Top 5 Types of Car Insurance Coverage [2024 Guide]

Road accidents are a common occurrence and may not happen due to your own negligence but due to the carelessness of others as well. Whatever the cause of the accident may be, there is always a loss of property involved, and in some tragic cases, even lives are lost or irrevocably altered due to injuries sustained during the accident.

Car insurance is the best way to protect the driver, car owner, passengers, and pedestrians from the consequential financial and legal implications. There are different types of car insurance to pick from, depending on the kind of protection you want. Let’s talk about the five most popular types of car insurance policies in the country.

Here are the 5 types of Car Insurance in India

1. Third-Party Liability Only Cover

The Motor Vehicle Act 1988 mandates that every motorised vehicle on Indian roads should have a third-party liability only cover.  The “third-party” in third-party car insurance is any property, person, or vehicle that sustains damage due to the actions of the insured while driving their vehicle. This is one of the more affordable kinds of insurance for cars in the country, as the scope of its coverage is limited.

These are the incidents that will be covered under third-party liability only cover:

• Damages to the third-party vehicle

• Damages to the third-party property

• cost of hospitalization and treatment of third parties

• Liabilities arising out of the deaths of third parties

Third-party car insurance will not cover damages or losses to the insured’s vehicle due to an accident, damages or losses to the insured vehicle in case of a natural calamity, or theft of the insured’s car. 

2. Own Damage (OD) Cover

Under the collision damage cover insurance policy, the insured will be reimbursed for the cost of repairs to your damaged vehicle. The premium for these types of car insurance in India will be calculated based on the vehicle’s age and its insured declared value (IDV). The insured declared value of the car is nothing but its market value. 

In the event that the cost of damages to your vehicle exceeds the current value of the vehicle, the insurance company will pay the current market value of the automobile in question. For older vehicles, the collision cover can be as low as possible. You must buy coalition cover if there is a lien on your vehicle.

The most important thing to keep in mind when opting for these car insurance coverage types is that the insured will get compensation from the insurance company only in case of an accident. So a collision damage cover is great for those who live in accident-prone pockets of the country or in cities that have dense traffic flow.

3. Personal Accident Cover

A personal accident cover can protect the owner of the car in case of an accident by covering the medical expenses that are incurred after the accident. These types of motor insurance can also protect passengers and drivers from medical bills in case of an accident. The insurance company will take care of the medical expenses, regardless of whether the accident was caused by the driver of the insured vehicle or another party. In the event of a death due to the accident, the insurance company will pay a lump sum to the family that suffered the loss.

4. Uninsured Motorist Protection

When an accident occurs, the insurance of the person who caused the accident should cover the cost of damages to your vehicle. But what happens when the other vehicle's owner does not have insurance? You would be forced to bear the cost of damages, right? This is where uninsured motorist protection comes in. These types of vehicle insurance

can protect the insured when the person who caused the accident does not have insurance. It can also come to your rescue when third-party insurance is not enough to compensate for the damages caused to your vehicle. Uninsured motorist protection will take care of both repairs to your vehicle and medical bills caused by the accident.

5. Comprehensive Car Insurance

As the name suggests, this is the most comprehensive type of car insurance you can choose for your automobile. The damage covered under a comprehensive insurance policy includes damage from third parties and damage to your own vehicle. It basically guarantees complete protection. Even though the price of these types of car insurance can be higher than that of a third-party liability-only cover, the range of protection offered against all the risk factors that you can face when your vehicle hits the road is unmatched with these types of car insurance in India.

One such unmatched coverage provided by the comprehensive insurance plan is protection against theft which is a feature missing in other kinds of insurance. This insurance policy can also protect your vehicle from:

• Natural disasters

• Man-made calamities 

• Fire

• Terrorist activities 

Here are some of the scenarios a comprehensive car insurance policy will not cover:

• Damages to the car due to drunk driving or driving under the influence of substances 

• Damages the car incurs while driving without a valid driving license

• Electrical and mechanical breakdown

• Usage-related wear and tear 

• Damages to the car due to illegal racing or speeding

• Damages to the car due to rash driving

• Damages incurred when on foreign soil 

Add-on Coverages

A basic comprehensive car insurance policy on its own offers more protection than third-party car insurance. But here is another great advantage to opting for a comprehensive car insurance policy. You can choose add-ons, which can further protect your automobile. With add-ons, you can customise this type of car insurance in India to suit your specific needs, as the basic version of the comprehensive car insurance policy may not address it. 

Here are some of the most sort after add-ons when it comes to a comprehensive car insurance policy:

a. Roadside assistance cover

A great road trip can come to a grinding halt when unforeseen issues, such as flat tires, dead batteries, or even a mechanical failure, happen. This is when an add-on like a roadside assistance cover can come in handy. Thanks to this add-on, you will be able to get assistance 24/7, even when your vehicle decides to act up in a remote location. 

b. Zero depreciation cover

Also known as a “nil depreciation cover”, you can use this type of add-on when your car suffers damage. When certain parts of your car need to be replaced, insurance companies will not compensate you for the entire cost of the repairs involved. They will account for the depreciation of the parts and compensate you accordingly. But if you take the zero depreciation cover add-on, you will get the entire cost of the repairs. Your car will have to be less than three years old for you to qualify for zero depreciation cover.

c. Key replacement cover

This is a nifty add-on for those who tend to be forgetful. Replacing a car key when you’ve misplaced it or when it’s been stolen/damaged can be a very expensive affair. But with the key replacement cover, the cost of repairing the key and lock set or even replacing a key will be fully covered by the insurance company.

d. No claim bonus protection

Most insurance companies tend to reward the insured with a no-claim bonus discount on the insurance premium when it comes time to renew the policy when a claim isn’t made against it for that year. Since the nature of road accidents is so unpredictable, you may not get to enjoy a no-claim bonus. If you get the no-claim bonus protection, you can still get the no-claim bonus discount even if you have made a claim. 

e. Return to invoice cover

This type of add-on can help you recover the total cost of your car as per the car’s invoice value in case it gets stolen or is damaged beyond repair.

f. Engine protection cover

The engine is the beating heart of your car. And it is a very expensive part to repair. The engine protection cover can cover charges related to the repair or replacement of the engine, gearbox, and differential that may happen due to certain reasons, like water logging or leakage of lubricating oil etc.

g. Consumables cover

In most cases, consumables such as lubricants, screws, washers, air conditioning gas, engine oil, etc. are used during repair. The cost of these consumables is not reimbursed by insurance companies under a basic comprehensive car insurance policy. A consumables cover add-on will ensure that you don’t spend out of pocket on these consumables. 

Car Insurance Premium

The amount you pay as your car insurance premium can be on the higher or lower side, depending on certain factors: 

A higher premium may be charged if you: 

• Opt for comprehensive insurance over third-party insurance

• Opt for add-on coverage

• Have a high claim rate

• Repair a new car

• Don’t renew your premium on time

A lower premium may be charged in these cases:

• You own an older car

• Your car’s cubic capacity is less

• Opt for higher deductibles

Though multiple types of vehicle insurance are available, the best one to go with might be the comprehensive car insurance policy, as it gives more bang for your buck even though it's more expensive than the state-mandated third-party car insurance. At the end of the day, driving does put you at risk, so being armed with good car insurance can help you be at peace when on the road, as you will be prepared for any eventuality.

Frequently Asked Questions

Below are some of the frequently asked questions on Top 5 Types of Car Insurance Coverage [2024 Guide]

How many types of car insurance are there? 

There are about 5 types of car insurance in India. They are 

• Third-Party Liability Only Cover

• Collision Damage Cover or Own Damage (OD) Cover

• Personal Accident Cover

• Uninsured Motorist Protection

• Comprehensive Car Insurance with Add-ons

What type of insurance is best for a car? 

The best type of insurance for a car is one that caters to all your needs as the insured. A comprehensive car insurance policy offers a great deal more protection when compared to other types of car insurance. So this kind of car insurance is a safe bet for your vehicle.

What is the most common type of car insurance?

The most common type of car insurance found in the country is the third-party car insurance, as it is mandated by the government of India. No vehicle can ply on Indian roads without it. But since its scope is very limited, most people tend to choose comprehensive car insurance, which includes all the aspects of third-party insurance and own damage cover, giving you and your vehicle an expanded scope of coverage. 

Is the premium high for comprehensive car insurance?

Yes, the premium for comprehensive care insurance is on the higher side when compared to the other types of car insurance in India. This is only because comprehensive car insurance offers more protection for your car than other types of motor insurance. One sure-shot way of keeping your premium down is to renew your policy on time. Another way to keep your premium payment at an optimal level is to opt for a no claim bonus protection cover, which will give you the benefit of a no claim bonus discount even if you make a claim. 

Is it mandatory to get comprehensive car insurance for my automobile?

No, only third-party car insurance is mandatory as per the directive of the Indian government. However, purchasing a comprehensive car insurance policy can be very helpful, as third-party car insurance does not protect against the damage incurred by the insured’s car. And with the great number of add-ons available, comprehensive car insurance can be customised to suit all your needs as a car owner. 

How can I judge which is the best insurance policy?

The best way to get a policy is to do some research and compare policies. You can then narrow it down to the one that best suits your needs and budget. 

Is it possible to switch from third-party car insurance to comprehensive car insurance?

Yes, it is possible to make this switch during the policy renewal period.