Motor insurance gives protection to the vehicle owner against (i) damages to his/her vehicle, and (ii) pays for any Third-Party Liability determined as per law against the owner of the vehicle. Third-Party Insurance is a statutory requirement. The owner of the vehicle is legally liable for any injury or damage to third-party life or property caused by or arising out of the use of the vehicle in a public place. Driving a motor vehicle without insurance in a public place is a punishable offense in terms of the Motor Vehicles Act, 1988.
The following 5 things should be known before taking CAR Insurance. However, there could be several other factors that are required to be understood before buying the right cover for your CAR. Beginners should consult an Insurance Broker or expert before buying the right cover for their CAR.
1. Types of Policies:
One can purchase two types of car insurance policies –
Third Party Policy –– Third Party Liability Insurance is mandatory for all vehicles plying on public roads in India as per the Indian Motor Tariff 2002. This covers liability for injury, death of a third party, and damages to others that you are responsible for. Coverage is as per requirements of the Motor Vehicles Act, 1988. Compulsory Personal accident cover for owner-driver is also included. The policy can also be extended to cover various other risks like Personal accidents to occupants of the vehicle, Workmen’s Compensation to drivers, etc. over and above the cover available to him under the statute.
Comprehensive Policies — In addition, it is sensible to cover loss or damages to the vehicle itself by way of Comprehensive/Package policy, which covers both “Liability” as well as “Own damage” to the insured vehicle. Own damage covers the damages suffered by the insured car. Comprehensive plans offer maximum coverage. You can take add-on covers also along with standard comprehensive policies. The Sum Insured under a Motor Insurance policy reflects the value of the motor vehicle determined based on the concept known as Insured’s Declared Value (IDV). Insured’s Declared Value is the value arrived at based on the manufacturer’s present value and depreciation based on the age of the vehicle.
2. Coverage of Motor Insurance:
The damages to the vehicle due to the following perils are usually covered under OD (Own Damage) section of the Motor Insurance policy:
- Fire, Explosion, Self- Ignition, Lightning;
- Burglary/Housebreaking / Theft;
- Riot & Strike;
- Earthquake;
- Flood, Storm, Cyclone, Hurricane, tempest, inundation, hailstorm, frost;
- Accidental external means;
- Malicious Act;
- Terrorism acts;
- While in Transit by Rail/ Road, Inland waterways, Lift, Elevator or Air; and
- Land slide / Rock slide;
What Motor Insurance excludes:
The following contingencies are usually excluded under the Motor Insurance Policy:
- Not having a valid Driving License;
- Under Influence of intoxicating liquor/ drugs;
- Accident taking place beyond geographical limits;
- While Vehicle is used for unlawful purposes;
- Electrical/Mechanical Breakdowns.
3. Premium Determination:
Many factors determine the premium you will pay. For OD cover different insurance companies charge different premiums for similar coverage. You should try getting three or more comparison quotes. For this you can check various intermediaries’ websites; it will help you compare premiums. Do not forget to compare deductibles, coverage, and IDVs as premiums may be lesser of one insurer but with higher deductibles, lower coverage, and lower IDV, which will adversely impact you in the event of claim settlement.
The OD coverage is left to be rated by individual insurance companies after duly filing rates with the Insurance Regulatory and Development Authority (IRDAI). The same is determined on the following factors amongst others — Age of vehicle; Discounts/loadings- Appropriate Bonus/loading/ discounts along with past claims experience are taken into account while calculating the premium.
Third-Party Liability Premium rates are laid down by IRDAI.
In case of break-in insurance, vehicle inspection would be required and extra charges will have to be incurred for the same. You need to give information about the following items that are commonly used to determine your premium: Vehicle registration details with Engine No., Chassis no., Class of vehicle, cubic capacity, seating capacity, etc. (All relevant details are in the RC book/card and a copy of same may be handed over) Tax paid details; Certificate of fitness, Driver details – age, gender, qualifications, license validity Previous insurance history, if any.
4. No Claim Bonus:
No Claim Bonus (NCB) is the benefit accrued to an insured for not making any claims during the previous policy period. As per current norms in India, it ranges from 20% on the OD premium (and not on Liability premium) and progressively increases to a maximum of 50%.
If, however, a claim is lodged, the No Claim Bonus is lost in the subsequent policy period.
NCB is given to the insured and not to the insured vehicle. Hence, on the transfer of the vehicle, the motor insurance policy can be transferred to a new owner but not the NCB. The new owner has to pay the difference on account of NCB for the balance policy period. The original owner can, however, use the NCB on a new vehicle purchased by him.
5. Period of the Motor Insurance Policy
A motor insurance policy is usually valid for a period of one year and has to be renewed before the due date. You should pay the premium on time. No Insurer offers a grace period for paying the premium. In case of a lapse of policy by even one day, the vehicle has to be inspected. Moreover, if a comprehensive policy is allowed to lapse for more than 90 days, the accrued benefit of NCB (No Claim Bonus) is also lost.
This article is authored by – Abhishek Mishra – CEO & Principal Officer, Bonanza Insurance Brokers
Having prodigious experience of more than 21 years and familiarity with the BFSI Industry, Abhishek Mishra is currently associated with Bonanza Insurance Brokers as the CEO & Principal Officer. Since its inception, being a vital part of the organization, his self-evident leadership skills have soon transformed the company into a mammoth and fastest-growing fintech brand in India. After a very strong and successful stint with Karvy Insurance Broking Ltd as Principal Officer, Abhishek joined Bonanza group in 2013 and Bonanza Insurance in 2015.
At Bonanza Insurance Brokers, he brings a multi-disciplinary approach to his role & is overall responsible for conceptualizing, strategizing & directing business development activities along with exploring new service and product opportunities. He is involved in major corporate decision-making and management of the overall compliance and resources of the organization. He has an established record of developing high-performance teams to deliver risk management solutions to clients across geographies and industries. Not only is he proactive in his business approach, but extremely futuristic and constantly at the forefront in bringing innovations in day-to-day business.