Understanding Car Insurance and Coverage Limits in India

Posted in: Insurance | on: June 27, 2011

Insurance Coverage

Car insurance should be all inclusive. It should cover all sorts of accidents such as man-made, natural happenings, etc. If a vehicle is met with an accident, the driver must pay for the injured or pay to clear the damage occurred to the car or to pay in case of medical needs after that accident. Insurance should cover all the requirements. Only then,the person will be protected financially. Usually, a good insurance covers medical expense, damage cost, and injury expense.

There exist different types of insurance coverage.They are personal cover, natural damage cover, man-made damage cover, theft cover, comprehensive or all embracive cover in car insurance.

What Does a Car Insurance Cover?

A car insurance covers,

Man Made cover

Insured person's clinical expense

If an accident happens with the insured person's car, the insurance will cover his medical expense.

Insured person's possession injury

In the case of damage to the car of the insured person, the insurance will cover the expense to correct the damage. The coverage amount is pre-determined. One can get the pre-determined amount though the expense is higher.

Third-party's belonging damage

If the insured person's car accidents the third-party's belonging, the insurance will cover the amount to clear the damage.

Third-party's clinical expense

If accidents with the third party cause bodily sufferings to that party, the insurance will cover for his/her clinical expense.

Natural Damage Cover

Loss due to naturally occurred disasters like fire, earthquakes comes under this category.

Personal Cover

This type gives security to the family in cases of the insured person's death. One can avail few lakhs in this insurance category.

Theft Cover

If the insured vehicle is stolen, this insurance will help.

Comprehensive Cover

A comprehensive cover will embrace all the above said insurances. For a person's best security, an embracive cover is the correct choice.

What Does Not Cover Under Car Insurance?

An insurance cover will not comprise the following.

Machine errors after became older

Insurance will not cover the cost, if there is any damage to the mechanical parts of the car and any damage due to aging.

Personal errors

Personal errors like, if the insured person is drunk while making the damage or if the person does not have license.

Losses due to the activities like war and nuclear attacks

There will be no protection of insurance in cases of loss due to war and nuclear activity.

Other errors which are not mentioned in the insurance policy

If the car met with non-said losses which are not mentioned in the terms of policy,it will not come under the insurance cover.

Important Factors of Car Insurance Premium:

One should pay some amount as premium for the persistence of insurance. The premium amount one should pay depends on some factors. Let's see in detail.

Physical factors

Insurance companies will see the person's age, gender, marital status, place of residence and job. Small age people tend to have more accidents. Likewise, populous areas are more prone to accidents.

Factors Related to Car

Insurers will consider the car factors like the age of the car, whether the car is big or small, fuel type of the car and the safety rate of it. Big sized cars are safer than the small ones that the chance for accidents are lower than the smaller ones. Older cars can cause severe accidents thereby injuring the persons inside.

Driving skill of the person

If the person is experienced in driving, car accidents will happen very rarely. As the insurance companies will intend not to pay or pay very rarely the coverage,they consider all these things.

Insured Declared Value

Insured Declared Value or shortly IDV is required to decide the amount of insurance that is to be paid during claim. It is calculated based on the current market rate of the car. IDV is the value of the sale price of the car, subtracting the depreciation. Accessories costs are calculated only if they need insurance. If IDV is less, then the premium is also less.

Zero Depreciation Insurance

Zero depreciation insurance cover is an insurance type in which the whole amount will be settled while claim. Here the depreciation is not considered.

Normal insurance will provide the amount, subtracting the depreciation at the time of claim. So, the insured person must pay extra in case of damage repair. But in zero depreciation insurance, as the full amount is paid, there is no need to pay more. But here the cost of premium will be high, and it is allowed only at the time of buying a new car.

No Claim Bonus

No claim bonus which is known as NCB is a benefit to the insured person. Sometimes, there will be no need to claim the insurance. In such cases, the insured person will be offered a bonus called no claim bonus. From first renewal, the insurance holder is eligible to have the bonus if no claim is occurred in the previous year.

24 × 7 Spot Assistance

It is a value-added service provided by the insurers. If the insured car is repair and unable to move, then one can avail this spot assistance. For cases like accidents, puncture, empty fuel, one can use this service. By phone call or message, one can avail this service at the time of need. Some insurers provide toll free numbers for this service.

Engine Protector

It is one of the value additions to the insurance and it is also an insurance cover particularly for the engine of the car. During any faults or any repair in the engine parts, one can use this. The cost to recover the engine repair is significantly high. So, it is a good thing to add this while insuring the car.

Car Insurance Renewal

For insurance to continue all time, one should renew it periodically. Usually, car premiums are renewed annually. To avail the benefits of the insurance policy, renewal premium should be paid without lapse.

The premium is the fixed amount determined at the time of policy making. Increase or decrease in the premium depends on the coverage amount. At times, this renewal premium will change depending on some factors. If the premium is not paid properly, the insured cannot enjoy the full benefits of the insurance.

What is Car Insurance Premium Calculator?

Premium calculator is a tool used to calculate insurance premiums of car to make better choice of it. Because every policyholder is different, their requirements are also different. Based on this, one shall choose and compare among various insurers. One should provide some basic details of car like registration number and policy details at the time of calculation. If there is any other information about various coverages added on with the policy, it is also required to calculate the premium. Let's see how it is calculated.

How is Car Insurance Premium Calculated?

Based on whether it is a new car or an old one, premium is calculated. One should provide car type, fuel type, registration number, existing policy details and previous claim details for the calculation of premium for old cars. For new cars, one should provide details like car model, state of registration, manufactured year and personal details of the owner. It is an online tool provided by the insurers at their respective sites. There is also a formula to calculate this manually.

Insurance Premium = Self-damage premium - (NCB + Discounts) + Premium of liability.

Discounts are given in cases of safety precautions taken for that insured vehicle.

Car Insurance Renewal Premium Calculator

Renewal premium is also calculated based on the above said details of car and personal details. Renewal premium will rarely undergo any changes, depending on the driver safety rate.

What is Third party Car Insurance?

As per the Motor Vehicle Act, 1988, it is compulsory for a person who owns car to have third-party car insurance.
This insurance policy offers financial protection to the policyholder in the case of any loss or damage to the third-party due to accident.
You will be covered by your third-party insurance policy in the case of accident and injuries or any damage to the property of a third party.
This policy is available for two wheelers, four wheelers and commercial vehicles.
The third-party car insurance does not cover damages caused due to intoxicated driving, deliberately performed accidents, illegal acts, commercial purposes and car theft.

How to Purchase Car Insurance in Online?

You can easily purchase car insurance in online using the insurance company website of your choice. The steps given below are general as it might vary according to the insurance company.

Step 1: Visit the official website of the insurance company which you want to purchase your car insurance and select 'Car Insurance' option.

Step 2: Enter details such as your vehicle registration number/ chassis number, mobile number and email id.

Step 3: Enter the age of your car and select the policy type you want.

Step 4: If needed, select the add-on covers and generate the quote.

Step 5: Enter your personal details and upload necessary documents.

Step 6: Complete the payment process using your credit card/debit card/ internet banking/ e-wallet.

What are the Documents Required to Claim Car Insurance?

In order to claim car insurance, you need to possess the documents listed below.

A copy of your car's registration certificate
A copy of FIR
A copy of insurance policy
A copy of your driving license
Original car repair bill, cash receipts, etc.

How to Claim for Car Insurance?

Third Party:

If you have caused any damage to the third party's vehicle, inform about the incident to your insurer immediately.
Note the details of the car owner and insurer in the case of damage caused by another vehicle to your vehicle.
The compensation amount to be paid will be decided by the Claims Tribunal in the case of major accident.

Own-damage:

If your car suffers from personal damage, inform it to your insurer as soon as possible.
You will be provided only one-week time within which you need to inform your insurer about the damage.
Once you have informed the insurer, a surveyor will be sent to examine your damaged vehicle.
After identifying the reason and the degree of damage, the insurer will approve/ reject your claim.
In the meantime, you can take your car to the garage for repair or you can ask your insurer for the same.
Upon approval of your claim, the compensation amount will be settled.

Theft:

If your car is stolen, you need to inform at first to the police and the insurer.
You need to submit necessary documents and should hand over the car key to your insurer.
If your car cannot be traced within a time period, the police will issue an on-traceable certificate.
With the on-traceable certificate, the insurer will proceed for your claim settlement.
The insurer will pay the current market price of your car.

Best Car Insurance Companies in India:

Bajaj Allianz Car Insurance

There is a good benefit in the insurance policy of Bajaj Allianz.
They provide 24 × 7 roadside assistance and call assistance, NCB, more garages, vehicle monitor facility, towing facility and zero depreciation.
There exist add-ons like baggage cover, key replacement cover, consumables cover and accident cover.
Also, car alerts, customization, monitor patterns of driving, vehicle tracking are available as extra benefits.
It does not cover damages due to ageing of car, mechanical problems, alcoholic driver accidents, accident done without license, damage due to war and nuclear activity and damage to consumables with no damage to car.

Royal Sundaram Car Insurance

This insurance company provides a wide range of policy, all embracive packages.
It provides security by saving car from damage, unbound liability for third party injury claims, property damage of other party up to 7.5 lakhs and personal accident cover.
It gives 24 × 7 assistance, roadside assistance, cash-free facility, authorizing repairs, fast and free inspection.
It provides personal cover up to 2 lakhs and covers electronic and electrical items, CNG system, etc.
There exists covers like, engine protector, baggage loss cover, cover for depreciation, insurance deduction cover and windshield cover.
One can avail easy and convenient payment option, discounts and online assistance.

Tata AIG Car Insurance

Every car owner is eligible to avail this insurance.
It covers third party liability, damage of the vehicle due to fire, theft, riots, terrorist activities, natural disasters and landslides and personal cover to the driver.
If damage occurs outside the geographical area, self-injury, accident without license and the driver being alcoholic during accident, insurance will not be covered.
They provide various add-ons like zero depreciation, NCB, engine security, roadside assistance, cover for the consumables, tyre cover, key replacement cover, repair of glass and loss to the belongings cover.
It also provides add-on to electronic items.
Third party liability coverage is 7.5 lakhs.

HDFC Ergo Car Insurance

HDFC ERGO Motor Insurance protects the car by providing insurance for damages, theft, other party claims and personal accident. One can choose among various car insurance plans.
They will provide maximum coverage amount.
They provide plans for commercial vehicles, motors and two wheelers.
This insurance cover is transparent and speed processing in nature.
Conveniently, one can add value packs with it.
Toll free service is available.
This usually covers self-damage like accidents, theft, natural disasters, NCB, and fire.
Then there exists personal cover for medical expense and third-party liability.
It offers online facility to book policy and to calculate premium. It also offers HDFC mobile app.
It does not include ageing of car, machine errors, damage outside the geographical area, and for accidents done without license.

New India Assurance Car Insurance

It offers two types of coverage - liability policy and package policy.
Liability cover is up to 7.5 lakhs for commercial vehicles and 1 lakh for motors.
It includes towing charges. No claim bonus is given in the range of 20% to 50% depending on the type of vehicle and previous years of no claim.
It also covers damage due to terrorist acts, natural calamities, fire, theft, land and rock slides.
There are some other factors to calculate the insurance which are IDV, fuel capacity, residential area, age of car and value additions.
It excludes mechanical breakdown, damage due to war, loss while making accident without license.

ICICI Lombard Car Insurance

For easy renewals and no delay processing of policy, one can avail this insurance.
It also provides an option to switch between policies without losing any benefits of the previous plan.
It includes personal cover of about 2 lakhs, third party liability cover and loss due to human and natural disaster cover.
As said above, it does not include any mechanical errors, ageing damage, depreciation, loss due to war and nuclear activity.
Depending on the installed electronic and electrical systems and the fuel type, total value is determined.
It provides cash-free repair, quality assurance for almost 6 months, towing option and loss assessing survey.
During claims, one should provide correct documents like policy papers, RC copy, FIR if required, driving license, claim form for third party claims, transfer papers of RTO and original estimate.
It provides toll free service, 24 × 7 assistance, towing option, cash-free claim settlement and online insurance making.
Premium is calculated based on the type and age of car, IDV and discount.