A motor insurance policy is generally a financial protection one assures for their vehicles. With increasing thefts, accidents and frequent breakdowns of motor vehicles, it is important that you purchase an adequate motor insurance policy. In India, the basic motor insurance policy is also made mandatory by law.
To purchase a motor insurance policy, you need to know the different types of insurance policies, factors affecting the premium and various add-ons, exceptions and additions.
Types of motor insurance
Types of motor insurance policies are mainly classified based on the coverage coverage and the type of vehicle seeking insurance.
Third Party Liability Insurance: Third party insurance is the most basic and common auto insurance. This is also known as just liability insurance or simply an action plan. In addition, the Motor Vehicles Act, 1988 made it mandatory for all vehicle owners to purchase third party insurance policies. Penalties may be imposed for driving a car without this policy. The policy only covers damages and damages to a third party, vehicle or property.
Comprehensive Motor Insurance: As the name suggests, a comprehensive insurance policy has comprehensive coverage. This includes both third party liability coverage and damage to your own vehicle. Although the maximum coverage for injuries / deaths under this policy is unlimited, the coverage for damage to third party property and there is a limit of 7.5 lakhs.
In the case of third party liability cover, it protects you from accidental injuries / death or property damage to third party legal liabilities. In the case of self-damage cover, the policy provides protection against damage to the insured vehicle from accidental damage, theft and natural disasters.
Personal car insurance policy: Comprehensive car insurance policy covers comprehensive coverage and protects the owner from the risks of accidents, natural disasters and theft. At a minimum, all car owners must purchase third party insurance coverage, as this is mandatory by the government. This type of coverage ensures that the car owner is covered in respect of damages and injuries to a third party.
Two Wheeler Insurance Policy: Just like car owners in India must have a third party insurance, all two wheeler owners must buy a two wheeler insurance policy. This applies not only to the damages caused to the owner by accidents, disasters, fire, theft, etc., but also to the damages and injuries to any third party.
Insurance Policy for Commercial Vehicle: As the name suggests, this type of insurance coverage is for vehicles intended for personal or commercial use.
Examples of commercial vehicles that fall into the category of heavy and light commercial vehicles, trucks, buses, multi-purpose vehicles, agricultural vehicles, etc.
Motor Insurance Add-on Plans
Each person has unique needs and expectations and the basic motor insurance plan may not cover these requirements. In such cases, you can opt for motor insurance add-ons, also known as car insurance riders. These add-on covers increase your basic policy by expanding your coverage and are available at a nominal premium. Some common riders that offer:
Zero Depreciation Cover:
Zero depreciation cover, also known as zero depreciation cover, can lead to huge savings during claim. Everyone knows that as soon as a car leaves the showroom, its price starts to go down. Therefore, when you file a claim, all costs associated with the depreciation will be borne by you personally. In such a situation, zero depreciation cover may be useful to you. If you purchase a policy that has an additional layer of zero depreciation cover, the insurance company will cover the costs associated with the depreciation of the vehicle and its components.
No Claim Bonus (NCB) Protect Cover:
The No Claim Bonus is basically a discount you can get when renewing your motor insurance policy. Individuals who do not claim during the policy term are entitled to a No Claim Bonus. However, with the No Claim Bonus Protect cover, you can protect this bonus even after claiming it during the policy term.
Engine Protection Cover:
An independent comprehensive motor insurance plan does not cover the cost of repairing engine related damages. By purchasing an engine protection cover, you can cover the cost of protecting your car engine. This add-on is especially for people who live in waterlogged areas.
Back to Invoice (RTI) Cover:
Car theft is a major problem in major parts of the country. When a car is stolen, a comprehensive cover reimburses the value of the car, but it is not covered by the cost of the total loss. It is important to note that an RTI cover will not cause depreciation and will cover the actual invoice value of your vehicle.
Personal Property Damage Cover:
A motor insurance policy covers damage to a vehicle and its components. However, it does not cover the loss of expensive electronic items such as mobile phones, laptops, which may be in the vehicle at the time of damage or damage. Compensation for personal cover damage also covers these items.
Personal Accident Cover for Passengers:
A comprehensive motor insurance policy covers the owner or driver, but does not cover passengers. Therefore, you should consider this add-on to extend personal accident coverage to passengers as well.
Usable cover: From a vehicle standpoint, individual vehicle parts, engine oil, screen washers, etc. are collectively considered consumer goods. Although part of the vehicle, the cost of covering these parts is not covered by the insurance company. If you purchase add-on consumer goods, their cost will be borne by the insurance company.
Apart from the above, there are many other add-ons that you can buy. For example, you can purchase a daily allowance cover that reimburses travel expenses when your vehicle is repaired. Or you can buy a key replacement cover, which will allow the insurance company to reimburse you for the cost of replacing the vehicle keys. You can also purchase a Roadside Assistance cover, which provides 24/7 protection against flat tires, fuel failure, breakdowns, etc.
Motor insurance premium
The type of insurance policy you purchase and the coverage you choose will be determined by the premium you pay. Therefore, it is important to understand the factors that affect motor insurance premium and how you can reduce your premium costs without compromising on the completeness of the motor insurance policy.
Type of cover:
The premium paid for a comprehensive motor insurance policy covering both the insured vehicle and the third party is relatively higher than the premium for a third party motor insurance policy.
Vehicle Safety Features: Generally motor insurance policies cover the cost of damages caused by accidents and other incidents that may damage your car. If your motor vehicle is equipped with additional security features such as anti-theft devices, airbags, GPS tracking system, chances are it will reduce the damage caused by accidents. In some cases, some features may even help prevent accidents. As a result, motor vehicles with such safety features are likely to attract lower premiums.
Your place of residence, or specifically where your vehicle is located and where it is used, is one of the major factors affecting your motor insurance premium. Here, insurance companies consider metros to be more dangerous than smaller cities. This approach stems from the belief that vandalism and accidents are more likely to occur in metros than in Tier-II and Tier-III cities. So, if you live in a metropolitan city, you are more likely to pay a higher premium on your motor insurance policy.
Changes: If you make any auxiliary changes to your motor vehicle, such as installing alloy wheels, roof rails, etc., you will have to pay a higher premium to have these covered by the insurance company.
No Claim Bonus: NCB is a discount on the premium paid by the insurance company for non-claim during the last year or policy term. Therefore, it is advisable not to claim for minor damages such as repair of broken locks or wipers.
Age: Your age plays an integral role in determining the premium you will pay for your motor insurance policy. It is believed that more experience comes with age. As a result, younger drivers have to pay higher premiums than older and more experienced drivers.
Final thoughts and bottom line
If any decision is to be right, it is important to be informed. Undoubtedly, it is important that you buy a motor insurance policy so that you can protect your assets and minimize financial costs in the event of loss, accident and damage. However, to really benefit from the policy, you need to make sure that the motor insurance policy you are buying fits all and meets all your needs.