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Car Insurance Policy In India

Last Update Date : April 30, 2019
Estimated Read Time: 7 min

Car Insurance

Car Insurance or Motor/Vehicle Insurance is much required to protect vehicle owners from any accidents, theft, damage or financial loss defined as per policy.

Getting a car insurance is easier these days from top insurance companies or car companies like Maruti, Bajaj Allianz, HDFC Ergo, Bharati AXA, United India Insurance, ICICI Lombard etc..

Certain policies also cover both Comprehensive and Third party insurance. Auto Insurance is a contract between you and the insurance company to protect you from unwanted mishaps against the premium paid by you. Insurance companies follow the guidelines as per IRDAI (Insurance Regulatory and Development Authority of India).

History

Today the Indian automotive industry is one of the largest in the world that has its roots since 1897 when the first car plied on Indian roads. The first Indian who owned a car in 1901 was Mr. Jamshedji Tata. The first launch was in 1942 by Hindustan Motors, competitor Premier in 1944 and Mahindra & Mahindra in 1945 respectively which is termed as a ‘landmark’ decade in the automobile history of India. Through 1930s cars were imported in small numbers in India.

The wide use of cars began in urban areas slowly after the First World War. There was no form insurance concept in the world during that period. The United Kingdom through the Road Traffic Act 1930 has introduced a compulsory car insurance scheme. Here the vehicle along with the driver has to be compulsorily insured.

Motor Insurance in India

The concept of motor insurance coverage includes a protection cover for the damage caused to the vehicle, theft etc. against the policy taken by the vehicle owners. Motor Insurance is mandatory in India. The premium may differ depending on the vehicle whether it’s a a two-wheeler or a four-wheeler.
The policy value also is based on the vehicle’s Insured Declared Value (IDV) declared by the showroom at the time of purchase of your new car.

The IDV keeps changing as the vehicle value depreciates year after year.

IDV = (Manufacturer’s listing price-Depreciation) + (Accessories not included in the listed price-Depreciation).

Benefits of Car Insurance

Here are few benefits of opting for a vehicle insurance policy by the owner.

  1. The car insurance policy can save the owner from financial loss and protect him in case of any accident, having to pay more money towards the vehicle damage, theft, etc.
  2. In case of any uninsured or under insured driver hitting your vehicle then the car insurance can help in paying for the damage and medical costs.
  3. Car insurance can save time and energy involved in getting the damaged car in getting repaired, negotiate the repair expenses, dealing with payment of other person’s claims etc.
  4. Based on requirements, one can customize and opt for either Third-Party Car Insurance or Comprehensive Car Insurance.

A third-party insurance is a type of insurance where it covers the damages/injuries caused by your car to a third person, vehicle or property. A comprehensive insurance is a combination of third-party insurance along with self-damage coverage.

Factors Affecting Premium

  1. Insured Declared Value (IDV) which is declared by the showroom at the time of buying car is the cover amount of the vehicle. This gets decided based on the vehicle value after adjusting the depreciation.
  2. Age will also be the deciding factor as the driving of a person gets better based on his age.
  3. History of Claims comes into picture and the premium would be higher in case a person makes continuous claims. However, if there are no claims made during the policy term, then a discount would be available from 10% to 50%.
  4. Occupation is one of the criteria in deciding the premium amount as there are discounts available for certain professions like Chartered Accountants, Doctors etc.

Insurance for a New Car Vs Second Hand/Pre-owned Car

The insurance will be offered by the showroom itself from where the car is purchased to its owner. Also, there are different options available in the market to compare and decide on a policy that suits to the requirement.
In case of second hand or pre-owned cars, a vehicle inspection would be done after which the insurance vendors will proceed further issuing the insurance policy for the vehicle.

Important Points to Remember While Purchasing Car Insurance

  1. Compare between different insurance providers to get the best quotation as per your requirements.
  2. Check on the Deductible Amounts which you will have to pay at the time of accident from your pocket before the Insurance Company starts the claim process.
  3. Go through the policy document before finalizing the auto insurance policy where you would pay the premium amount annually. A receipt will be issued as a proof by the Insurance provider towards the payment.
  4. In case of any event or accident, file the claim at the earliest with no delays.

Coverage In Motor Insurance

Let us see what all a Motor Insurance policy provides as part of the cover:

  1. Damage / Loss due to unexpected calamities like theft, strike, transit damage over road, rail or water, terror activity, band, burglary etc.
  2. The Insurance also provides cover against the damage or loss through natural calamities like earthquake, floods, storm, etc.
  3. Accident Cover is provided where there occurs any unfortunate event or disability to the driver. A coverage up to 2 lakhs is provided in such cases.
  4. Third Party Legal Liability Cover provides protection against accidents or loss resulting in injury or an event of a third party.

Here is a check-list of the areas which are covered by a motor insurance policy and those which are not in the policy purview.

Covered Under InsuranceNot Covered Under Insurance
Damage/loss through natural or man-made calamitiesIntentional damage/loss, general wear & tear
Accident CoverageDriving under the drug influence, alcohol etc
Third Party Legal Liability CoverDamage/loss occurred due to war
Insured person driving the carDriving someone else’s car
Protection in case of any unfortunate event/disability to the driverUninsured driving the car

Car Insurance & Claims

The car insurance claim is a process where the insurance company gets a claim request from the Insured towards the compensation for the loss and damage after an event. The insured may even ask the insurance company to represent in case of any unintentional damages caused to the third party.
There are 2 ways of making a claim by the Insured:

  1. Car Insurance Cashless Claims
  2. Car Insurance Reimbursement Claims

Car Insurance Cashless Claims is where there would be no need for the Insured to make any payment at the network car service centers of the Insurance provider. Once the damages are covered in the policy, the Insurer makes claim settlement with the car workshop authority.

In Reimbursement Claims, the Insured will be paying for the damages/loss caused to the vehicle towards the repair at any of the workshops. The Insured will submit all the bills and receipts related to the repair to the insurance provider for reimbursement.

Points to Note While Filling Claim Form

It advisable to go through all the details before opting for claims from any insurance provider.
The sooner the better concept has to be followed in claim process without any delays. As per IRDAI (Insurance Regulatory and Development Authority of India), the Insurer can’t reject any claim for the delays made by Insured.

Already the Insured would have gone through due to accident and in addition the stress is to get the claim process run smoothly. Post-accident, the vehicle will be moved to car service center and the communication starts with the Insurance provider. Let’s see on the important points to note while filling the claim form.

  1. Garage Visit – The Insured should always visit the authorized workshop or garage along with the vehicle where an estimate can be made there towards the damages caused. This helps to know if the total cost is within the insurance claim limits. The claim forms are available at the work shop or can be downloaded online to fill and proceed further. Its recommended to take a document proof that vehicle is sent for repair from the workshop authority.
  2. Filling Claim Form – While filling up the claim form, the Insured can attach all the repair bills, medical bills in case of any injuries. At times, the Insurance Company seeks permission from you to get access to your medical records as per the situation
  3. Final Settlement – After all this, the Insured has to sign the final claim settlement. Before doing so, he should check the prices quoted by the Insurance Company and not the actual workshop rates. Also, if required, the Insured can ask the Insurance Company Representative to explain all the details in the claim form before signing it. It’s also important to keep a copy of claim sheet for future reference.

IRDAI often drags the Insurance companies through notices for not abiding to the standard and laws while doing claim settlement with the claimants.

The Insurance companies send a typical response that they have negotiated with the claimant and obtained consent with an intention to provide benefit to the customer. There are instances where IRDAI even penalizes the Insurance companies for not following the legality in such negotiation and getting consent letter from Insured is not the complete solution.

IRDAI acts strictly to ensure that there is transparency while following relevant guidelines at the time of making fair claims with the claimants.

By now we understood the vital role of vehicle insurance along with the protection to the owner in case of any unforeseen situation.

One can compare the best car insurance quotes and customize as per requirement out of various types of vehicle insurance policies provided for all road vehicles by the insurance companies. To name a few are Bajaj Allianz, HDFC Ergo, Bharati AXA, United India Insurance, ICICI Lombard etc. Refer to the policy document or the contract to know what costs are covered in the policy offered to you against the premium paid on an annual basis. Accordingly, you can customize and choose various coverage options that is right for you.

A little hard-work will help you to secure your car or a two wheeler from any unwanted mishaps and provide financial protection.

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CA Shreya Oturkar
Shreya is a tax advisor at H&R Block (India) with intensive experience in SME taxation and audit. She holds an advanced post graduate qualification in accounting and is highly skilled in financial analysis and reporting. Apart from her professional achievements, Shreya is a talented artist with a flair for free-hand sketching!

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