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What is Car Insurance?
Car is one of the most important and beloved item of possession for
any individual. It is the one of the most important needs of an individual, after home.
In simple language, Car Insurance is a contract between the Customer and the Insurance Company wherein you pay a premium
for a policy that will provide protection against every comprehensible risk related to your vehicle; damage, theft,
death and injury in an accident, plus liability protection in case you are sued as a result of an accident (Third Party
Liability).
Importance of Motor Insurance
As per Motor Vehicle Act 1988 by Government of India any motor vehicle plying in a public place needs to be compulsorily
insured against Third Party Injury and Property Damage . India is home to one of the largest automobile markets in the world. Alongside rise in the number of cars plying on the
road, the events of car being involved in a mishap has also increased in recent years. Add to that, a rise in repair
costs and car breakdowns has added to the woes. Also, any payment to be made towards damage to the third party due to
accident, needs to be taken into account. A car insurance policy offers protection from such risks.
What are the Benefits of Car Insurance Policy?
Comprehensive Cover:
This policy cover is a combination of OWN DAMAGE & THIRD PARTY DAMAGE . Own Damage Cover offers protection from damage
to car owing to human actions, with coverage of risks of theft of the vehicle, burglary, acts of terrorism, riot or
damage in transit by air, road, rail and waterways.
Insurance company covers Depreciation parts of a car in Own
Damage, e.g. Plastic, rubber, tube, tyre, denting & painting, airbag, nylon, battery, glass, Fiber Glass, Metal, and
more, as per the car age.
Under Third Party Damage Cover, two types of damages get covered:
- Human Life: Unlimited (decided by the court)
- Third Party Property: Up to 7,50,000/-
Third Party Liability:
The cover offers you protection against legal liability caused due to damage to third party property and/or resulting in temporary or permanent disability to the third party.
Personal Accident Cover:
A Car Insurance policy offers protection of vehicle post-accident but you as the driver, are not covered under it. Compulsory Personal Accident Cover, as part of Car Insurance Policy, for the owner driven cars under the motor insurance policies has been increased from Rs 2 Lakh to Rs 15 Lakh now. You can claim upto 100% of the sum assured in event of permanent or total disability and the nominee would receive 100% of sum assured in case of demise of insured.
What Factors to Consider Before Choosing Car Insurance Company?
(Following factors needs to considered before shortlisting on a particular car insurance company)
Reputation and Financial Standing
One of the most crucial aspects of choosing car insurance providers is to do research on the reputational and monetary standing of the car insurance provider. You can go through online reviews, speak to the friends and relatives and through the newspapers and stay abreast with car insurance sector news.
Convenience
The car insurer which you opt for must have the digital presence and payment options and also if there is a mobile app which could help the customers then it is a big plus. You can get digitally signed policy through their portal.
Cashless Garage Network
One of the most harrowing after things is to get the car fixed after an accident. If you can get the car repaired at a garage that offers the cashless facility and is on empanelled list of garages connected to vehicle insurance company then it is definitely a higher positive
Customer Service
An important measure is the Customer Service of the motor insurance company. The support the customer gets in relation to buying and the after sales service is important for choosing motor insurance policy
Add More Value with Add-on Cover for Your Car Insurance Policy
Merely having third party liability and Comprehensive Cover may not suffice your vehicle protection requirements. Hence, Add-On Covers are provided by car insurance companies to protect the motorist from the scenarios that are generally excluded. Each add-on cover presents the automobile owner with unique advantages. Below mentioned are most popular Add-On Covers.
Ten Popular Car Insurance Add-On Covers
Personal Accident Cover
Under this Add-On, any partial or permanent disability or death incurred as a result of the vehicle meeting with an accident is covered for the owner driver of the vehicle. In such an unfortunate event, the nominee would receive sum assured in event of death. All hospitalization expenses arising from any Partial or Permanent Disability or Dismemberment are also covered in this Add-on.
Engine Coverage
When a vehicle is stranded or submerged in flood waters, the engine of the car can be damaged when the car is started later on. Loss arising from this is referred to as consequential loss, arising from events outside of direct loss like accidents. With an Engine Cover/ Hydrostatic cover, all engine centric damages and costs arising from same, are covered.
Roadside Assistance
The objective of this Add-On of Car Insurance is that you would be able to get assistance in case your car breaks down. You can expect assistance for minor repairs, battery restart, spare key arrangement, phone assistance, emergency fuel and towing to nearest authorised workshop.
Zero Depreciation Cover
Insurance Company pays the claim of car only after deducting the depreciation value of the car. When you subscribe this Add-On, in case of a claim, insurance company will not deduct any depreciation of parts while paying for claim.
Daily Allowance
Under this Add-On, you can use an alternative vehicle in event of car being damaged or stolen. Allowance varies from Rs. 500 to Rs. 1000 depending on model of car and is given for 10 to 15 days. The car needs to be repaired at authorized garage to avail the benefit of this cover.
Consumables Cover
Under this Add-On, the car owner is given cover by car insurance company for costs related to nuts, bears and bearings, screen washers and engine oils and other such consumable item, as may be used for repair, in event of car getting damaged in accident.
Accident Coverage for Car Passengers
This Add-On provides Lumpsum payments in event of death or permanent total or partial disability suffered during accidents for passengers, other than driver of the vehicle.
Return to Invoice cover
By taking this cover you would be able to get back the original invoice value and not just the Insured Declared Value. The cover is not available for imported vehicles.
Ambulance & Medical Expenses
This Add-on covers cost of expenses which are incurred towards the ambulance services.
Rental Assistance
The cover provides transit assistance in case you are stranded due to breakdown of your car.
Points to Consider Before you Buy Car Insurance Policy Add-On
- Vehicle model, age and components needs to be considered. For cars older than 5 years, its is recommended to opt for roadside assistance and Zero Depreciation Cover, if available
- Motorists from coastal areas need to opt for Hydrostatic Lock / Engine Covers more than those residing in mainland
- Personal Accident Cover is preferable for a person who has to travel extensively and is using his own vehicle for the travel
- Return to Invoice and Consumables Cover add-ons help lessen the impact on any out of pocket expense / compensation in case vehicle gets totalled or heavily damaged in event of accident
Remember, each add-on has been made keeping in mind the coverage, which is not available in a comprehensive cover. So make the selection of add-ons very carefully by evaluating and selecting the most relevant covers as per usage and driving conditions.
How is the Premium Calculated for the Car Insurance Policy ?
(The Premium for Car Insurance Policy is calculated basis following factors )
| Insured Declared Value (IDV) | The vehicle insurance provider will consider the IDV of the make and model of your car. The IDV changes annually after adjusting the depreciation value of the car |
|---|---|
| No Claim Bonus (NCB) | You would receive a No Claim Bonus in every claim free year |
| Discounts or offers | If the vehicle contains additional accessories which include selling price of the car, then the premium for those accessories will be calculated separately |
| Age of the car | When the company introduces newer models, older models enjoy reduced premium |
| Geographical location | India has been classified into Zone A and Zone B. Zone A includes all major cities including Bangalore, Ahmedabad, Chennai, Mumbai, Kolkata, Pune, and New Delhi, where the accident risk is considered to be high, the insurance premium is higher than in Zone B (the rest of the country) |
| Add-ons | Facilities like roadside assistance, nil/zero depreciation, return to invoice, lock and key replacement and loss of personal belongings add to the premium cost |
How does Insured Declared Value Affect Your Car Insurane?
Insured Declared Value can be taken as the current market price of your vehicle. It is the maximum sum assured that vehicle insurance company would pay in case of claim being raised on loss or theft of your vehicle or if gets damaged beyond repair.
In order to arrive at Insured Declared Value of your vehicle, car insurance policy Company adjusts it with standard depreciation rates as prescribed under Indian Motor Tariff Act
| Following table is used to arrive at Depreciated Value of your Automobile | |
|---|---|
| Age of Vehicle | Depreciation Chart |
| 0-1 | Insurance value at 95% of invoice price. Depreciation—5% |
| Renewal after 2nd year | 20% depreciation on IDV of previous year |
| Renewal after 3rd year | 30% depreciation on IDV of previous year |
| Renewal after 4th year | 40% depreciation on IDV of previous year |
| Renewal after 5th year | 50% depreciation on IDV of previous year |
| Renewal after 6th year | 10% to 15% depreciation on IDV of previous year is deducted year on year |
