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Car Insurance Policies

A car insurance policy provides protection against damages that may arise out of road accidents involving the vehicle. This type of insurance is mandatory in India and car owners need to have at least a basic, minimum level insurance policy in place before driving. Provisions under the Motor Vehicles Act mandates that car owners compulsorily purchase insurance coverage against third parties. Driving around without one is a legal offence.

Car insurance policies cover damages that may occur due to natural calamities, man-made calamities, provide personal accident cover and third-party legal liability. Most policies are valid for one year and can be renewed annually.

One can choose the right policy and premium amount depending on personal requirements, the type of car owned and the type of protection required. It is important to make an informed choice before purchasing a policy and compare the different policies in the market. There are different types of policies available to suit different needs and each policy comes with a number of add-on features like towing facility, key replacement or cover for loss of personal belongings. These add-ons come with an extra fee.

Car Insurance
Car Insurance

Why is it required to have Car Insurance?

  • Mandatory – It is compulsory for car owners to have an insurance policy in place as per mandates under the Motor Vehicles Act in India. Coverage against third parties is mandatory.
  • Proof- It is necessary to carry the insurance policy in the vehicle as proof. Driving without a valid car insurance policy is considered illegal in the country.
  • Infrastructure & driving behaviour in India – The lack of a disciplined road culture in India, heavy traffic and poor infrastructure make roads highly unsafe and accident prone, making car insurance a must to cover risk in these circumstances.
  • High accident rate- According to statistics from the Ministry of Road Transport & Highways, the accident rate in India is alarmingly high, with cases being reported every day in the print and electronic media. Due to this disturbing trend, it is generally advised that car owners have at least a good coverage amount to protect themselves and their family.

Benefits of Taking a Car Insurance Policy:

  • Pays for damages- A car insurance policy will help cover heavy losses or damages that may be every expensive to pay for without an insurance cover. You will not have to pay for damages that arise out of someone else’s negligence, damages that may be caused to property in case of a road accident, vandalism theft, flood, fire etc.
  • Reduces liability- A good insurance cover considerably reduces liability, especially third- party liability. For example, if the car owner causes an accident to a third-party, the insurance cover will pay for the damages incurred by the party. It can be medical treatment, legal fees or property damage.
  • Pays for hospital/medical expenses- In case of serious injuries, a person who is insured, will be covered under the insurance policy. Hospitalization and medical expenses will be paid for in such cases.
  • Costs less when bought online- The cost of an insurance policy is much lesser when purchased online, making premiums much lesser. This is because of the low operating costs, elimination of the need for a broker and easier renewal terms.
  • Compensates family in case of demise- In case of an unfortunate event like death of a car owner in a road accident, the insurance policy will pay compensation to the family members of the victim.

Different Types of Car Insurance Plans in India:

Comprehensive car insurance cover- A comprehensive car insurance policy provides wider and complete coverage to any kind of damage that may occur. Liability insurance or collision insurance will cover only road accidents but this kind of policy will also protect you in cases of theft, damage caused due to natural calamities, animal collision, riots etc . However, premiums may be higher due to the vast scope of coverage offered.

Third-party liability- This kind of insurance policy covers losses that may incur due to damage caused to the property of a third-party. In India, it is legally mandatory to purchase a third-party insurance policy with a certain minimum coverage amount.

Car Insurance Policy Coverage:

  • A car insurance policy covers any liability claims by people who suffer bodily injuries in an accident.
  • Any liability that may involve property damages to third parties.
  • The policyholder will be protected against losses occurring out of theft or natural calamities
  • In case the car is involved in a collision, losses will be covered by the insurance policy.
  • Medical payments will be made to the policyholder and family members in case of an unfortunate incident.

Inclusions and Exclusions of Car Insurance:

Inclusions

  • Damage due to accident
  • Damage due to natural calamities
  • Damage due to theft, riots
  • Liability to third parties

Exclusions

  • Wear and tear caused over time to the car
  • Breakdown
  • Accident while driving a vehicle not your own
  • Belongings in the car

How to Compare the Best Car Insurance Policy Online?

Before purchasing a car insurance policy, it is important to do some research, compare and analyse the best policies available in the market and make a good choice. The key is to compare the main coverage features provided by insurers, check and review add-on riders and premium costs. It is always wise to use an insurance premium calculator to get different insurance quotes. It can get quite confusing and tricky but it is important to be cautions because a wrong decision will cost you a heavy premium and you may end up with not-so-great coverage options.

Here are a few factors that you need to look into before purchasing a car insurance policy:

  • Claim settlement ratio
  • Network of cashless garages
  • Number of add-on riders
  • Customer reviews
  • Time taken to settle claims on an average
  • The number of claims successfully settled by the insurance provider
  • Cost of premium
  • Track record and reputation of the insurance company in the market

Important Add-On Covers/Riders for Car Insurance:

  • Zero depreciation cover- Also referred to as bumper to bumper cover, this add-on covers the loss that a policyholder may incur due to the depreciation of the car value over a period of time. For example, If a policyholder does not opt for this rider and certain parts in the car needs to be replaced after an accident, the insurance policy will only pay the insured party the depreciated value and not the entire cost.
  • Return to invoice cover- One of the most important add-on features, return to invoice cover assures that the policyholder receives the original invoice value and not lesser in case of a theft or unfortunate incident. This is the amount including the registration fee and road tax.
  • Engine protection- In case of any damage to the engine, this add-on feature will cover the cost of repairs or replacement.
  • Emergency or roadside assistance- This add-on cover provides assistance to the policyholder in case of any emergencies on the road like a breakdown or an accident. A toll-free number will be made available by the insurer and assistance services like towing, tyre replacement etc may be provided.
  • No claim bonus- Insurance policy holders who have not claimed anything for a whole policy year will be eligible for a no claim bonus. This will allow the user to avail a discount on the premium during the renewal process.

Best Car Insurance Companies in India:

Company Third-Party Cover Claim Ratio Special Features Cashless Claim
Bajaj Allianz Car Insurance Upto Rs.7.5 L 72.07%
  • Emergency assistance
  • Vehicle tracking system
  • Personal care policy
4000+
Hdfc Ergo Car Insurance Upto Rs.7.5 L 85.8%
  • Emergency assistance wider cover
  • On-site minor repairs
  • Age Discount
3400+
Reliance Car Insurance Upto Rs.7.5 L 87.3%
  • NCB even after a claim.
  • 24x7 Anywhere Assist
2300+
Royal Sundaram Car Insurance Upto Rs.7.5 L 82.78%
  • Spare care cover
  • Voluntary deductible cover
3300+
Tata Aig Car Insurance Upto Rs.7.5 L 83.74%
  • Courtesy/Hire care
  • Emergency transport/Hotel expenses
2000+

Documents required for Car Insurance:

  • Registration Certificate
  • Driving License

Claim Procedure for Car Insurance:

Step1 – The first step is to call your insurance company immediately. In case of an accident, also report it to the police as soon as possible.

Step 2- Raise a claim request and provide relevant details and documentation as asked by your insurance company.

Cashless Claims Process:

A cashless claim process is when an insurer wants to avail repair services from network garages covered under the policy. Insurers usually have a cashless network of garages that provide repair services to policyholders. In this case all expenses will be taken care of under the cashless claim feature and the user can get his/her car repaired in any of the registered garages that the insurance company is tied up with.

Following are the steps to make a cashless claim:

  • Inform insurance company and provide all details
  • Handover vehicle to garage
  • Inform authorities at the concerned network garage and get cashless settlement

Reimbursement Claim Process:

If you meet with an accident and incur expenses towards repairs or medical expenses, the same will be reimbursed by the insurance company after the proof for the same is provided. It is important to keep records of all expenses made and submit those documents while applying for a reimbursement claim.

Car Insurance Cashless Network:

Initially, cashless settlement process was usually provided for health insurance policies, but off late, this option can be availed even for car insurance policies. Today, there are numerous insurance companies that offer policyholders the option to apply for cashless claims through the wide and comprehensive cashless network of car garages across India. Most insurance providers tie up with garages in different cities to provide this service. Policyholders can avail this benefit by handing over their cars to the closest garage in their locality for repairs. The owner of the car can get his/her car repaired from any of the listed network garages. The bills and payments towards the repairs will be paid to the garage by the insurance provider and the customer does not have to pay from his own pocket.

How Cashless Network Works?

Most car insurance companies in India partner with a set of well-known garages that offer repair services to their clients. Policyholders will usually be given a list of these network garages and be informed of this facility while purchasing the insurance policy. Information about the specified list of network garages in each city will also be available online, through help desks or insurance agents.

In the case of an unfortunate occurrence like an accident, the holder of the policy can make a claim through the cashless network for repairs to damages. Once a claim is made under this method, the insurance provider will approve the request for the service.

This has come to become a very hassle-free and quick method to resolve issues and get the car repaired. The following are the advantages of cashless network garage services:

  • Faster and stress free method
  • Service can be availed without cash in hand
  • Cashless network garages offer premium and good quality service

However, there are a few disadvantages to this process of claim settlement:

  • Costs will only be covered for repairs mentioned in the insurance policy and any repairs outside this purview will be charged for.
  • Cashless garages may not be located in all areas and sometimes certain smaller towns may not have a listed cashless network garage.

What is Car Insurance Premium Calculator?

A car insurance premium calculator provides a probable premium cost for a particular type of policy. This tool will give prospective policy buyers the scope to calculate their premiums based on their preferences and add-on cover options that they might choose. This can also be used to calculate premiums while renewing policies.

With this, a buyer can explore different premium options, coverages provided and insurance quotes can be obtained from different policy providers online. This is a quick and easy tool that helps buyers make the right choice in a short span of time.

The following are the benefits of a car insurance premium calculator:

  • Provides a wide comparison of the different options available in the market.
  • A customer can get information that is unbiased and not through agents, which can tend to be biased towards certain specified policies.
  • Quick and easy
  • Saves time
  • Helps make an informed choice prior to purchase

How Do Car Insurance Companies Calculate Premiums?

Premium = Own Damage Premium - (No claim bonus + discounts) + Liability premium as mandated by IRDA

Refer to the below sample table to understand how premium is calculated:

Year of manufacture 2012 Comprehensive policy with no claim bonus
Ex showroom price Rs.4,16,000
Depreciation in % 20% Rs.83,200
Insured declared value Rs.3,32,800
Own damage premium 1.970% Rs.6556
NCB discounts 20% Rs.1311
Total OD premium Rs.5425
Personal accident cover Rs.100
Legal liability paid to driver Rs.50
Compulsory third-party cover Rs.1110
Net premium Rs.6505
Service tax @ 14% 14% Rs.911
Total premium Rs.7416

Ways to Reduce Car Insurance Premium:

  • If you choose a lot of riders/add-on covers, it will increase the cost of your premium. So it is best to choose the most important options and avoid ones that may not be that necessary.
  • Usually, vehicles that are parked in a garage are likely to attract a lesser premium.
  • Car owners with a number of in-built safety features such as engine cut-off systems, anti-theft systems, anti-lock brakes, airbags and other similar features may be eligible for a lesser premium.
  • If an insurance policyholder goes for a higher deductible amount, the amount to be paid while making a claim, the premium might be considerably lesser.
  • It helps to have a good track record. Drivers with a good and clean driving record and no traffic violations are more likely to avail lesser premiums than those with a bad driving history.
  • Car insurance premiums depend on a number of factors and the number one factor is the price of the car. So choose a car accordingly.
  • Premiums are lesser and more affordable for those who take it at a younger age. So the earlier you avail a car insurance policy the better.