Car Insurance: Types

Car Insurance Insurance

Car Insurance Policy is a contract between the motor insurance company ; a car owner that provides on-road protection against any loss or damages arising due to an accident. A car insurance policy provides financial coverage to the beneficiary of the car policy against any loss or damages arising out of road accidents, third party liabilities, theft, man made calamities, fire , natural disaster & other unforeseen circumstances.

Types of Car Insurance Policy in India

There are three types of car insurance policies that are available in India.

Comprehensive Car Insurance

A comprehensive insurance policy provides coverage for third party liability as well as damages caused to your own car. In comparison with third party liability insurance, a comprehensive four wheeler insurance policy offers extensive coverage, more benefits and covers the damages caused to the insured car in case of an accident, collision, theft, etc.

A comprehensive policy can be further extended by opting for add-ons like accessories cover, engine protector, zero depreciation cover, medical expenses, etc. This type of coverage is the most popular as it offers end-to-end coverage and thus less stress for the policyholder.

Third Party Car Insurance

Third party insurance safeguards you from any legal liability due to your own car’s involvement in an accident. Your insurance provider will compensate you for death, disability, injury, or property damage to any third-party. Therefore, you are protected from the financial liability towards the third-party.

Third-party liability car insurance prices are a mandate in India under the Motor Vehicles Act, 1988.

Points to Consider While Selecting Car Insurance Policy

What is covered

Checkout the inclusions and exclusions of both third party insurance and comprehensive vehicle insurance policy. Only buy third party insurance if you can bear your own damage expenses.

Incurred Claim Ratio

Higher ICR, indicate satisfied customers and more the chances of your claim being settled.

Add-on Covers

It is always recommended to buy a comprehensive car policy with additional benefits like roadside assistance, zero depreciation, flat tyre assistance, etc.

What’s Covered in Car Insurance Policy?

The four wheeler insurance policy covers the following:

  • Loss or damage to the insured vehicle.
  • Loss or damage to your vehicle caused by accident, theft, fire, explosion, self-ignition, lightning, riots, strikes or act of terrorism, natural calamities.
  • Financial liability caused by the injury/death of a third party or damage to the property.
  • Personal accidental insurance cover.

Add-On Covers in Car Insurance Policy

Add-on covers are the additional covers or protection that you include in your 4 wheeler insurance plan to keep your car safe from any damages or total loss. The add-on covers need to be purchased on payment of an extra premium amount. Following are some of the add-on covers – No Claim Bonus Protection cover, Zero Depreciation cover, Engine Protection cover, Key protection cover, etc.

No Claim Bonus Protection Cover

For every claim-free year, the insured is rewarded with a discount on the renewal premium. This discount is called – No Claim Bonus (NCB) It is cumulative and increases every year. It usually ranges from 10% to 50% and can save a substantial amount of money on the premium payable for your auto insurance.

Let’s take an example if a policyholder doesn’t make a claim during the tenure of his auto insurance policy, he becomes eligible for No Claim Bonus, on the basis of which, a certain rebate is offered on the payable premium. With No-claim-bonus protection cover you can retain your NCB even after registering a claim during the policy term. The terms and conditions vary from one insurer to another.

Engine Protection Cover

An engine is one of the most important parts of a car. And engine protection cover compensates the cost of fixing the indirect damages that are caused to the engine due to lubricating oil leakage and water ingression. It covers the Gear Box Parts, Engine Parts, and Differential​Parts.

Zero Depreciation Cover

This additional feature offers compensation even for the depreciating value of your car. With this feature, you will not have to pay for the depreciation value of your vehicle’s parts. It is mostly valid on private cars and is subjected to a specific number of claims during the policy period. Compulsory and voluntary deductibles (as per the case) will be applicable despite zero depreciation cover. You can check with the insurance company for any terms and conditions before making the purchase.

Consumables Cover

Sometimes, a bunch of unforeseen expenses can drain all your savings. Consumables Cover​​. Includes all the expenses incurred on consumable items for any perils that are covered under the policy. Consumable items include screws, nuts and bolts, washers, AC gas, grease, lubricants, bearings, clips, engine oil, distilled water, oil filter, brake oil, and fuel filter are mostly covered.

There are certain terms and conditions that are applicable to this add-on cover that varies from one insurance provider to another. It is mostly valid on private cars and is subjected to a particular number of claims during the policy period. You can check with the insurance company before making the purchase.

Key Protection Cover​

Once in a lifetime everyone would have lost or misplaced their car keys. In such cases, the insurer can offer you the financial help by covering the costs incurred on replacement and repair of your car keys. Here’s what Key Protect Cover​will offer.

  • You will be permitted for a fixed number of claims during your policy period.
  • Any case related to theft or burglary should be supported by a Police FIR
  • The replaced keys will be of the same type as the ones that were lost or stolen.
  • Any broken or damaged keys will be replaced by the insurer.
  • In case of misplacement or theft of car keys, the insurer will replace the entire set of keys including the lockset, after submission of all the other keys to the insurer.

Daily Allowance Benefit​​​​​

In case of accidental damage, you might have to leave your car in the workshop and travel on your own. This add-on cover comes to your rescue when your vehicle is parked in the garage after an accident for repair. If you have this add-on cover the insurer will provide you daily travel allowance if the vehicle requires to be in the garage for more than 3 days (varies from insurer to another).

Personal Accident Rider Benefit

Personal Accident Rider is an optional add-on benefit that can be added to the comprehensive auto insurance by paying an extra premium. This rider provides the policyholder with the coverage of medical expenses due to damage, personal injury or disability caused due to an accident.

Cover for Car Accessories

By simply opting for a separate add-on policy, you can avail the coverage for your car accessories, which a normal 4 wheeler insurance policy may not cover. Such additions may increase the premium, but it is always beneficial and cost-effective rather than fitting a new car accessory.

Save Through Paying High Deductibles

Deductibles are a certain percentage of the claim amount that the insured has to pay from this own pockets. A policyholder can save by paying higher deductibles. At the time of filing a claim, if you choose to pay higher deductibles against your claim, your auto insurance provider manages to give you some discount on premium later on.

Personal Accident Cover

A comprehensive car policy not only provides third-party cover but as well as offers cover against personal accident. In personal accident cover, you get a pre-defined amount against death because of the accident and permanent total disability. In addition to this, one can purchase this cover for co-passengers as well even on an unnamed basis, which will be maximum as per the seating capacity of the vehicle. However, the amount of coverage is pre-determined even in this case.

Loss or Damage of the Insured Vehicle:

A comprehensive car policy provides coverage against damage or loss to your car. Reasons for damage like fire, accident, or self-ignition are covered in this plan. In addition to this, if the car faces losses because of theft, burglary, terrorism, riots, then also an insurance policy covers it. Moreover, it also covers loss or damage occurred due to transit via train, air, road, inland waterways, or lift.

Vast Network of Garages:

Most of the motor insurance providers have a wide range of network garages that are spread across the country. This feature ensures that you can get the service of your car anywhere in India.

Liabilities of Third-Party:

If your car meets with an accident and causes loss or damage to the property of a third-party, then do not worry as it is covered under four wheeler insurance policy. Moreover, if you come across any legal liabilities because of an accident by your car like death or injury to any person or property, then do not worry, your car policy provides you coverage for the same.

What’s Not Covered in Car Insurance Policy?

Following features are usually not covered in a 4 wheeler insurance policy:

  • Loss or damage if a policy is not in force.
  • Gradual wear and tear of car and its parts.
  • Loss or damage to the vehicle when driven by a person without a valid driving license.
  • Loss or damage to the vehicle as a result of intoxication due to drugs, alcohol etc.
  • Loss or damage to the engine as a result of oil leakage.
  • Loss or damage to the vehicle as a result of abuse of car manufacturer’s guidelines.

How to Calculate Car Insurance Premium?

Car insurance price is decided based on several factors. It is also easy to find out the four wheeler insurance premium using an online car insurance calculator. However, the insurance provider takes into consideration the following parameters before fixing the car insurance price:

  • IDV (Insured Declared Value) of the vehicle
  • Age and Type of Car
  • Engine’s Cubic Capacity
  • Geographical zone

Car’s IDV Calculation Formula:

  • IDV = Car’s Showroom price + Accessories cost – depreciation value
  • Thus, the formula to calculate OD premium amount is:
  • Own Damage premium calculation formula:
  • Insured Declared Value X [Car Premium as per the insurer)] + [ Optional Benefits] – [NCB/Discount etc.]

How to Renew Car Insurance?

It’s mandatory to renew your car insurance to avail of the policy benefits without a break. Therefore, you should ensure your car policy before it expires. Follow the steps given below for online car policy renewal.

How to File a Car Insurance Claim?

All the car owners, at some point in time, need to file an insurance claim for a certain loss or damage. To avoid any confusion while filing a 4 wheeler insurance claim, here are a few points that you need to consider:

Documents Required for Filing a Car Insurance Claim

Keep the following documents ready while registering a claim with the Insurer

  • Copy of Police FIR
  • Claim form duly signed by the policyholder
  • Fitness Certificate for commercial vehicles
  • Driving License
  • Car Registration Certificate (RC)
  • Insurance documents with the endorsement
  • The insurer will settle your claim within a week from the date of submission of all the required documents.

FAQs About Car Insurance Policy

  • When should you renew your car insurance policy?
  • The policyholder should renew his car policy before the expiry of his existing policy. This will ensure that there is no break in policy and you can continue to avail benefits such as no claim bonus.
  • What is Zero Dep in Car Insurance Policy?
  • Zero Dep refers to Zero depreciation car insurance. It is an add-on cover that allows the policyholder to get compensation up to the insured declared value (IDV) or current market value of the car without taking depreciation into account. You need to pay an extra premium amount to avail benefits of zero DEP in your 4 wheeler insurance policy.
  • How many times can we claim car insurance in a year?
  • The limit to filing a claim for 4 wheeler insurance per year varies from one insurance provider to another. Most insurance companies allow multiple claims in a year until the IDV is not exhausted. You should check your policy document to know the exact number of times you can claim your four-wheeler insurance policy in a year.
  • What is bumper to bumper Car Insurance policy?
  • Bumper to bumper car insurance refers to the insurance policy that provides complete protection to the insured car without considering the depreciation of its parts. In other words, this type of four-wheeler insurance allows the policyholder to obtain compensation up to the market value of the car in case of damage or loss to the car. However, it attracts about 20% higher premiums than your regular 4-wheeler insurance policies.
  • Do I need to file an FIR to raise a car insurance claim?
  • Under certain types of claims, your motor insurer may need you to file a First Information Report or FIR with the Police as part of the claim process. For instance, claims arising out of car theft or third party liabilities will require a Police FIR. On the other hand, claims arising out of car damages due to natural calamities may not need a Police FIR.
  • How long does it take to settle a car insurance claim?
  • There is no standard time period followed by all insurance companies to settle a vehicle insurance claim. Claim settlement period varies from one insurer to another. For example, one insurer may settle your claim within 7 days whereas another may settle it within 14 days. Moreover, claims with complexity usually take more time to be settled than simple claims, such as a car dent.
  • How can I transfer my four wheeler insurance policy to the buyer of my car?
  • To transfer a vehicle insurance policy to your name, you need to follow the steps given below:
    • Fill up Form 28, Form 29 and Form 30 available with the RTO bearing the previous policy owner’s signature
    • Submit the filled-in forms to the RTO along with proof of vehicle sale
    • Get the Clearance Certificate from the RTO
    • Submit the required documents to the motor insurance company, including application form, old policy document, original RC with your name on it, NOC from the previous owner, etc.
    • Pay the transfer fees
    • The policy will be transferred to your name and new policy document will be issued
  • Does a car insurance policy cover passengers?
  • Mostly, motor insurance companies do not cover passengers in the vehicle under four wheeler insurance. However, passenger cover is offered as an add-on by motor insurers in India to provide personal accident cover for the unnamed passengers travelling in the car.
  • Does a car insurance policy cover tyre damages?
  • Most motor insurance companies only cover accidental damages to the vehicle’s tyres under four wheeler insurance. Any non-accidental loss or damages to the tyres are not covered. However, you can buy tyre protect add-on cover to keep any non-accidental loss or damages to your car’s tyres covered under your four wheeler insurance policy.
  • Will my car policy cover electrical fires?
  • Yes, Any loss or damages caused to your car due to electrical fires (or fire resulting out of a short-circuit) are covered under four wheeler insurance.
  • Is it mandatory to buy car insurance in India?
  • Yes, Motor insurance with a minimum of third party cover is mandatory in India for all car owners. Under the Motor Vehicles Act 1988, cars without third party insurance are not allowed to legally ply on public roads. People who violate this law can be punished.
  • What is the insurance claim procedure in case of car theft?
  • In case your car has been stolen, you must file an insurance claim with your motor insurer. Take a look at the process of filing car theft claims under four wheeler insurance:
    • File an FIR with the Police as soon as your car gets stolen
    • Intimate your insurer about the theft of your car
    • Inform your RTO about the theft
    • Submit all the required documents, including the claim form, FIR copy, RC, etc., to the insurer
    • Obtain the No Trace report from the Police
    • The insurer will process your claim and pay the IDV of your car in about 90 days
  • What will happen to my No Claim Bonus if I renew expired car policy?
  • If you renew your expired four wheeler insurance policy within 90 days of the expiry date, then your NO Claim Bonus (NCB) will remain intact. However, if you renew the expired policy after 90 days, you will lose your NCB.
  • What is the penalty for driving without valid car insurance today?
  • If you are caught driving your car without a valid insurance policy for the first time, you will be liable to pay a penalty of Rs 2000 or/and will be jailed for up to three months. In case you are caught without valid insurance for the second time, you will have to pay Rs 4000 as fine or/and serve up to three months in jail.