Motor Insurance

What is Motor Insurance?

Motor Insurance ensures protection to the vehicle owner against financial risks that may arise due to any third party liability when damage caused to the other vehicle, and it also pays for damages caused to own vehicle. A Motor Insurance insures your car, two-wheeler, commercial vehicle, or other road vehicles. Carrying a Third Party Insurance is a legal requirement. The Motor Vehicles Act, 1988 mandates that driving a motor vehicle without motor insurance is a legal offense.

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Why should I buy Motor Insurance?

We hear every day about the rising instances of on-road accidents. Both the vehicle owner and a third party receive damages to their vehicles and bodily injury as well. It thus becomes quite imperative to get insured with a Motor Insurance Policy. Here are some top reasons why you should buy a Motor Insurance.

Mandatory under Legal Ground

It’s a legal binding to have a third party insurance for your vehicle under the Motor Vehicle Act. The core reason to mandate motor insurance is third party liability. Just like any other property, a vehicle running in a public space can cause damage to the life and property of others. Such liability for death, bodily injury or damage to property of third parties is borne by the insurer. Thus, the third party liability is part of every motor insurance policy and no vehicle in India is allowed to run on the road without it.

Covers Third Party Legal Liability

Having a third party liability, motor insurance coverage is legally mandatory. Such cover helps you get away from legal consequences that may arise due to damages caused to a third party on the part of your fault. Under this scenario, your third party insurance coverage will pay for their treatment.

Pays for Own Damages

The repairs of your motor vehicle are quite a costly affair. Several a times, you need to pay for damages from your own pocket. You may also need to pay for damages when you have crashed into a wall or met with an accident (on your own fault). Buying a motor insurance will help you save this cost and your insurance company will pay for damages/repairs caused to your vehicle.

Protection from Act of God

A natural calamity such as earthquake, storm, hurricane, cyclone, etc. could damage your vehicle. To tackle this scenario, you must buy motor insurance that provides financial protection by taking care of the losses within the scope of the policy.

Security from Non Accidental Incidents

Not only there is a loss to your vehicle in case of accidents, but motor insurance can also be fundamental and beneficial in the event where your vehicle is stolen or vandalized. Having a motor insurance will give you financial assistance to bear such losses.

Financial Peace of Mind

As a motor insurance helps you with giving a comprehensive protection to your vehicle, not having an insurance can lead to some agonizing times. It is better to be “safe than sorry”. For many people, the uninsured loss of a vehicle utterly turns their lives upside-down.

What kinds of Motor Insurance Policies can I opt from?

There are three types of motor insurance plans under the ambit of motor insurance policy.

Car Insurance

By buying car insurance, you can get the coverage against the Third Party Liability and damage/loss caused to your own vehicle due to an accident on the part of your fault. You should buy a Car insurance to get the complete cover.

Two Wheeler Insurance

This motor insurance provides cover against damage caused to your own vehicle due to an accident (on the part of your fault). It also pays for any third party liability that arises due to property damage/ bodily injury caused to the other vehicle.

Commercial Vehicle Insurance

A Commercial Vehicle Insurance aims to ensure protection against financial loss that may arise due to a third party liability due to property damage or bodily injury caused to the other vehicle. It also pays for damages caused to your own vehicle.

Types of Motor Insurance Cover

When buying a motor insurance, it is also important to choose the right cover. Following are the two types of insurance covers you can choose from.

1. Third Party Motor Insurance/Liability Only Policy

Carrying a third party insurance stands mandatory under the Motor Vehicles Act, 1988. It ensures cover against a third party liability arising out of property damage and/or bodily injury to a third party involving your vehicle. It keeps you away from any legal repercussions arising out of the third party liability. It does not cover any loss/ damage caused to your own vehicle. You can also get the personal accident cover for owner-driver.

2. Comprehensive Motor Insurance/ Package Policy

This type of insurance cover provides cover against the third party liability plus pays for damages caused to your own vehicle and bodily injury. Under this cover, you can avail cashless claim when going to a network garage for repairs and you can also claim reimbursement when you approach a non-network garage for repairs.

Perils Covered

Following perils are covered when choosing a comprehensive motor insurance policy.

• Fire, Explosion, Self- Ignition, Lightning

• Burglary/Housebreaking / Theft

• Flood, Storm, Hurricane, Tempest, Cyclone,

• Earthquake, Landslide, Rockslide

• Riot & Strike

• Malicious Act

• Terrorism Acts

• In-transit by Rail, Road, Air, or Inland waterways.

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What are the Benefits of buying a Motor Insurance?

There are several benefits associated when buying a Motor Insurance.

Safe on Legal Ground

One of the prime benefits of buying a motor insurance is the legal protection. You never have to face a third party liability that may arise due to any damage to the other vehicle. Instead, your motor insurance will pay for it.

Covers Damage Costs

A motor insurance provides cover against the costs that arise due to a third party liability. You can also get Own Damage (OD) cover under a comprehensive motor insurance cover.

No Worries Ahead

With a motor insurance, you need not to worry about the financial burden arising due to a third party liability. As the motor insurance also pays for Own Damage, it also covers you against your vehicle damage or bodily injury. Enjoy financial indemnification in the event of any such loss under the scope of your motor insurance policy.

Ease of Vehicle Repairs

Your insurance policy will also pay for repairs that may be costly on your pocket. You can go to a network garage to get a cashless service and also avail reimbursement facility when getting repairs with a non-network garage.

No Claim Bonus

If you have not made any claim during a policy period, you are entitled to receive the NCB benefit. You can redeem this NCB benefit on the next policy renewal. Your insurer will lower down the premium amount for your policy, hence saving your money on premium payment. It’s better to accumulate NCB for some couple of years, and then claim for it.

Cost Effective

With the increasing usage of internet access, you may buy new or renew your motor insurance policy from any corner of the world. You may buy a motor insurance policy at just a few clicks. Assess the benefits by comparing online and buy an insurance plan online as per your need. You can also avail additional discounts by buying online.

How my Motor Premium is Calculated?

Following are some of the key factors held accountable for determining the premium amount for a Motor Insurance policy.

Type of Insurance Cover

You have the option to choose from a third party or a comprehensive insurance cover. A comprehensive insurance has two components namely, own damage and third party. These two components contribute towards the premium amount. When choosing a comprehensive cover, you need to pay higher premiums than a third party insurance cover which solely covers damages arising out of the third party.

Insured Declared Value (IDV)

IDV is considered as the sum insured and it is fixed at the commencement of each policy period for a motor vehicle. If you have a brand new car, you will have a higher IDV. The premium amount is directly proportional to the Insured Declared Value. Higher the IDV, more will be the premium amount for your motor insurance.

Age of the Vehicle

Your vehicle’s age plays a key role in deciding upon a premium amount. As your vehicle gets older, its IDV is reduced, and thus, you will be charged for the lower premium amount.

Cubic Capacity of Vehicle

It is a major determining factor for calculating the premium amount. The higher the cubic capacity of your vehicle’s engine, higher will be the premium amount.

Geographical Location

The location where your vehicle is registered is taken into account while determining the geographical location for premium. There are two insurance zones, namely Zone A and Zone B. The premium of a vehicle registered under a location which falls in Zone A (which includes the major metro cities) has a higher premium than Zone B (which includes rest of India). The reason being Zone A cities have a higher risk because of being densely populated, higher traffic, higher theft incidents and more prone to accidents.

No Claim Bonus (NCB)

If you have a claim-free year, you are entitled to receive a No Claim Bonus benefit. When you don’t make any claim during the tenure of policy, your insurance company will offer discounted premium rates in the succeeding year. Thus, accumulated NCB can lower down the rate of premium substantially.

Various Discounts

There are certain discounts on premium given by the insurer which will reduce the motor insurance premium amount reasonably. Such discounts are on account of vehicle safety features like advanced braking systems, airbags, advanced locking systems, tracking devices, alarm systems, installation of anti-theft devices in the vehicle, etc. Also, a registered member of an automobile association can avail discount on premium.

What are some Smart Buyings Tips?

When you are looking to buy a motor insurance for your vehicle, it is important to go through the following key tips to make a smart move.

Compare and Buy Online: Before buying, you should compare motor insurance policies offered by several insurers online. Online buying will be cost effective and informed buying decision. You can easily compare the policies online and pick a policy that caters to your insurance needs.

Evaluate the Right IDV: Insured’s declared value is the current market value of the vehicle. Higher the IDV, higher will be the premium. It is prudent to disclose the correct IDV as in case of loss the claim amount will be based on IDV.Lower IDV may fetch lower premiums, but it will prove to be a brunt in case of loss or total loss.

Opt Relevant Riders/Add on Covers: It’s wise to opt for a rider(s) as per your need to enhance protection for your vehicle under critical circumstances. The riders and its benefits may differ from insurer to insurer, so it’s advisable to understand the benefits attached with a specific rider, you want to choose.

Decide on Deductibles: Part of the loss which is to be borne by you is termed as deductible. Compulsory deductible you can’t escape, but decide the right amount of voluntary deductible. Those who are confident of their driving ability could opt for a higher voluntary deductible to save on premium.

Read the Fine Print: When you want to buy a motor policy, it is important to know the benefits it offers and what’s not included in the policy. Go through the terms and conditions of the policy. It is imperative to understand your policy, so as to make a well-informed decision.

Choose the Genuine Insurer: Prior to buying a policy, it’s important to check whether the insurance company is registered with IRDAI. Dealing with a genuine and licensed insurance company is imperative.

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Is there any Add on Cover/Rider with Motor Insurance?

Riders in motor insurance are optional add-ons that enhance the insurance coverage. It provides vehicle owners with the additional and valuable advantages. Listed are the common riders available with motor insurance policy.

Zero Depreciation Cover

In a vehicle accident claim, your insurer will deduct a depreciated value for the specified damaged parts and the claim amount you receive is not just enough to cover the financial loss. With this rider, your insurer will not deduct any amount toward depreciation count while settling claims.

No Claim Bonus Protector

This add-on helps in saving your NCB upto one or two claims (depending on the insurer) during the policy period. It’s highly advisable to opt for this add on in case your accumulated NCB is above 25%.

Engine Coverage Rider

If your vehicle’s engine is damaged due to water stalling, leakage of oil, etc., your insurance company covers the engine repair if you choose this rider.

Key Replacement Cover

In the event of car keys being lost or left in the car, key replacement cover efficiently assists you to unlock the vehicle in such scenarios. This add on cover includes the cost of making duplicate key if the key is lost and also the cost of lock if the lock needs to be replaced following the loss of a key.

Roadside Assistance

This rider provides you 24x7 roadside assistance to get rid of a mechanical breakdown or other critical issue of your vehicle. Under this rider, your insurance may also provide services like tyre change, jump start of the vehicle, on the spot repair, towing services, emergency delivery of fuel, etc.

Medical Expenses Rider

In the case of medical emergencies, this rider pays for the ambulance charges and medical expenses that are incurred after the accident.

Personal Accident Rider

Many motor insurance policies provide the policyholder with this rider. It provides coverage against personal accidents, accidental death, and temporary and permanent partial/total disability for the driver and other occupants.

(Note: The riders specified above may vary from insurer to insurer. Choose the riders to make your journey safe and enjoyable)

What is Not included in the Motor Insurance?

Here are some contingencies that are not included under the Motor Insurance:

• Driving a motor vehicle without a valid Driving License.

• Driving a motor vehicle under the influence of drugs/ alcohol.

• Electrical/Mechanical Breakdowns.

• An accident takes place outside the geographical limits.

• The vehicle is used for some illegal purposes.

Do’s and Dont’s in Motor Insurance

Read the Do’s and Dont’s related to your Motor Insurance.

Do’s	Dont’s
Search out for motor insurance plans being offered by numerous insurers online	Ask anyone else to fill your motor insurance proposal form
Fill the proposal form sensibly and provide the right facts and figures	Leave any column blank in the proposal form
Go through the policy wordings to ensure what is covered and what is not	Forget to get the details regarding policy benefits and claims procedure
Ask your insurer or concerned executive about add-on covers available with the motor insurance	Forget to renew the policy after expiry of the policy period
Do review and understand your coverage before talking to your insurer or your agent.	Be forced to get the insurance from your vehicle dealer, you have the option to buy it online
Make sure to keep all these documents updated from the concerned authorities	Let your No claim bonus affected for minor claims
Retain a copy of the duly filled proposal form for your own records	Make false declarations about the actual use of the vehicle you are insuring

FAQ's

Q: What is a motor insurance policy?

Ans: A motor insurance policy ensures protection to a vehicle owner against financial risks that may occur due to a third-party liability. It also provides cover for damages caused to your own vehicle. Under the Motor Vehicles Act, driving a motor vehicle without motor insurance is a legal offense and thus, it is obligatory to get a third-party motor insurance.

Q: What are the types of motor insurance?

Ans: When it comes to choosing motor insurance, there are broadly three categories to choose from, including Two Wheeler insurance, Car insurance & Commercial Vehicle insurance. These motor insurance policies provide the comprehensive cover for your vehicle and third party liability as well.

Q: How does motor insurance work?

Ans: By buying a motor insurance, you will get coverage against damages caused to your vehicle and to a third party. In a motor insurance policy, the insurance company will pay for the damages upto the coverage limits. When buying a motor insurance policy, you need to check the extent of coverage you will require.

Q:How is motor insurance premium calculated?

Ans: The motor insurance premium is calculated on the basis of some key factors like IDV of vehicle, type and age of the vehicle, cubic capacity and geographical zone. Under motor insurance premium, you can get the third-party cover, own damage cover, personal accident cover and other add-ons like road side assistance, engine protection, NCB protection and much more.

Q: How do I renew motor insurance?

Ans: When it is to renew the motor insurance, you need to enter the vehicle’s registration number and other personal details like phone number and e-mail address. You will then see the details of the existing policy and thereafter, you will get an option to renew the policy. After paying the premium online, your motor insurance policy will be renewed instantly.

Q: Which is the cheapest motor insurance for my vehicle?

Ans: When you are looking to buy the cheapest motor insurance, you need to go through the premium of policies offered from various insurers. Also, don’t forget to check the benefits and coverage before insuring your motor vehicle.

Q: What is IDV in motor insurance?

Ans: Insured Declared Value (IDV) refer to the current market value of the vehicle. It is the highest sum payable by the insurance company towards the claim amount for the insured motor vehicle.

Q: Do motor insurance premium can be paid in installments?

Ans: Motor insurance is generally for a year but, in some cases it is available for a couple of years at one go. There is no provision to pay the premium the motor insurance in instalments. The motor insurance premium must be paid in advance.

Q: What documents do I need to submit at the time of motor insurance claim?

Ans: For claiming amount under motor insurance, you need to submit the following documents.

Policy number
Your contact number
Name of insured person
Vehicle number
Make and model of the vehicle
Location & extent of loss
Details of event that lead to raise a claim

Motor Insurance Glossary :

Here are the basic terminologies used in a Motor Insurance Policy

Accident: An unforeseen or unexpected event.

Act of God: An extraordinary disruption caused by a natural mean such as a flood, earthquake, storms, lightning, etc. that cannot reasonably be foreseen or prevented.

Accessory: It refers to parts of a motor vehicle which are not provided by the manufacturer along with the vehicle. These parts are also not essential for running of the vehicle.

Arbitration: It is a common way of resolving motor insurance disputes rather than filing a lawsuit. Both the aggrieved party and the insurance company agree that a third party can look into the dispute and make a decision to resolve it.

Break-In: If the insurance policy of the motor vehicle has expired and the customer seeks insurance for the same vehicle, it becomes a break-in policy.

Catastrophe: A violent and harsh natural event such as a calamity, disaster, and tragedy.

Cubic Capacity: It defines the volumetric capacity of the engine of a vehicle.

Compulsory Deductible: It is the amount of loss that the insured has to bear compulsorily for every claim.

Comprehensive Policy: This motor vehicle insurance provides cover for third party liability plus own-damage cover.

Contribution: If a motor vehicle is insured under two or more insurance contracts, the loss needs to be shared among the insurers involved, as per the proportion of the sum insured.

Cover Note: It is a document issued by an insurance company providing temporary cover until a formal policy is issued.

Depreciation: It refers to decrease in the value of your motor vehicle by normal wear and tear. Typically, depreciation is not covered under a basic motor insurance policy, unless it is mentioned explicitly in the policy wordings.

Gross Vehicle Weight: It refers to a value specified by the manufacturer as the maximum loaded weight of a motor vehicle.

Hit and Run accident: An accident resulting from the use of a motor vehicle/motor vehicles of which the identity cannot be confirmed from the reasonable efforts.

Insured’s Declared Value (IDV): IDV is the sum assured fixed by the insurer at the commencement of each policy period. It is determined on the basis of the manufacturer’s listed selling price of the brand and model.

Insurance Zones: Insurance companies have demarcated the country into two different zones. Zone A for metro cities and Zone B for rest of India. If the registration of the motor vehicle falls into Zone A, the vehicle owner needs to pay premiums at a higher rate than Zone B.

Light Motor Vehicle (LMV): The Gross Vehicle Weight of a motor vehicle, the unladen weight of any of which does not exceed 7,500 Kgs.

MACT (Motor Accidents Claims Tribunal): In order to resolve the claim disputes at the minimal expense, the Claims Tribunals have been constituted by different state governments under the Motor Vehicles Act, 1939.

Market Value: The present monetary value of a motor vehicle when sold in the market.

Material Fact: Any fact, when disclosed may affect the decision of an insurance company, related to determining a premium, writing the cover, claims settlement, and many others. The falsification of a material fact will lead to termination of the policy.

No Claim Bonus (NCB): Upon getting a ‘claim-free’ year, you can avail a specific percentage of No-claim bonus. You can avail the NCB benefit in the form of discounts on the premium amount at the next renewal period.

Motor Insurance Policy: It is an agreement between a motor vehicle owner and an insurance company. Under this contract, an insurer provides cover against damage/loss caused to the motor vehicle or its parts resulting from the natural and/or man-made calamities. A vehicle owner, on the other hand, needs to pay premiums to ensure this protection.

Own Damage: The Own Damage covers you against any damage/loss caused to your vehicle arising from natural and man-made calamities as specified in the policy wordings.

Perils: These include the uncertain events or occurrences that may cause damage to your motor vehicle. It may include Fire, flood, earthquake, etc.

Third Party Liability: It refers to the bodily injury/property damage caused to a third party. A minimum Third Party Liability (Liability-only) is a compulsory requirement under the Motor Vehicles Act.