Types of Car Insurance
There are majorly three types of car insurance available in India. Third-Party, Comprehensive and Pay- as- you drive. While it is mandatory to have third-party car insurance to get financial protection against third-party legal liabilities. On the other hand, comprehensive car insurance gives complete protection by covering third-party liabilities and damages to your own car as well. And, Pay as you drive is a newly introduced car insurance policy in India. Let’s just get into the details and know more about these policy types below.
Car Insurance Policies You Must Know
Third-Party Car Insurance
Third-party car insurance is the basic car insurance cover that provides financial protection against damages and losses caused to a third-party person, vehicle, or property only. As per Motor Vehicles Act, 1988, it is compulsory for a car owner to avail of this insurance for a minimum of 3 years, in case you are buying the policy for the first time. This policy offers cover for death, injury, and disability. However, third-party property damages of up to INR 7.50 lakh are also covered under the same.
Comprehensive Car Insurance
Comprehensive car insurance gives extensive and all-around protection to third-party legal liabilities as well as own damages in case of an unfortunate event. Thus, with the help of this policy, not only a policyholder can safeguard himself against any mishappening but a third party(individual) also gets financial protection.
This all-inclusion policy also gives protection against unforeseen losses such as road accidents, natural & man-made calamities, theft, fire, etc.
A comprehensive car insurance policy comes with add-on covers which means a policyholder can opt for these covers and customize his policy. Yes, based on your requirements, you can personalise your comprehensive car insurance policy and reap maximum benefits.
Below are the add-on covers that you can opt for under comprehensive car insurance:
Zero Depreciation Cover: The moment your brand new car comes out from a showroom, from then onwards its value starts depreciating day by day. Thus this cover helps in keeping the value of your car intact. If you opt for this cover, your insurance company will not deduct the depreciation cost during the claim process. Hence, you will get the complete claim settlement amount.
Engine & Gearbox protection Cover: This is helpful in case of complete engine failure, water damage, leakage of lubricating oil, etc. It covers the repair cost of the engine and gearbox of your car.
Roadside Assistance: If you get stranded in the middle of a road due to the breakdown of your car, opting for this cover would help. You can get 24x7 roadside assistance whenever your car is in need.
Consumable Cover: This add-on cover bears the cost of consumables like nuts, bolts, screws, coolants, lubricants, etc.
Return to Invoice Cover: This add-on cover would be helpful in case of theft or total loss, wherein the policyholder can claim for the on-road price of his car (printed on the invoice). Here the actual compensation could be higher than the IDV of your car.
Passenger Cover: This cover gives protection to co-passengers of the car as well. This add-on covers financial liabilities of up to INR 15 lakh arising out of death, temporary/permanent disability, or bodily injuries to co-passengers in the car.
Tyre Protect Cover: With the help of this cover, the tyres of your car are completely protected. If opted, you will not have to bear the cost- of-replacement, removing, refitting, and rebalancing the tyre in case of accident/mishappening.
No Claim Bonus Protection: This add-on cover keeps your NCB discounts intact even if you have raised some claims during your policy tenure. Depending upon the terms and conditions of your insurance company, you can reap the benefits of this cover at the time of policy renewal.
A Complete Cheat Sheet on Third Party and Comprehensive Insurance -What’s Covered and What’s Not
Below is a table that will give you a better understanding of what’s covered and what’s not under both policies.
| Coverage | Third Party | Comprehensive |
|---|---|---|
| Damages/Losses to own car due to an accident | No | Yes |
| Damages/Losses to own car in case of fire/theft | No | Yes |
| Damages/Losses to own car in case of a natural calamity | No | Yes |
| Damages to Third-Party Vehicle | Yes | Yes |
| Damages to Third-Party Property | Yes | Yes |
| Personal Accident Cover | Yes | Yes |
| Injuries/Death of a Third-Party Person | Yes | Yes |
| Customizing IDV/Policy Customization | No | Yes |
| Add-on Covers | No | Yes |
| No Claim Bonus | No | Yes |
Pay As You Drive Car Insurance: In January 2020, the IRDAI launched the Pay as you drive car insurance policy under its regulatory sandbox initiative to provide customized solutions to vehicle owners. Pay as you drive or usage-based insurance is also a popular car insurance type, where the premium is linked with the usage of the car. This policy is also known as Telematics insurance, where software helps in tracking the kilometers covered by the vehicle. Thus, ultimately helps in knowing the driving behaviour and premium rates.
The policyholder needs to choose among different kilometer slabs (2,500 km, 5,000 km, 7,500 km, and so on) and then a telematics device is fitted into the car. This device is linked to the mobile app to record all information about car usage. The telematics device records all important aspects such as:
- Kilometers Driven
- Vehicle’s Overall
- Hard-braking
- Fuel Usage
- Night-time Driving
- Acceleration
- The Average Speed of the Vehicle
Based on the data collected by the device, the insurance company easily knows the driver’s risk profile hence decides the premium accordingly.
Summary
Before choosing or buying any type of car insurance, it is ideal that you should compare the pros and cons of all the policies. Based on your requirement and pocket, you can opt for either third-party, comprehensive, or pay as you drive car insurance and get financial protection against any mishap.