What are the types of Car Insurance?
There are two forms of motor insurance: Liability Only policy that covers bodily injury and/or death, property damage to third party and also provides personal accident cover to the occupants. The second being Comprehensive policy that covers loss or damage to the vehicle insured in addition to the Liability Only policy.
As per the Motor Vehicle Act 1988, Liability Only policy, also known as Act Only policy, is mandatory for all vehicles plying on public roads in India. This cover protects against any liability arising from bodily injuries and/or death, property damages to a third party. It also includes a Personal Accident cover for the owner-driver.
Comprehensive Insurance, also known as Package Policy, covers loss or damage to the insured vehicle in addition to the Liability Only policy.
The following risks that can cause damage to the insured car are covered:
- Fire, Explosion, Self-ignition or Lightening
- Terrorism, Riot and Strike, Malicious Act
- Burglary, Theft and Home Breaking
- Earthquake, Storm, Tempest, Flood inundation, Landslide or Rockslide
What does car insurance include and exclude?
Motor insurance includes a variety of factors that may result in damages to your car and injury to its occupants. The exclusions comprise of normal wear and tear, damages suffered while driving under the influence of intoxicants, etc. For a more comprehensive list, see below.
What Motor Insurance Includes?
The damages covered by a car insurance policy are enumerated under the OD section of the policy document.
These generally include:
- Fire, Explosion, Self-ignition or Lightening
- Terrorism, Riot and Strike, Malicious Act
- Burglary, Theft and Home Breaking
- Earthquake, Storm, Tempest, Flood inundation, Landslide or Rockslide
What Motor Insurance Excludes?
- Normal Wear and Tear and Electrical or Mechanical Breakdowns
- Damage to Tyres (unless vehicle also damaged)
- Driver without a Valid Driving License
- Driving under the influence (DUI) of intoxicants such as liquor or drugs
- When the vehicle is used for any illegal purpose
- Usage outside geographical limits
- Vehicle is used for Hire or Reward, Carriage of Goods, Organised Racing, Pace Making, Speed Testing, Reliability Trials
- Nuclear Wars and Perils
What factors affect the total premium of a car?
The premium is determined on the basis of the car value, age of the vehicle, cubic capacity and geographical zone. The insured has an option to select various add-on covers available with the insurance companies.
- Insured Declared Value
- Cubic Capacity
- Age of Vehicle
- Geographical Zone
- Add-on Cover, if opted
- Third Part Liability (as defined time-to-time by IRDAI)
- Owner-Driver Personal Accident (PA) Cover for Rs. 15 lacs
- Personal Accident Cover for Passengers maximum to Rs. 5 lacs Per Passenger
- Anti-Theft Device Discount
- CNG / LPG - Inbuilt or External
How is the sum insured calculated?
Sum Insured is fixed at the commencement of each policy period and known as Insured Declared Value (IDV). It is fixed on the basis of manufacturer's listed selling price, adjusted for depreciation, defined under the Indian Motor Tariff.
For Own Damages
The sum insured is based on the Insured Declared Value (IDV) of the car. IDV is the value assigned to the vehicle by the insurance companies based on the manufacturer’s present value of the car and the depreciation percentage based on its age. Some companies may also consider the accessories to get the final IDV.
For Third Party
Third Party Liability Insurance is mandatory under the Motor Vehicles Act, 1988. It provides protection against injury or damages to third parties or their belongings in case of an accident. Insurance companies also provide a Personal Accident cover that covers accidental death or permanent total disability for the owner-driver of the insured vehicle.
What is a No Claim Bonus (NCB)?
NCB is a discount given by insurance companies while renewing a motor insurance policy if the owner has not made a claim during the previous policy period(s). The NCB can be accumulated upto maximum of 50% on OD premium.
NCB is transferable from previous policy to new policy of same class of vehicle but cannot be transferred from a private policy to a commercial policy.
The standard rates of NCB are:
| No Claim Period |
Discount Rates on Own Damage Premium |
| 1 year of no claim |
20% |
| 2 consecutive years of no claim |
25% |
| 3 consecutive years of no claim |
35% |
| 4 consecutive years of no claim |
45% |
| 5 consecutive years of no claim |
50% |
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