Commercial Vehicle

This type of insurance policy protects a business which is reliant on the vehicle, from incurring any financial loss due to accidents or occurrence of uncertainties. It offers accidental coverage as well as protection of third party liability.

The various classifications of car insurance on the basis of features and scope of coverage under the policy are-

Third party liability insurance

This is compulsory insurance to be purchased by the owners of all vehicles in the country. Third party liability insurance as the name suggests protects the interests of the third party liabilities arising from the fault of the person having insurance. This insurance only covers very basic aspects of insurance and does not protect the car owner in case of any financial loss due to accidents.

Comprehensive Insurance

This is a typical insurance policy that protects the liabilities arising from a third party, expenses incurred on accidental damages, theft or external damages. The various inclusions or enhancements that can be added to a comprehensive policy are listed below-

Zero Depreciation Cover

This is a type of insurance which is the most appropriate insurance for a fully protected vehicle. In case of accidents and damages which require repairs, zero depreciation cover reimburses the full amount to the policyholder. The only clause for purchasing a zero depreciation policy is that the vehicle should not be over 3 years old. It; features make it the most popular type of car insurance in India at present.

Roadside Assistance Cover

This is an appropriate insurance for people who have been prey to or are afraid of being stranded on the road without any assistance. This insurance safeguards the policyholder from uncertainties and provides cover for events such as flat tire, empty fuel tank, car break down, battery issues to name a few.

No Claim bonus protection cover

The no claim bonus is an amount rewarded by the insurance company to a policyholder in case they make no claims in a year. NCB is also a significant feature that reduces the value of the yearly premium to be paid.

Key replacement cover

As the name suggests, in case of loss of the ignition key, this insurance reimburses the value spent on replacement of the key. The amount reimbursed can be either full or a partial amount depending on the coverage of the policy.

Engine and electronic cover protection

It is self-explanatory that this insurance safeguards the policyholder in case of any expenditure is made on the damage repair of any/all electronic or engine parts post an accident.

The cost of buying insurance is the recurring premium paid the person has invested in an insurance policy for his car. The premium to be paid by the person investing in a policy is decided by the following factors-

  1. Model and make of the car

Each insurance providing company has a curated data of all the cars available in the market at each point of time. This data has a specific amount associated with each car model and brand in accordance with their features, safety measures, speed measures etc.

  1. Age of the car

As an older version of the car is susceptible to less damage, its value in comparison to newer models reduces exponentially. Thus, the premium for a new model of the same car would be higher than that of an older version.

  1. Geographical location

In accordance with being prone to road accidents, India has been divided into 2 major zones- ZONE A and ZONE B. ZONE A consists of 1st tier cities such as New Delhi, Mumbai, Bangalore, Pune, Kolkata etc which have more number of vehicles and thus are more susceptible to being a  part of an accident in comparison to other cities with lower volume of vehicles and a lesser chance of being involved in a car-related uncertainty.

  1. No Claim Bonus

A person who has not taken any claim from an insurance company in one year is eligible for a no- claim bonus. A few insurance companies even reduce the premium marginally for people who have a history of not making claims on account of small expenditure.

  1. Insured Declared Value

This is the maximum pre-decided value that the insurance company is liable to pay to the person whose car has been insured, in an event of an accident or theft. In simple words, Insured Declared Value is the value of the vehicle in the market at present. The IDV changes every subsequent year and is dependent on various factors such as the car model, make, handling, condition, additional features etc.

  1. Enhancements or accessories

The premium paid by a person investing in the insurance is also affected by the nature of the vehicle. In case a vehicle is immensely modified or additional enhancements have been added to the vehicle structure such alloys, tires, interior changes etc. then the premium to be paid increases. Whereas in case no modifications have been made to the vehicle, the premium is relatively lower.

  1. Additional features

In case the person buying the vehicle insurance wishes to increase the insurance cover features and scope, then the premium to be paid rises.

Car insurance is an indispensable need for all car owners to protect themselves as well as the third party from expenses incurred on damage repair of the vehicle or health.

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