Insurance as a concept is straightforward. You pay a specific sum of money as insurance premium to insure your asset against unfortunate events, which can cause monetary losses. In exchange for the premium, the insurance company promises to offer financial assistance in case of a list of events mentioned in the terms and conditions of the policy. The complications arise when one dives deeper into scenarios, jargon, and claim-related queries.

How Does Car Insurance Work In India? - Acko

This article will give an overview that will clear most of the generic questions related to how does car insurance works in India?. For specifics, you will have to scan through the relevant policy’s Policy Wordings or get in touch with the insurance company’s customer support team.

Car Insurance in India:

The car insurance industry in India has undergone several positive changes in the recent past. Digitization is the most prominent of them. Insurance has been simplified with the arrival of new-age digital insurance companies.

Now, potential policyholders do not have to depend upon agents to help them understand the nuances of an insurance policy. All information is available in an easy-to-understand manner on the insurer’s website. This way, the prospective policyholder can make an informed choice. Policies can be compared and quotes can be generated within minutes. You can buy or renew car insurance policies under five minutes thanks to online vehicle insurance.

Why Should You Buy Car Insurance in India?

You should buy car insurance in India to ensure you do not face a financial loss in case of an unfortunate circumstance such as a car accident, natural calamity, etc. Also, buying car insurance in India is compulsory. Failing to do so will amount to penalties. Going by the number of vehicles on the road and the rate of accidents, it is imperative to make the right choice when it comes to purchasing car insurance coverage.

Types of Car Insurance in India:

Listed below are the two options when it comes to selecting a car insurance policy.

Third-party Liability Car Insurance Policy:

The Motor Vehicles Act states that this type of car insurance is compulsory if you want to drive your four-wheeler legally on Indian public roads. When police officials ask for insurance, they check whether your Third-party Liability Car Insurance policy is active or not. If not, then you have to face penalties. The rule is so strict that you can end up in jail as well.

Comprehensive Car Insurance Policy:

This policy is more desirable if you want all-round coverage. A Comprehensive policy, as the name suggests, is a wide-ranging cover. It not only includes the features offered by a Liability-only policy but also offers Own Damage cover. This means you are insured if your car causes damages to others, and also if it is damaged by others or natural calamities.

What Is Covered In A Car Insurance Policy?

Here’s the answer to what does car insurance cover in India? For an exact list of coverage, refer to the respective Policy Wordings.

Third-party Car Insurance Coverage:

  • Third-party injuries
  • Third-party death
  • Third-party property damage
  • Personal accident cover for owner/driver

Comprehensive Car Insurance Coverage:

  • Third-party injuries
  • Third-party death
  • Third-party property damage
  • Personal accident cover for owner/driver
  • Theft
  • Fire
  • Calamities
  • Damage to the car due to accident

What Is Not Covered In A Car Insurance Policy?

Here’s a list of items not covered in a car insurance policy. For an exact list of exclusions, refer to the respective Policy Wordings.

  • Driving under the influence of alcohol
  • Driving under the influence of intoxicants
  • Driving without a valid license
  • Driving without an active car insurance plan
  • Damages during war-like situations
  • Servicing expenses

How Does Rental Car Insurance Work In India?

Nowadays, one can hire a car on rent and drive it. Such cars are often referred to as self-drive cars. In India, the vehicle insurance purchased is for a particular vehicle, therefore it won’t apply if you are driving a rental car. You will have to abide by the terms and conditions of the rental car company for the insurance cover. Usually, such companies have a Third-party Liability Cover in place for the self-drive cars.

Factors That Affect Car Insurance Premium:

Insurers consider a lot of factors before finalising the insurance premium for a Comprehensive policy. However, when it comes to a Third-party Liability policy, the premium is stated by the Insurance Regulatory and Development Authority of India (IRDAI), which is based on the vehicle engine’s cubic capacity. Here’s a list of factors that affect the insurance premium of a Comprehensive policy.

Insured Declared Value:

This is popularly known as IDV. IDV is the market value of the car. It is not the resale value but the amount you shall receive in case the vehicle faces a total loss. Some insurers allow you to select your IDV from a range. A higher IDV will amount to a higher premium and a lower IDV will amount to a lower premium. However, the relation between IDV and the Sum Insured is the same as IDV and the premium.

Car Insurance Cover:

If you choose multiple Add-ons, it is bound to increase your car’s insurance premium. Therefore, it is suggested to select only those Add-ons that you feel are suitable.

Age of the Car:

The age of the car is also related to its value. An older car will be less costly as its value will be on the lower side due to factors like depreciation.

Safety and Security:

Installing safety features such as anti-theft devices in your car will lower the premium charged. Make it a point to install only those anti-theft devices that are certified by the Automotive Research Association of India (ARAI).

History of Claims:

No claims result in No Claim Bonus. And No Claim Bonus equates to a discount on the premium while renewing the car insurance policy.

How Is Car Insurance Priced or Calculated?

The price calculation for the two types of car insurance in India is different. Here’s how they are priced.

Third-party Liability Insurance Policy:

The rates of a Third-party Car Insurance policy are not decided by insurance companies. The IRDAI gives directives regarding such rates. They might or might not change from a year-to-year basis. Third-party rates are the same across all car insurance companies.

Comprehensive Insurance Policy:

Here, the insurance companies are free to charge their premium. However, they have to abide by the IRDAI rules when it comes to the inclusive Third-party insurance component. The factors on which the insurance companies charge premium are mentioned above. Apart from the above-mentioned factors, they also consider their competition and charge accordingly.

Add-ons for Car Insurance:

You can consider purchasing the following Add-ons to ensure you have enhanced car insurance coverage.

  • Zero Depreciation – This negates the charging of depreciation while settling claims.
  • Roadside Assistance – With this Add-on, you can call up the insurance company for assistance in case you get stranded.
  • Engine Protection – Get enhanced insurance protection dedicated to the car’s engine.
  • Passenger Cover – This is a personal accident cover for the car’s passengers.  
  • Invoice Cover – Such a cover will reimburse you with the car’s invoice value if it faces situations of a total loss.

How To Make Car Insurance Claims?

Here’s how the claim process works in car insurance.

Third-party Claims:

Here, the third-party will have to file a claim against the policyholder by registering a First Information Report. A case will be lodged and heard in the Motor Claims Tribunal and settled accordingly.

Own Damage Claims:

For damages to the insured car, the policyholder will have to contact the insurance company and apply for a claim. Usually, this can be done via call, mobile application or website. Once the claim request is accepted, the insurance company will assign a surveyor and the claim will be settled as per the surveyor’s report.

Should You File Claims For Small Damages?

No, you should avoid filing claims for small damages because of the following points.

Deductibles:

While settling claims, you have to contribute towards the claim amount thanks to the Voluntary Deductible. Therefore, by raising a claim for a small amount, you would end up paying the Voluntary Deductible as well as disturbing your claim record. Instead, if the repair amount is miniscule, consider settling it on your own.

No Claim Bonus:

You are rewarded with a No Claim Bonus if you do not raise a claim. This can be helpful in the form of a discount while renewing your policy.

Also, read: What is IDV in Car Insurance?

How To Buy The Best Car Insurance Policy In India?

You can analyse your requirements and purchase the best car insurance in India in the following ways.

Online:

A basic online search will give you a lot of options. You can check the premiums, coverage, and features of the policy and buy it by making an online payment.

Offline:

You can buy a car insurance policy by visiting your preferred car insurance company’s branch office.

Through an Agent:

You also have the option of purchasing a car insurance policy via a certified agent. Your car insurance dealer can also be an agent, and you can purchase car insurance from the dealer as well.

Frequently Asked Questions:

Which is the ideal way to purchase car insurance?

Buying car insurance online can be termed as a better way, as it is a convenient process and enables you to make an informed choice.

Is it possible to renew a policy online if it was initially purchased from a car dealer?

Yes, you can renew a car insurance policy online irrespective of the point of the initial purchase.

Is it safe to buy car insurance online?

It is safe to buy car insurance online provided you purchase it from a certified insurer.

When is an online car insurance purchase process completed?

An online car insurance purchase process is completed after you receive the policy document.

Where can I read all the terms and conditions of a car insurance policy?

You can read all the terms and conditions of a policy in its respective Policy Wordings. In most cases, the Policy Wordings are available in the Downloads section of the insurance company’s website. Make sure to go through the terms and conditions mentioned in the Policy Wordings to make an informed choice.


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