Motor vehicle insurance is the insurance coverage of the risk of third party arising out the use of motor vehicle and also for covering the risk of damage caused to the vehicle. Taking insurance policy for coverage of certain risks are made compulsory and coverage for other risks are optional at the instance of the owner. Accordingly, motor vehicle insurance policies can be divided into two, namely, compulsory insurance policy (Act policy) and comprehensive policy.
Compulsory or Third party car insurance policy
As per 1988 vehicles act, insurance of motor vehicle covering the third party risk is made compulsory in India and the Motor Vehicles Act provides that, vehicle should not be used in public place without having this insurance.
A third party legal liability policy will cover the cost of any legal liabilities which may arise if your vehicle has been involved in an accident where a third person has been injured or if any third party’s property has been damaged. Third-party car insurance offers cover against any legal liability to a third party caused when you are at fault. It covers any damage or injury caused by the insured, to another person or property. A third-party liability cover is made mandatory in India under the Motor Vehicles Act, 1988.
Benefits of buying Third-party Car Insurance
This type of car insurance covers the owner in case of any legal liability owing to death or injury to any individual or damage to any property caused by the insured vehicle. The Motor Vehicle Act stipulates that a third-party claim can be made under the categories of "no fault liability claims" where the claimant is under no obligation to allege and prove negligence on the part of the vehicle that caused the accident or "fault liability claims".
Third-party Car Insurance Exclusions
Third-party only car insurance policy does not cover the cost of damages to a vehicle or the belongings in the vehicle in case of an accident. It will also not provide cover if your car or belongings are stolen or destroyed.
A comprehensive policy, as the name suggests, offers overall protection against damages to both parties involved in an accident. This scheme is extensive, and it covers damages to car, theft, legal liability to third-party, and personal accident cover. The policy coverage can be further improvised by opting for add-ons like accessories cover, engine protector, zero depreciation cover, medical expenses, etc. This coverage is highly popular since it offers end-to-end coverage and hence ensures less stress for the policyholder.
Without a comprehensive insurance cover, you risk paying from your pocket for expensive repairs of damages following an accident. Comprehensive car insurance in India is often costlier than standalone third-party insurance cover. However, it provides a lot more benefits to the insured compared to standalone third-party covers.
Comprehensive car insurance often includes coverage for: theft, fire, natural disasters like a hurricane or a tornado, vandalism, falling objects, Damage done to your car by animals, civil disturbance, like a riot that results in damage or destruction of your car.
Essential Components Of Comprehensive Car Insurance Policy
A comprehensive car insurance policy is the highest form of protection you can buy for your vehicle. It is always recommended to have comprehensive insurance even though the law does not mandate it. With a comprehensive insurance plan, you can be rest assured that the potential losses due to accidents are easily taken care of. Some of the essential components of comprehensive car insurance are as follows:
• It provides protection against damages from accidents, even if you are at fault.
• It provides end-to-end protection for a vehicle even against theft or damages caused by natural disasters.
• Add-on covers like zero depreciation and engine protection are also available along with comprehensive insurance covers.
• No additional premium is required for covering third-party liabilities in the case of accidents.
Reasons to Upgrade to Comprehensive Car Insurance
Comprehensive is also known as “other than collision” coverage because it normally includes coverage for:
• Glass damage (such as a broken windshield)
• Damage sustained from hitting an animal or bird
• Damage from falling objects or missiles
• Fire incidents
• Damage sustained due to severe weather or natural disaster -- such as windstorm, hail, hurricane, tornado, etc.
• Damage to a third party.
Without comprehensive coverage, a car insurance claim cannot be made if your vehicle receives damage that is not due to collision. For high valued cars, this type of insurance is desirable as an additional protection.
Comprehensive Car Insurance Exclusions
• Aging, wear and tear, etc. of the vehicle
• Electrical or Mechanical breakdown
• Damage to tyres and tubes. However if the vehicle is damaged at the same time, liability of the company will be limited to 50% of the replacement cost.
• Damage caused by a person driving without a valid license.
• Damage caused due to drunken driving or driving under the influence of drugs.
• Loss/ damage caused by war, mutiny or nuclear risk.