New Car Insurance Policy

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Over the past few years, more and more car owners are understanding the importance of having car insurance. Buying car insurance is not considered just a formality but also a necessity to save you from the financial burden in case of any unpredictable contingencies. 

What is New Car Insurance?

When you buy a new car, before you can take it out of the showroom, you need to have car insurance for it. This mandate has been issued by the Motor Vehicles Act, 1988. Knowing how your car insurance plan works would help you understand its benefits, importance and other important aspects. On this page, we will try and learn all about new car insurance.

According to the latest IRDA regulation in June 2020, all new cars sold from August 1, 2020, need to buy a mandatory 3-year third-party insurance policy and can opt for a one-year own-damage coverage with the same. Thus, as a new car owner, you can opt to buy an own-damage cover policy for 1 year from any car insurance provider, as there is no provision for long-term own-damage coverage available anymore.

Importance of New Car Insurance

  • Having a car is not just important, it is mandatory. The only choice you have is between comprehensive or third-party insurance.
  • Car repairs can burn a big hole in the pocket, an insurance plan will reduce the financial burden on you.
  • Most car insurance companies offer round-the-clock customer care for your assistance.
  • A cashless claim can make the repair of your car easy and problem-free.
  • Knowing that you have backup financial support can make driving stress-free and give you peace of mind.

Types of Coverage for New Car Insurance

Traditionally, Car Insurance can be classified into 2 broad categories:

  1. Third-Party Liability Car Insurance
    Third-party insurance covers the damages and losses that your car causes to a third party
  2. Comprehensive Car Insurance
    It is a combination that not just covers third-party liabilities but also your car’s damages

However, to make car insurance more suitable and customer-friendly, new variations are done regularly. The following are also types of Car Insurances:

  • Own Damage
    Own Damage Car Insurance would cover you for the repairs that are required if your car is damaged due to accidents, collisions, man-made and natural disasters
  • Pay As You Drive
    On the basis of the estimated distance, your car would travel in a year, your pay as you drive car insurance policy would be customised
  • Personal Injury Coverage
    The driver and the passengers are covered for injury and death

Difference Between Third Party, Pay as You Drive and Comprehensive Car Insurance

 

Let us take a look at the basic features of the main types of car insurance. It would help understand the meaning of each and the differences between them: 

ParticularsThird-Party Car InsurancePay As You Drive Car Insurance Comprehensive Car Insurance
What it Means

The third-party policy covers the loss and damages that your car causes to a third-party, it could be 

person/property

You have the option of choosing the insurance plan that is determined based on the average distance you car covers in a year A combination of third-party liability along with an own-damage cover that not just covers third-party liabilities but also your car’s damages
What it CoversOnly third-party losses will be covered, any damage to your own car will not be coveredIt is a kind of comprehensive car insurance, thus would cover own-damages and third-party liabilitiesDamages to your car along with the third-party damages will be covered 
Add-OnsNo Add-ons are availableAdd-ons are availableAdd-ons are available
Who can buyAnyone who has a car has to buy a third-party insurance

Anyone can buy, 

as a type of 

Comprehensive car Insurance

Comprehensive insurance covers third-party as well as own damage, so anyone who has a car can buy this kind of policy
Need to BuyCompulsory  An optional policyAn optional policy
Where to BuyAvailable with all car insurance companiesAvailable with only a limited car insurance companiesAvailable with all car insurance companies
Tenure 3 yearsAnnual1 year third party + 3 year own damage

Features & Benefits of New Car Insurance

  1. Cover for Risk
    Your car insurance will cover you against damages caused in an accident and/or man-made and natural disasters.
  2. Affordable
    The amount you pay towards the premium will be far less than you may have to spend on the repair of your car after an accident. Third-party insurance is a cheap and affordable policy that you can invest in.
  3. Option of Add-ons
    Along with a basic comprehensive car insurance plan, you can also pay a little extra and increase the coverage offered by the plan. There are numerous options that can expand the scope of insurance.
  4. Flexibility
    A tenure of car insurance is pre-decided. If you are not satisfied with your car insurance company, you can switch to another company at the time of renewal. Don’t worry, you will not lose out on your No Claim Bonus.
  5. Death/Injury Benefits
    On an accidental death or disability, your car insurance would also cover you under Personal Accident Insurance.
  6. Discounts on Premium
    With so many car insurance companies around, there is increased competition. When all of them try to attract customers, there are various offers and discounts that are promised.
  7. No Claim Bonus
    Not making a claim throughout the year, can fetch you a bonus, which is called the No Claim Bonus. It can range from 20% to 50%

What is Covered Under New Car Insurance?

  1. Third-Party Car Insurance 
    As discussed earlier, the third-party car insurance policy covers the loss and damages that your car causes to a third party, it could be a person/property. Let us take a look at what all it covers:
    • If your car has caused property damage to a third party, the insurance company will cover the cost of damage of up to INR 7.5 lakh.
    • If in an accident, a third-party person dies, the claim will be judged according to the tribunal courts and the compensation will be paid.
    • If an accident causes disability to a third-party person, then the medical expenses will be paid by the company.
  2. Comprehensive Car Insurance
    The coverage of comprehensive car insurance is much wider than third-party. Let us see how:
    • Accidental damages are covered under comprehensive car insurance
    • Damage caused to your car if it catches fire
    • If your car is stolen, and the police are unable to trace it, your car insurance company will compensate for the same
    • Any damage caused to your car due to a natural disaster like floods, earthquakes, landslides etc.
    • Any damage caused to your car due to a man-made disaster like terror strike, riots, strikes etc
    • Third-party damages are also covered under comprehensive car insurance
    • If your car gets damaged during transportation
    • The policy also covers the owner/driver if he gets injured or dies
    • Add-On Covers
      Add-on covers further expand the coverage of a comprehensive car insurance policy. Though different companies offer different add-on options to their customers, the most common ones are:
      • Zero Depreciation Cover
        Zero Dep add-on is highly recommended for cars that are less than 5 years old. The depreciation factor is excluded when a claim is made, and you end up not paying anything from your pocket.
      • No Claim Bonus Protect
        You must know by now that when you do not make a claim in a policy year, the company gives you a bonus in the form of a discount on the next year’s premium. With NCB Protect Cover in Car Insurance, you can safeguard your bonus even if you make a claim.
      • Passenger Cover
        With Passenger Cover in Car Insurance, you can cover your co-driver too. The insured person will receive compensation in case of disability/ death.
      • Conveyance Benefit
        Under this cover, when your claim is accepted and your car is under repair the insurance company gives you a cash benefit on a daily basis. The amount that you receive depends on the kind of plan you own and on the insurance company's policies too.
      • Key Replacement Cover
        The company will bear the replacement cost and will provide you with a new key if you lose it, in case your keys are stolen, you would have to lodge an FIR at a police station.
      • Tyre Protect Cover
        In case your car needs tyre replacement, the removing, refitting and balancing of the new tyres will be covered by the insurance company if you opt for tyre protection cover in your car insurance policy.
      • Return To Invoice
        If you feel your car is at the risk of going for total loss, or of getting stolen, this is the cover for you. Under this return to invoice car insurance plan, the compensation will be the same as the amount you had to pay at the time of car purchase. The amount will also include the GST and registration charges.
      • Breakdown Assistance Cover
        If your car breaks down, the car insurance company will arrange for a tow truck, mechanic and transportation to a garage. You will also be dropped at a suitable place of your choice while your car is repaired.
      • Engine & Gearbox Protection
        Repair of an engine can be a costly affair. However, with engine and gearbox protection cover you can get a cover for the repair. This plan works even if the cause is not an accident.
      • Consumable Cover
        Nuts, bolts, engine oil, lubricants come under the category of consumable and are not covered under your basic insurance. You can buy a consumable car insurance cover to compensate for such parts. It should be noted that this cover is available only for cars that are up to 3 years old.

What is Not Covered Under New Car Insurance?

Despite offering extensive coverage, there are still certain aspects that are not covered under car insurance. Given below is a list of the most common exclusions, however, confirm the same from your car insurance company. If driving in the following conditions, your claim would be rejected: 

  1. Driving under the influence of alcohol or any other intoxication
  2. Depreciation and normal wear and tear of the car is not covered
  3. An accident caused because of your negligence
  4. Electrical and Mechanical breakdowns
  5. Driving without a valid licence
  6. Intentional accidents
  7. Damage due to war

How to Buy New Car Insurance Online?

These days, buying car insurance is a matter of minutes. However, it is recommended that before you buy a policy, you compare the different plans offered by different insurance companies. You can surf the web to find out the features and benefits and also the premium rates.

When buying a car insurance policy for your new car, you simply need to follow the steps given below:

  1. Go to the official website from which you wish to buy the policy
  2. Go to ‘car insurance’
  3. Enter all the required details such as name, mobile number, email
  4. Enter your car details like-manufacturing year, model, variant, registration details, etc
  5. You may be asked to attach a few documents, however, most companies only ask you to fill in the application form to purchase the policy
  6. Choose between the different kinds of insurance plans available
  7. Select the add-ons you wish to add
  8. Pay the premium amount via credit/debit card, net banking
  9. You will receive an email with a soft copy of your car insurance policy

Documents Required when buying New Car Insurance Online:

As mentioned earlier, most companies have eliminated the need for paperwork when buying a policy online, it is suggested that you keep the following documents handy:

  • Registration Certificate (RC)
  • Drivers Licence
  • Duly filled Application Form
  • Valid ID Card
  • Residence Proof

How to Claim New Car Insurance Online?

Even if you are a very cautious driver, accidents can happen. A claim can be of three types:

  1. Third-Party Claims
    If because of your car, a third-party is wounded/killed/damaged, you must lodge an FIR/MCR at the nearest police station and inform the Third-Party insurance company. The company would contact the Accident Claims Tribunal (MACT) and once authorisation is received from the tribunal, the company would settle the claim with the third party.
  2. Theft of the Vehicle
    You need to lodge an FIR as soon as you find that your car is lost. If the police are unable to trace your car, they would provide you with a “Non-Traceable Certificate”. You would have to submit this along with the other required documents (listed below) and the insurance company would compensate your loss based on the IDV of your car.
  3. Own Damage Claims
    When your car is damaged in a collision, it is termed as ‘own damage’. There are two ways in which an own-damage claim can be settled-
  • Cashless Claim
    When you get your car repaired at a network garage the company would settle the claim directly with the garage. You would not be required to bear the cost of repair.
  • Reimbursement 
    When you get your car repaired at a non-network garage of an insurance company and would have to pay for the damages upfront, this is known as the reimbursement claim process. You can settle your claim by filing a claim request later with all the required documents.

Documents Required for New Car Insurance Claims

Given below is a list of documents required at the time of making a car insurance claim:

  • Policy Papers
  • Copy of MCR if someone else or his vehicle or property is damaged,
  • Copy of FIR in case of theft
  • Non-Traceable Certificate, in case of theft
  • Copy of Driver’s License
  • Copy of the RC
  • Duly filled and signed Claim Form
  • Valid identity card
  • Cancelled Cheque, in case of a reimbursement
  • All repair bills, in case of a reimbursement

Factors Affecting New Car Insurance Premium

  1. Type of Policy 
    As mentioned earlier, third-party insurance is a much cheaper kind of car insurance. Because a comprehensive policy offers wide coverage, it costs a little extra. However, when buying a new car, it is strongly recommended that you invest in a comprehensive car insurance policy only.
  2. Location
    As the area in which you reside determines your driving style, your location plays a key role in fixing the premium. Metro cities see more cars on the roads, which causes more accidents and thus there’s more risk involved. Therefore, a car bought in a metro city may fetch a lower IDV but a higher premium as compared to the same make and model in a smaller city/town.
  3. Add-Ons Selected
    Of course, when you include an add-on cover to your basic policy you will have to spend a little extra. But do not consider not buying add-ons only to reduce the premium. In the long-run, the insurance plan will be much cheaper than repair costs.
  4. MMV
    The make, model and variant of a car directly impact the premium. For example, a Mahindra Scorpio would have a much higher car insurance premium than a Maruti Alto. Similarly, car insurance plans for hatchbacks will be cheaper than SUVs and sedans.
  5. Policy Tenure
    When you opt for a long-term policy, the insurance company offers you a discount on the premium.
  6. IDV
    The market value of your car plays a significant role in determining the cost of premium. The more expensive your car, the more you would have to spend on its insurance. For example insurance for 2020 Honda City will cost you way more than a 2020 Maruti Baleno.
  7. Deductibles
    Deductible is the amount of money that you are willing to spend from your own pocket in case a claim is to be made. The higher deductible you choose, the lesser premium you end up paying.

Things to Consider While Buying New Car Insurance

  1. Remember, buying third-party insurance is compulsory under the Motor Vehicles Act. Driving without car insurance is a punishable act. You may also be heavily penalised.
  2. When buying insurance for a new car prefer going a comprehensive plan
  3. Avoid looking at the premium rate only, rather see which plan offers the maximum coverage
  4. Check if the company offers a good No Claim Bonus
  5. Online reviews can greatly help in seeing how customer-friendly the company is
  6. Take a look at the claim procedure, it should involve minimum paperwork and should offer cashless claims
  7. Prefer choosing a company that offers a wide range of add-ons

Common Myths About New Car Insurance:

It is estimated that in India, only about one-fourth of the car owners have car insurance. Because of this there are also many myths that people have regarding car insurance, a few of them are:

  • MYTH #1 - Buying car insurance is very expensive.
    Truth: If you choose the right variant, you actually end up saving a lot of money actually.
  • MYTH #2 - Only new cars need insurance.
    Truth: Each and every vehicle needs a valid insurance policy to ply on Indian roads.
  • MYTH #3 - Once you buy insurance, you need not renew it.
    Truth: Of course you need to renew your car insurance policy every year to keep it valid.
  • MYTH #4 - In case of an accident the insurance company will pay 100% of the repair cost.
    Truth: Insurance companies do not pay the depreciated cost of the repair for the damages resulting from that particular accident unless the zero-depreciation add-on cover has been opted for.
  • MYTH #5 - When you buy insurance from one company, you have to stay with it always.
    Truth: Porting your car insurance policy from one insurer to another is very simple.
  • MYTH #6 - Claim procedures are lengthy and time-consuming.
    Truth: Claim can be easy, especially if it is cashless.
  • MYTH #7 - I only need third-party insurance.
    Truth: Comprehensive car insurance plans cover the damages to your own vehicle as well.
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