Today, for any car owner, choosing the right car insurance is of utmost importance. A number of elements need to be considered before you decide to buy the insurance. Being the car owner, you need to lay down your insurance requirements based on the insurance coverage, the tenure, the kind of benefits offered, option of add-ons, etc. In India, it is mandatory to have a third-party liability at least. There are a number of reasons why one should avail car insurance:
Due to the number of insurance firms offering competitive car insurance covers, it is always a good idea to compare the various insurance policies available in the market and choose the one that favours your requirements the most. There are a number of online platforms today that allow you to compare various policies from the comfort of your home. You can also visit the designated insurance offices to learn more about the various insurance schemes and buy the most suitable insurance cover.
Out of all the factors, insurance coverage is considered the most vital. Based on the coverage offered, insurance plans are of two types:
Also known as Third-party insurance, this plan provides limited coverage. The plan covers your liabilities towards the third-party involved in the accident. The third party liabilities will include personal losses and/or property damage. Personal losses covered under this plan include accidental death and body injuries. This insurance cover can be availed at a low premium as it covers third-party liabilities alone. This cover allows you to raise a claim under the ‘no-fault liability claims’ category. Here, you are allowed to raise the claim without having to provide proof that suggests your negligence caused the accident. Sometimes insurers provide personal injury protection cover as an add-on for this insurance policy.
Unlike the third-party liability cover, this plan provides an extensive coverage for the policyholder. Also known as ‘other than collision’ cover, this plan covers the following:
The premium for this plan is high due to the extensive insurance coverage the plan provides. Insurers usually provide a number of add-ons that you can opt for under the comprehensive plan. The add-on options are as listed below:
You can choose between third-party insurance and comprehensive insurance depending on your basic insurance coverage needs.
When buying a car insurance policy, car owners have two options - a third-party car insurance policy or a comprehensive car insurance policy. Most car owners that are new to motor insurance readily opt for a third-party car insurance policy as it is a lot more affordable, but apart from it being cost effective, the coverage of a third-party insurance policy is limited. The main difference between a third-party car insurance policy and a comprehensive car insurance policy is the extent of coverage as well as coverage under a number of circumstances.
A third-party coverage which is mandatory as per the Motor Vehicles Act, 1988, is the most basic form of motor insurance and offers coverage for damage only to the vehicle of the third party following an accident or collision. By holding a third-party car insurance policy, no coverage can be claimed by the policyholder for his/her own vehicle. In addition, a third-party car insurance policy offers coverage for medical expenses of the third party if the accident causes injury or disability - be it partial or permanent. Lastly, if the accident between the policyholder of the third-party car insurance policy and the third party leads to the death of the third party, then the third-party car insurance policy offers compensation to the dependents of the third party.
As already mentioned, the biggest difference between a third-party car insurance policy and a comprehensive car insurance policy is the extent of the coverage and coverage under a number of circumstances. While a third-party car insurance policy offers coverage in the case of an accident, a comprehensive car insurance policy offers coverage to the policyholder following an accident, if the car catches fire, if the car is damaged or deemed as total loss following a man-made disaster such as a riot or a strike, a natural calamity such as an earthquake, flood, landslide, lightning, cyclone, etc. A comprehensive car insurance policy also offers coverage if the car is stolen, or is damaged while being transported. As the name suggests, a comprehensive car insurance policy extends coverage to both the policyholder or the first party and the third party involved in the accident. It offers coverage to the property of both parties and also offers coverage for medical expenses if any of the parties or both parties are injured or disabled following the collision or mishap. It even offers compensation if death occurs to any of the involved parties following an accident.
Though a comprehensive car insurance policy offers coverage under a wide range of circumstances, it does not cover some situations and a few parts of the car. To enhance their protection, policyholders can opt for add-on covers that they can purchase in addition to the premium of the base policy. Some of the common add-on covers offered by motor insurers are the engine and gearbox protect cover, zero depreciation cover, roadside assistance cover, key replacement cover, personal accident cover for passengers, etc.
While insurers as well as experts will say that a comprehensive car insurance policy should be purchased come what may, due to the cost of the policy, the policyholder should make the decision based on certain factors as listed below:
Policyholders should decide whether to purchase a third-party car insurance policy or a comprehensive car insurance policy based on the current market value of their car. If the car is old and not that expensive, the policyholder, despite the limited coverage, should rather go for just a third-party car insurance policy. This is because a third-party car insurance policy is affordable and the comprehensive car insurance policy is a lot more expensive. Even though one can afford a comprehensive car insurance policy, if the car is old and not that expensive, the depreciation factor will be high and following a claim, the coverage will be extended up to the Insured Declared Value of the car. For example, if the car is 5 years old, the depreciation of the car will be around 50% - half the value of the car when it was first bought. If it’s more than 5 years old, then the depreciation will be higher and it would be pointless to spend quite a bit on purchasing a comprehensive car insurance policy. However, if the car is relatively new, and is a high-end or an expensive car, then opting for a comprehensive car insurance policy is advisable as it will actually reduce the financial burden following an accident as it will cover the costs of repairs of the damages caused to the car under a number of circumstances.
When it comes to deciding between a car insurance policy based on its coverage, then a comprehensive car insurance policy trumps the third-party car insurance policy. A third-party car insurance policy is limited as coverage is extended only to the property or the vehicle of the third party. The policyholder in this case receives no coverage and the burden of the expenses to repair the damages to one’s car and medical expenses, if any, can dig a hole in one’s pocket. With this regard, a comprehensive car insurance policy is better as it particularly offers coverage to both parties as well as offers coverage for incidents apart from just an accident. While a third-party car insurance policy offers medical coverage just for the third party, the comprehensive car insurance policy comes with a personal accident cover that offers medical coverage for the policyholder as well as for the third party. With the personal accident passenger add-on cover, the passengers in the vehicle of the policyholder will also receive medical coverage.
When it comes to the cost difference between the two types of car insurance policies - the third-party car insurance policy and the comprehensive car insurance policy, the third-party car insurance policy is cost effective. Based on the engine capacity of the vehicle and the model, the Insurance Regulatory Development Authority of India standardizes the premiums of a third-party car insurance policy every year. That said, a comprehensive car insurance policy is a lot more expensive and the premium is determined on a number of factors and is not standardised. The premium of a comprehensive car insurance policy is set based on the IDV of the vehicle, age, model and make, driving history of the policyholder, his/her profession, number of past claims, etc.
Due to a majority of the vehicles on the roads of India being uninsured and the low penetration of motor insurance policies in the country, the Supreme Court has recently made the long-term third-party car insurance policy mandatory. Previously, the long-term insurance policy was offered by insurers only for two-wheelers. Now, four-wheelers need to have the three-year third-party insurance policy and two-wheelers need to have a five-year third-party insurance policy. The mandate by the Supreme Court will ensure that car owners will be insured for a longer span and will not need to renew their insurance policy every year - a fact why most vehicle on the roads of India are uninsured.
While this is good news in a way, now, new cars are all set to cost more and obviously, the third-party premiums will increase as of 1 September 2018. According to the Insurance Regulatory Development Authority of India, for cars, the premium of the third-party insurance policy will be Rs.5,286 for four-wheeler with an engine capacity of less than 1,000cc, for cars with an engine capacity between 1,000cc - 1,500cc, the premium will be priced at Rs 9,534, and for cars with an engine capacity more than 1,500cc the premium will be set at Rs.24,305.