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.
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.
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.