What is Motor Insurance Policy?
Motor insurance (also known vehicle insurance or auto insurance) is a mandatory insurance policy which is taken for motor vehicles like two wheelers (bikes), cars, trucks and etc. As per the regulations prescribed in the Motor Vehicles Act, 1988, every vehicle must have a valid insurance cover in India. Keeping this legal requirement in mind, a motor insurance policy is designed by general insurance companies. Individuals buying a vehicle should also buy a motor insurance policy.
The policy compulsorily covers damages and injuries caused to any third party or property by the insured vehicle. .If, however, a comprehensive policy is taken, damages suffered by the vehicle can also be covered.
Types of Motor Insurance Policies
There are two types of motor insurance policies which are available in the market. They are –
- Third party liability only policy – this is the mandatory insurance cover which is required by the Motor Vehicles Act, 1988. Under this policy, two types of coverage are allowed. The first coverage is against bodily injury or death of any third party due to your vehicle. If, when using your vehicle, you injure any individual or cause any individual’s death, you would face financial liabilities. You would have to pay for the injury or death caused.
- The first coverage in a third party liability policy pays for this financial liability. Under the second coverage, damages caused to surrounding third party property are covered. If, your vehicle damages any property belonging to any individual, you might be liable to pay for the damages caused. The third party policy pays for this loss too. Moreover, you might also find a personal accident cover in the third party liability policy. This cover pays an additional benefit in case of accidental death or disablement of the driver or owner of the insured vehicle.
- Comprehensive motor insurance policy – this policy is also called a package policy because it combines the coverage for third party liability and own damage in one package. While the damages caused to any third party or property is covered under the plan, damages suffered by the insured vehicle are also covered. The policy pays for the repair costs which incur when the vehicle is damaged. Besides these coverage features, a comprehensive policy also has the option of add-on covers which enhance the scope of coverage.
- Car Insurance – under this type of motor insurance policy, coverage is given for privately owned cars. car insurance plans can be bought as comprehensive policies or liability only policies.
- Two wheeler insurance – under two wheeler insurance plans, privately owned two-wheelers are covered. These policies might have a coverage duration of 1 year to 3 years.
- Commercial vehicle insurance – commercial motor insurance policies cover all types of vehicles used for commercial purposes. Thus, commercially used cars, bikes, trucks, lorries, scooters, minivans, etc. can be covered by this plan.
What are the benefits of a motor insurance policy?
A motor insurance policy has the following benefits–
- It fulfils the legal requirements –Since the Motor Vehicles Act, 1988 mandates a validthird party insurance cover., the motor insurance policy takes care of this legal requirement.
- It pays for your financial liability – if you injure any individual due to your vehicle or damage someone else’s property, you face a legal liability. You are bound to compensate the aggrieved party for the financial loss you have caused. This compensation might be a financial burden on you. A motor insurance policy removes this burden as it pays your financial liability.
- You can cover your own damages too – if you buy a comprehensive insurance policy, damages suffered by your vehicle are also covered. The repair costs incurred in restoring your damaged vehicle is paid by the policy and you don’t feel the pocket pinch.
Why is it necessary to compare auto insurance policies?
Because of the legal mandate, there are a lot of auto insurance policies in the market. Each policy has something different from the other. That is why, comparing becomes necessary. Following are the reasons why comparing is necessary and also beneficial –
- You can get the best IDV for your vehicle – different companies have a different calculation for the vehicle’s Insured Declared Value (IDV). Ideally, you should choose the highest IDV to maintain the value of your vehicle. Comparing lets you do just that. When you compare, you can check the different IDVs offered by insurance companies and choose the best value for your vehicle
- You can choose the most comprehensive coverage features – auto insurance policies offer similar coverage features. However, some plans enhance their coverage by offering various inbuilt benefits. When you compare you can find out the coverage features available in different plans and choose the best plan which has an all-inclusive scope of coverage
- You get the best premium rate– premium charged for motor insurance varies as per the provider. Comparing lets you buy a policy which has the best premium rate proportionate to the coverage offered.
- You get a wide variety of add–ons – add-ons are additional coverage features which enhance the coverage benefits. Different auto insurance plans offer different add-ons. Through comparing, you can choose the required add-ons which are available in selected plans.
- You can earn premium discounts– auto insurance policies offer a discount in premium depending on various factors. While the discount factor would be the same, the rate of discount varies between plans. Comparing lets you avail the maximum possible discounts in your auto insurance policy. The different types of discounts which you can earn on your motor insurance premiums includethe following –
- Discount for installing safety devices in the vehicle which reduces the risk of theft and accidents
- Discount for becoming a member of recognised institutions like Automobiles Association of India, etc.
- Discounts for making modifications in the vehicle for differently-abled owners
- Discounts for buying the policy online
- Discount for buying long-term policies under two-wheeler insurance plans
- Discount for choosing voluntary deductible and paying a portion of claim from your pockets
- Discounts for professionals like doctors, lawyers, etc.
- Discounts for making no claims in your policy which can go as high as 50%
- You can read reviews of existing clients– when you compare online you can find reviews and feedbacks from existing customers of the policy. These reviews give you an insight into the plan’s suitability and enable you to buy the best insurance policy in the market.
Motor insurance coverage
Coverage under a motor insurance policy is available for the following contingencies –
- If your vehicle causes bodily injury or death of any third party (any individual other than yourself and your vehicle), you are financially liable to pay for the harm done. A motor insurance policy pays the claims arising out of these financial liabilities
- If your vehicle damages any surrounding property which does not belong to you, you are liable to compensate for the damages caused. The motor insurance policy covers such damages and pays the relevant compensation
- There might be a personal accident cover in some motor insurance plans. Under this cover, accidental death or disablement of the owner/driver of the vehicle is covered. A lump sum benefit is paid in such cases
- If you buy a comprehensive motor insurance policy, you get coverage for the damages suffered by your vehicle due to man-made or natural calamities like theft, fire, explosion, lightning, earthquake, etc. Moreover, damages suffered when the vehicle is in transit are also covered.
- Motor Insurance Add-On Covers
A comprehensive motor insurance policy provides various add-on covers at an additional premium. These add-ons increase the scope of coverage of the plan. The following add-ons are commonly available with most motor insurance policies –
- Roadside assistance cover –Roadside assistance cover helps when there is a technical failure or your vehicle breaks down. It is available with almost every auto insurance provider.. Right from towing the vehicle to the nearest garage, temporary accommodation to battery service, flat tire service, fuel delivery, lockout service, and extrication, all these services are available under roadside assistance. .
- depreciation cover – depreciation of the various parts of the vehicle reduce the final claim settlement. The insurer pays the repair costs after deducting the applicable depreciation. Through this add-on, the effect of depreciation is nullified. Full claim settlement is done without deducting the applicable cost of depreciation.
- protect– in any policy year if you don’t make a claim, you earn a no claim bonus (NCB). This bonus increases every successive claim-free year. However, a single claim wipes out the entire NCB and you have to start from zero again. Through this add-on, the accumulated NCB is not lost even if you make a claim in your policy.
- protect – under this add-on damages suffered by the vehicle’s engine due to water-logging is covered.
- to invoice – in this add-on, the original invoice value of the vehicle is paid, including registration fees and road tax paid, in case the car is damaged totally or is stolen.
- accident cover for co–passengers – under this add-on, accidental death or disablement of co-passengers is covered.
- replacement cover– this add-on replaces your vehicle keys in case you lose them
- cover– cost of consumables used in repairing your vehicle is covered under this add-on
- cash allowance– a daily cash benefit is paid in this add-on when the vehicle is sent to the garage for repairs.
What is not covered in Motor insurance?
A motor insurance policy has a list of exclusions which are not covered. Damages and accidents incurred due to the following are, usually, not covered in any motor insurance plan –
- Driving under the influence of alcohol or drugs, without a driving license or outside the boundaries of India
- Consequential loss
- When the vehicle is used in violation of its limitations of use
- Engine damage due to oil leakage
- War, mutiny and related perils
- Deliberate accidental loss
- Contractual liability
- Normal wear and tear
Moreover, claims made in a lapsed policy would also not be covered
Top 10 Motor Insurance Policies in India
Despite there being a lot of motor insurance policies, here is a list of the top 10 plans you can find in the market –
- Ergo Car Insurance Policy – the policy provides a wide range of add-on covers to increase the scope of your cover
- Ergo Long Term Comprehensive Two-wheeler insurance policy – this is a two-wheeler plan offered by HDFC Ergo which has a long term tenure of 3 years
- AXA Comprehensive Car Insurance Policy – Bharti AXA’s policy has more than 3000 preferred garages and 101 branches across India
- Sundaram Car Insurance Policy – the motor insurance policy offered by Royal Sundaram offers you a free roadside assistance kit with more than 3300 garages across India
- AIG Auto Secure Car Package Policy – The policy gives you a personal accident cover for owner/driver along with 13 add-on riders to choose from
- AIG Two Wheeler Long Term Package Policy– this is a bike insurance policy offered for 2 or 3 years as required. You get a personal accident cover of Rs.2 lakhs and unlimited liability coverage for property damage up to Rs.1 lakh.
- Videocon Private Car Package Policy – the policy promises quick settlement of claim within 7 days and also support through telephonic communication
- India Private Car Insurance Policy – coverage under the policy is also allowed for terrorist and malicious activities. Towing charges are also covered under the plan
- Generali Car Insurance Policy – the plan offers help in case you face accidents and eases the claim settlement process
- AXA Two-wheeler insurance – the company provides you a 24*7 claim assistance and claim support. With just Rs.50 paid in additional premium, you can get a personal accident cover of Rs.1 lakh.
How to Choose Best Motor Insurance Policy?
- How to Choose Best Motor Insurance Policy?
Choosing the best motor insurance policy among dozens of policies available in the market is a daunting task. However, if you know the parameters on which the policies should be judged, you would be able to find the best policy for your vehicle. Here are some pointers which would help you choose the best motor insurance plan –
- Try and choose a plan which gives you the best Insured Declared Value (IDV). Since the IDV represents the value of your vehicle, the higher it is the better.
- The best policy should have the most inclusive coverage features. The higher the features the wider would be the plan’s coverage. So, look for plans which have good inbuilt coverage benefits.
- Look at the premium rates. They should be in proportion to the coverage offered by the plan. The best plan should have the highest coverage benefits at the lowest rate of premiums.
- The policy should have a range of add-on covers to allow you to choose the required covers and enhance the scope of coverage of your plan
- The list of preferred garages tied up with the insurance company should be exhaustive so that you can get cashless claim settlement
- There should be attractive discounts in the policy which would reduce your premium outgo and save money
Comparing is the best way of finding the best motor insurance policy. When you compare you can judge a plan against the above-mentioned parameters and choose the best.
Eligibility/Documentation Required for Motor Insurance
When you are buying or renewing a motor insurance plan, a set of different documents would be required. These documents include the following –
- Registration book of your vehicle
- A valid driving license of the proposer/owner of the vehicle
- KYC (Know Your Customer) documents of the owner of the vehicle. These documents include a recent photograph of the owner, address proof like rent agreement, electricity bill, etc. and age proof
- Invoice of the vehicle if it is new
- Copy of the previous policy document if you are renewing your motor insurance plan
- Copy of the Aadhar card of the owner so that the policy can be linked to the owner’s Aadhar
Things to Consider Before Buying Motor Insurance Plan
Buying a motor insurance policy online should be a well-thought of decision. You should do thorough research before buying the policy so that you don’t regret it later. Some important things to consider before buying motor insurance are as follows –
- The IDV – the Insured Declared Value (IDV) is the sum insured of your policy. It also depicts the value of your vehicle after depreciation. Since the value decreases every year, you should buy a policy which has the highest possible IDV
- features – don’t compromise on the coverage features. The more the features the better protection you can get
- type of policy – two types of motor insurance plans are available in the market – third party and comprehensive coverIt is recommended to a buy a comprehensive policy which also covers the damages suffered by your own vehicle.
- premium – weigh the premium against the IDV and the coverage features mentioned in the plan. The premium should be proportionate to these two factors.
- of preferred garages – if you want to make a cashless claim in your policy you should get your vehicle repaired at preferred garages. You should, therefore, check the list of garages which are tied-up with the insurance company so that you would know the garage nearest and most convenient to you.
- add-ons – add-ons increase the scope of cover. You should consider the available add-ons and choose which are required
- NCB – if you are renewing your motor insurance policy, consider the accumulated NCB of your existing plan and use it to claim premium discounts
- discounts – consider the available discounts in the policy to know the premium reduction available
Steps to renew Motor insurance policy
To renew your motor insurance policy, you should follow these steps –
- Compare the available plans online rather than renewing the existing policy. You can get enhanced coverage benefits at lower rates when you compare.
- After you have compared and found another plan, you need to provide your vehicle details and existing policy details for buying a new plan on renewal.
- After you have provided all the details, you have to make the premium payment. Keep in mind to utilise the accumulated NCB in your existing policy to reduce the renewal premium.
- Once the premium would be paid, the policy would be issued. The coverage date, however, would be the date following the expiry of the current policy.
- If, however, you want to continue with your existing policy, you can directly visit the insurer’s website and renew your policy online by paying the renewal premium.
Steps to renew expired Motor Insurance policy
If your motor insurance policy has expired, you need to follow the below-mentioned steps to renew it –
- Choose whether to renew the expired motor insurance policy from the same provider or buy a new one from a different provider.
- To find this you should compare motor insurance plans online first. Find the available plans, their IDV, coverage benefits and premium rates. Compare these things and then select the best plan for your vehicle
- Whether you continue with the existing plan or buy a new one, inspection of your vehicle would have to be arranged because your policy has lapsed. For this inspection, you have to approach the insurance company and arrange for a surveyor to visit you.
- The surveyor visits you, does the inspection of the vehicle, and files an inspection report.
- Based on the inspection report, the IDV and the premium for your motor insurance policy is calculated.
- If you are renewing your policy within 90 days of its lapse, you can utilise your old plan’s accumulated NCB for a premium discount. If, renewal is done after 90 days from the policy expiry date, the accumulated NCB would be lost.
- Pay the premium of the chosen policy and the policy would be issued.
How to File a Motor Insurance Claim?
- To file a motor insurance claim, you should follow these steps – If you have damaged your own vehicle and no other party was involved, you should inform the insurance company immediately.
- The company would inform you of the nearest garage where you can take your vehicle for repairs
- After the vehicle is taken for repairs, the insurer’s surveyor will visit the garage, make an estimate of the repair costs, submit his report and approve the repairs to begin
- Your vehicle would be repaired and delivered to you. The insurance company would pay the applicable claim directly to the garage if you visited the preferred garage. You might have to pay a portion of the claim which was not admissible.
- If you have taken your vehicle to a non-networked garage, you have to pay the repair costs and then get them reimbursed from the insurer
- In case of third party claims where you have injured a third party or damaged a property, a FIR should be filed with the police
- Then you should inform your insurance company and submit the claim form with the FIR
- If you lose your vehicle to theft, inform the insurance company, police and also the RTO. Obtain a FIR and file it with the insurance claim.