Motor Insurance

The word insurance is a bit confusing. Let us simplify motor insurance for you and reduce this confusion.  Buying an insurance policy for your vehicle is mandatory by law, if you drive a car or ride a bike. Read on to find more about a Motor Insurance Policy:

What Is Motor Insurance?

  • Motor insurance, also known as auto insurance, is an insurance coverage for bikes, cars, trucks and other commercial vehicles.
  • It offers to pay for or compensate you for any loss or damage to your vehicle listed below. It also covers any damage caused to another individual, vehicle or their property.

A motor insurance policy covers damages to the vehicle due to:

  • Accidents/collisions
  • Theft
  • Fire
  • Vandalism or sabotage
  • Riot and strike
  • Earthquake
  • Terrorism acts
  • Flood, storm, cyclone, lightning
  • Landslide

When Does Motor Insurance Come Handy?

The examples below showcase how Motor insurance helps in different situations. However, Situation 3 tells us how important it is that you choose the right Motor Insurance policy. For that, however, you need more information about Motor Insurance policies. This brings us to the types of motor insurance.

 Situation 1Situation 2Situation 3
ScenarioYou decide to spend the weekend at your farmhouse in the outskirts of the city.
It is a beautiful Sunday morning until you realise that your car is missing from the garage.
What?! Rs 5.5 lakh vanished in thin air.
You just got your licence. You hit the roads despite your father’s warning.
Everything goes well until a child suddenly crosses the road. The child is safe, but you bump into another bike.
It could easily cost you Rs 50,000 in medical bills and repair.
It’s Diwali! The entire country is lit up. The kids in your colony burst all kinds of crackers. You are in the celebratory mood until a cracker strikes the unattended petrol tank of your Tourist vehicle. Your car catches fire. Thankfully, the fire was doused immediately. The damage could still cost nearly Rs 75,000 to repair.
How insurance helps?You do not have to shell out from your pocket in case of damages. But only when your vehicle is insured.Your dad’s choice of a Comprehensive bike insurance came in handy.Choosing the correct insurance policy matters. Not all insurance types offer wide-spread coverage.
Benefits of being insured
Thanks to your Comprehensive Car insurance policy that covers theft, you receive money equivalent to your car’s value (IDV) back. Won’t you buy a new car with this money?

Your Bike Insurance Personal Accident cover pays for your medical bills; the Own Damage cover compensates for the bike’s repair. Plus, the ‘Third party’ cover pays for the damages caused to the other two wheeler.

You check with your insurance company. However, it turns out that the policy you have only covers for Third-party damage during collisions. You end up paying from your pocket. This could have been avoided.

 

Types Of Motor Insurance

There are many types of motor insurance policies available. Each vehicle type like car, bike, commercial vehicles etc has its own insurance policy.

Irrespective of the vehicle type, Motor insurance policies are mainly of two types which depend on what kind of liabilities the insurance covers.

TypeThird-Party PolicyComprehensive Policy
What does it cover?It covers damages caused to another person, their vehicle or property due to collision or accidents.It covers damages caused to you, your vehicle, or a third party due to collisions, theft, sabotage, natural calamities, man-made calamities or even fire.
What is not covered?It does not cover damages to your own vehicle or bodily injuries which you may suffer.It covers all kinds of damages, except for the loss suffered while drinking under the influence of alcohol or drugs or without a policy or license.

What is The Cost of a Motor Insurance Policy?

The cost of a motor insurance policy depends on a number of different factors such as the type of insurance policy, IDV of the vehicle, manufacturing year of the vehicle, etc. This cost is nothing but the amount you pay as the premium of the policy.

Here is a list of factors on which the cost of a motor insurance policy depends:

 

  • The Value of the Vehicle
  • The Type of Insurance
  • The Age of the Vehicle
  • Your Claim History
  • Add-on Covers
  • Security Features

 

Let’s understand each factor in detail:

The Value of the Vehicle

  • Your premium depends on the market value of your vehicle. This is known as the Insured Declared Value (IDV). It is the maximum amount that the insurer pays during a claim.
  • The higher the IDV of your car, the higher the sum-assured. This pushes up your premium costs.

The Type of Insurance

  • Different motor insurance policies offer varying coverage.
  • The greater the coverage, the higher the premium.
  • A third-party insurance only covers damage to another vehicle, person or property.
  • A comprehensive insurance, meanwhile, covers third-party damage as well as own damage.

So, a third-party insurance is cheaper than comprehensive insurance.

The Age of The Vehicle

  • The older the vehicle, the lower will be it’s market value.
  • However, age could make your vehicle more susceptible to damages, thus, increasing your premium amount.
  • This is why the insurer examines your vehicle thoroughly before processing your policy application.

Your Claim History

  • The number of times you make a claim in a year affects your premium amount.
  • A great number of claims can increase the premium amount.
  • If in any active policy year, you do not make a claim, you will get a bonus in form of discounts on your premium amount.
  • This bonus is called a No Claim Bonus (NCB).

Add-on covers

  • The extra services and coverage that you ask for, add to the cost of your premium.
  • The more the add-ons, the higher is the premium.

Security features

  • A vehicle with anti-theft system and other security features lowers the risk of loss.
  • This can lead to a lower premium cost.

How Do I Buy Motor Insurance?

These are 4 easy steps that will help you in buying a motor insurance to secure yourself and your vehicle.

 

  • Assess your needs
  • Make comparisons
  • Select the right plan
  • Pay the premium

 

1. Assess your Needs

  • Know your personal needs and those of the vehicle.
  • Keep all the required documents in order.
  • Get important details such as the manufacturing date, engine specifications, etc.
  • You must also know your vehicle’s market value. It is the maximum sum assured.

2. Make Comparisons

  • Check the different types of plans available.
  • Compare the benefits that the insurance companies offer.
  • See if there are add-ons that suit your needs.
  • Read the exclusions thoroughly.

3. Select the Right Plan

  • By this step, you will be clear about what you expect from an insurance policy.
  • Select the plan that best suits your needs.
  • Compare quotes from various insurers to get the best deal.
  • Reach out to the company which offered the selected plan.

4. Pay The Premium

  • Your policy becomes active only when you pay the premium.
  • Fill in the required application form and pay the premium amount.
  • You can do this online on the insurance company’s website.
  • You can also buy it from an insurance broker.

The whole idea of buying an insurance policy is protecting you against uncertainties.

Make sure that you read the policy documents carefully to have a thorough understanding of the coverage.

What are all these Terms and Conditions?

Let us quickly run you through the terms and conditions of motor insurance:

TermMeaning
Add-onsAdd-ons are additional services and coverage that you can ask for which can increase your premium amount.
Break in InsuranceWhen you do not renew your policy in time, it lapses. This results in a ‘break in insurance’ and then you have to buy a fresh policy.
Cover NoteThis temporary document can be treated as the certificate of insurance until the insurer issues your policy document.
DeductibleThis is a fixed part of your vehicle repair bill that you must pay from your pocket which can be as little an amount as Rs 1,000.
EndorsementIt is a written document attached to your insurance policy that adds to or subtracts from the benefits mentioned in the policy document. Such an endorsement becomes the final policy wordings.
First-party coverageThis term is used in the case of Comprehensive insurance policies, which means that your plan covers you and your vehicle for ‘Own damage’.
Grace PeriodIt is the period after your policy expiration date. If you pay the premium within this timeframe, your policy gets ‘renewed’. Otherwise, you have to buy a fresh insurance policy.
Independent AgentAn insurance agent who is not directly employed by any insurance company. Such an agent can represent more than one insurance companies.
LapseIt is the termination of the motor insurance policy due to non-payment of a premium.
MisrepresentationIt is a false, incorrect or an incomplete statement made while buying the policy.
No Claim RefundIt is the amount of the premium promised to be refunded to you in the event of not making a claim during the entire policy period.
Policy PeriodIt is the time period during which the insurance policy is in force.
RiderThis is the same as an Add-on.
SurchargeIt is an increase in the premium amount due to accidents that happen because of your fault.
Third partyAny person other than you, another vehicle or property involved in an accident is known as the Third party.
Uninsured Motorist CoverageIt covers the injuries suffered by you and the damages caused to your vehicle due to an accident involving an uninsured driver.
VINVehicle Identification Number or VIN is a unique identification number assigned to your car.
Zero DepreciationThe value of your vehicle reduces due to wear & tear and ageing. With an add-on, the insurer ignores such depreciation and pays the whole vehicle value to you during claims.

How To File A Claim?

Here’s how you can file a claim:

a) Third-Party Claim

  • If your vehicle causes damage to a third-party, ensure that you immediately report the accident to the police as well as your insurance company.
  • If you are the victim of the accident, you must get the insurance details of the third-party vehicle and inform their insurer.
  • After getting a notice from the third-party or the insured, the insurer will transfer the matter to a tribunal.
  • The tribunal decides the penalty amount. The insurance company then pays or compensates this amount.

b) Own Damage Claim

  • In case of damage to your vehicle, inform your insurance company within a week.
  • Any delay could result in claim rejection.
  • An independent surveyor examines the vehicle to assess the reason and the extent of the damage.
  • You or the insurance company will then take the vehicle to the nearest garage.
  • After a thorough examination of the incident, your insurer will send an approval.
  • You pay a minimum amount of the bill. The rest will be taken care of by your insurer.
  • Or if you pay the whole bill amount, the insurer will compensate you.

c) Theft Claim

  • Inform your insurer and the police.
  • Submit documents such as the copy of your vehicle’s registration certificate, your driving licence, etc.
  • Some insurance companies also ask you to submit the keys of your vehicle.
  • After a reasonable amount of time, if the police still cannot locate your car, it issues a non-traceable certificate.
  • Your insurance company then proceeds towards settling your claim.
  • It will compensate you for an amount equivalent to your car’s value.

Frequently Asked Questions

Will my No Claim Bonus be transferred if I change my insurer?

  • You will be entitled to your bonus earned during the previous policy period.
  • For this, you must submit a proof of the bonus earned.
  • A renewal notice from your current insurer or your expiring policy can be provided as a proof

How can I reduce my motor insurance premium amount?

There are many ways to reduce your motor insurance premium. If you own a car, follow the topics mentioned on car insurance. Bike owners can check the topics mentioned on Two Wheeler Insurance.

When can my motor insurance claim be rejected?

Your insurance company has the right to reject your claim in the following cases:

  • You fail to inform the insurer about the incident within a reasonable time period.
  • You have a second-hand vehicle, but the seller hasn’t transferred the insurance policy in your name.
  • In your insurer’s view, the vehicle is too old to be repaired.
  • You repair the vehicle before or without informing the insurer.
  • In a case of driving under the influence of alcohol or drugs or without a valid driver’s license.
  • If your insurance policy does not cover the liability.

What are the documents required to be submitted while making a motor insurance claim?

Generally, you would require the following documents:

  • A copy of your vehicle’s registration certificate
  • A duly signed claim form
  • A copy of the FIR (in case of third party liabilities or stolen vehicle)
  • Original repair invoice and payment receipt (in case of reimbursement claim)
  • Original estimate of the loss
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