Your new sedan, the apple of your eye, is whizzing around your neighbourhood facing risks of many kinds. Needless to say, you are worried about when there will be a scratch on her smooth, metallic body or the time when erratic rain will flood up the garage and damage her engine. If such thoughts seem to trouble you, then it is time that you invested in a good insurance policy customised to suit your needs, freeing you of all the anxieties about the safety of your car.
Different Types of Car Insurance Policies
Insurance companies offer a range of car insurance policies that cover different kinds of risk. The main types of motor insurance policies offered in India are as follows –
First-party Insurance Cover
This is more commonly known as ‘own damages cover’. First-party insurance offers protection to the life and property of the insured against an unforeseen event. It is not a mandatory insurance cover, but having it will allow the insured to seek compensation for all the damage caused to the car as well as recover medical expenses and other allied expenses in case of personal injury. However, if the damages occurred when the car was driven by an intoxicated individual or an individual who lacked a valid driver’s license, then the insurer will not pay the claim amount to the insured.
Third-party Insurance Cover
Popularly known as the ‘act only cover’, a third party car insurance is mandatory as per the Motor Vehicles Act, 1988. It is liability insurance that provides the owner of the automobile protection against the claims of another party. Third-party insurance guarantees only a basic level of protection to the insured. Policy covers are usually of two kinds namely, liability coverage policy and property damage policy. The eventualities covered under this policy are – partial disability, permanent total disability, death, and property damage of the third party person. The amounts that will be covered are – medical expenses, loss of earnings, compensation for physical disfigurement, etc. The insurance policy will also offer basic legal assistance and costs associated with the insured.
Comprehensive Insurance
This insurance policy offers coverage for eventualities such as theft, fire, damage caused by or to third parties, riot damage, arson or vandalism, natural disasters, etc., and combines the best features of first party and third party insurance covers.
Another way to classify insurance policy is – commercial and private car insurance policy.
- Private car insurance – is an insurance policy that covers the private vehicle of an insured from financial losses that are incurred as a result of theft, fire, accident, and natural calamities. The purpose of this policy is to ensure that the insured is compensated for personal injuries and losses due to damage caused to the car.
- Commercial car insurance – is an insurance policy that covers passengers and hired drivers of the commercial car and offers to protect the insured i.e. owner from liabilities or costs that arise out of accidents, theft, etc.
Comparison Between Comprehensive Coverage and Third-party Coverage
The differences between comprehensive and third party car insurance policies –
| Third Party Insurance Policy | Comprehensive Insurance Policy |
|---|---|
| An ‘act only cover’ is a type of liability insurance purchased by the owner of the automobile, for protection against the claims of another party in case of damages and losses suffered during an accident. | It is a wide-ranging, inclusive cover that offers the insured protection for the damages caused to own car as well as covers for third-party liabilities. |
| The premium is one of the lowest amongst the different kinds of car insurance policies available in the market. It is determined by the Insurance Regulatory and Development Authority of India (IRDAI). | It is higher than third-party insurance due to higher coverage and benefits. |
| There is no scope for customisation. | There is scope for customisations in the form of add-ons such as Engine Protect, zero assistance, NCB Protect, etc. |
The benefits of a third party insurance policy are– Helps the insured drive legally on the roads and by extension free them of any adverse legal repercussions. For example, it protects the pocket from hefty penalties or traffic fines. It has a very quick and easy process for purchase. The coverage offered is affordable. It prevents the insured from facing any financial stress arising from an unforeseen incident. | The benefits of a comprehensive policy are- Covers both own damages and third-party liabilities. Also, the insured can claim a No Claim Bonus at the end of the term in case there have been no claims made against the policy. The insurance policy will also provide basic legal assistance (including basic investigations and verifications) to the insured. |
The disadvantages of third party insurance policy are – There is no choice involved for the purchases of this policy. It is mandatory. Does not cover for own damages. | The disadvantages of a comprehensive insurance policy are – The policy does not cover wear and tear costs at the time of settlement of claims. Neither does it cover for damages caused due to wear and tear of the car over time. Certain vehicle parts and associated damages such as fibre and rubber are not fully covered by this insurance. |
| The eventualities covered under the policy are partial disability, permanent total disability, death, and property/car damage of only a third party. | Offers coverage for eventualities such as riot damage, theft, arson or vandalism, damage caused by third parties, natural disasters, etc. |
| It is mandatory as per Indian laws i.e. the Motor Vehicles Act, 1988 and its rules. | It can be opted by anyone, voluntarily. But for those individuals who have little use for their car or are using a very old car, this purchase might not yield too much value. |
What Add-ons Can You Get?
Additional options are basically extended coverage offered by the insurer in the insurance policy. These are available only in the case of own damage policies and comprehensive car insurance policies.
The different add-on covers that can be availed by the insured are –
- Engine protection, or the engine secure add-on provides compensation for repairs or replacement to the engine and its components in case of leakage of oil, water ingression, etc.
- Zero depreciation cover entitles the insured to claim the entire cost of replacing the damaged parts of the car. It ensures that the wear and tear costs are not deducted while making the final settlement.
- No Claim Bonus is an additional cover that ensures that the earned NCB will be safeguarded. The insurer guarantees that the slab of the insured that existed prior to the claim will still continue even after settling of claim and the NCB will not be disturbed for the first two claims during the policy term.
- The road assistance cover is an add-on that can be availed 24/7, 365 days of the year for emergency services, towing, refuelling, resolving technical issues, change of flat tyres etc. of the vehicle. The insurer offers even emergency accommodation and allied utility benefits if the insured is stranded in a remote location.
- The accidental coverage for passengers safeguards the interests of the passengers in the vehicle by providing for the cost of medical treatment, disability liability, and financial assistance in case of death during an accident. The scale of compensation depends on the nature of the injury.
- Return to invoice add-on ensures that the difference that exists between the IDV and the invoice value is reduced. The entire cost of the vehicle including the on-road taxes can be recovered by the insured in circumstances that the car was lost, stolen, or damaged.
- Daily garage allowance add-on is encashed by the insured when the car has gone for repairs and the insured is not in a position to use the vehicle or in circumstances when the insured has hired an alternate vehicle for use. This benefit may only be availed if the vehicle is being repaired in the authorised garage of the insurer.
- Consumables cover is an add-on that is used to cover consumable expenses for small parts such as nuts and bolts, screws, etc. for those cars which have expensive components.
- Key replacement compensation is an add-on cover that pays for the replacement of the car key or lockset when it is stolen, damaged or lost. It is not a standalone cover and concerns the security aspect of the car. This is especially used for replacing Frequency Operated Buttons (the technologically advanced keys of the car) which are quite expensive.
Generally, there are no limits to the number of add-ons that can be purchased, but it is advisable to choose only those add-ons that enhance one’s coverage.
What are the Exclusions of Comprehensive Coverage?
- The car was being used for any illegal purpose at the time of the accident.
- The person driving the car during the time of the accident was underage.
- The person driving the car during the time of the accident lacked a valid driver’s license.
- The person was voluntarily intoxicated at the time of the accident.
- The damages and losses suffered during war or a nuclear attack.
- The damages are a result of contributory negligence i.e. the insured has not exercised caution/due care.
- The damages were caused as a result of consequential damages that occurred after the occurrence of the actual accident. For example, turning on the car ignition even when there has been water ingression in the engine due to incessant rains.
- The vehicle is stolen thereafter and is not in the possession of the insured. For example, the insured continues to drive the car even after the accident was caused, worsening the condition of the car.
- The accident was pre-planned or premeditated.
Reasons to Pick a Comprehensive Coverage Over Others
A comprehensive car insurance policy is full of promises. This policy cover must be opted in as opposed to other policy covers due to the following advantages it offers –
Firstly, it covers both own damages and third-party liabilities – combining the positive aspects of these policies effectively.
Secondly, an option for add-ons can be availed in this policy to enhance coverage of the policy.
Thirdly, some car insurance companies offer the insured the privilege of customising the IDV i.e. the market value of the car.
Fourthly, it protects the automobile from natural disasters such as floods, earthquake,s etc. and also offers compensation in case of theft/fire of the vehicle.
Top Car Insurance Policies
- New India Assurance car insurance policy
- Bajaj Allianz car insurance policy
- TATA AIG car insurance policy
- HDFC ERGO car insurance policy
- Oriental car insurance policy
Please note: These policies are merely suggestive and not a substitute for the due diligence of the person seeking to purchase the insurance policy.
Conclusion
No amount of caution is sufficient when it comes to guarding things that are of value to you. Therefore, the choice of a car insurance policy requires careful consideration of the terms and conditions of the policy, and every effort must be made to mould it to suit your needs. It is prudent to invest sufficient time and energy in this process before you invest considerable sums into it.
