Car Insurance refers to the Insurance cover which provides compensation to any person who has suffered any bodily injury or whose property has been damaged in an accident caused by such insured vehicle. Keeping in mind the significance of this insurance, the Indian Law has made it mandatory for every car owner to obtain a Car Insurance with respect to such car.
The basic concept behind Car insurance is ‘Third Party Liability Insurance’. Here, the Insurance Company is the Insurer, the car owner is the Insured, while all other persons fall under the tag of “Third Party”. As per this, the benefit of the insurance coverage is provided by the Insurance Company, not to the insured, but directly to such third party which suffers any loss caused by the act of the insured person.
The two major purposes of Car insurance are to provide for the compensation to the third party, while also covering for Own Damage (sustained by own vehicle)
Types & Benefits
Liability only Policy – Mandatory
This policy adheres to the legal requirement under the Motor Vehicles Act, 1988. This covers only the compensation for treatment of injuries or damaged property of a third party.
- Low Premium.
- Doesn’t cover any damage to the insured vehicle, whatsoever.
- Low premium might lead to insufficient cover.
“Wait, what about my own, my precious, my dear car?”
If this is the thought in your head, then this is the policy to get your hands on. It extends the benefit to provide for the repair costs of the car damaged in a collision.
“But what if the Car is completely beyond repair?”
No worries, here, this policy ensures payment of the car’s value, i.e., worth of the car right before the accident.
This Policy is not compulsory, however, quite useful for expensive and new cars.
- Provides additional expense for managing repair costs of your own damaged vehicle.
- Provides the amount equivalent to the value of the car where it can’t be repaired.
- High premium costs.
- Doesn’t cover various situations like weather-damage, theft, etc.
Medical/Personal Injury Policy
Medical expenses for treatment of the injured persons in a car accident can be huge. This policy usually covers such expenses irrespective of whose fault the authorities fix.
- Provides compensation for the medical expenses of the persons injured in the accident (even if it includes any person at fault).
- Higher premium costs due to the uncertainty involved.
- A policy may or may not cover extremely good hospitals/emergency centers, depending upon the range of premium costs or other factors.
This policy, as its name suggests, gives a complete protection to the owner of the car. The efficiency of the policy can be adjudged from the list of causes provided by IRDA.
- Gives a complete cover to the insured, including unusual situations like weather damage, theft, and terrorism, etc.
- Substantially covers “Own Damage”.
- Very High Premium rates, proportional to the coverage offered.
- Covers very rare contingencies as well, which may not occur, most likely.
It provides the insurance cover for injuries and damage, without any concern about whose fault caused the accident. This makes the claim process simpler.
- Irrespective of whose responsibility the accident is, this policy ensures compensation to the concerned parties.
- Comparatively reduced struggle for successful claims.
- High Premium Costs.
- Low availability (So far available only in about 12 states).
Road Assistance Policy
This policy provides on the spot assistance in case of any breakdown or accident to the insured to help with the situation like towing / repair, etc.
- On the spot assistance provided.
- Very beneficial on longer routes like highways or in remote areas, or during unusual hours.
- Comparatively high premium costs.
GAP (Guaranteed Auto Protection) Policy
In case of cars bought in installments, where complete payment is still due, this policy can be quite beneficial. It usually covers the difference between the actual value of the car and the amount due to the lender.
Some lenders even require it compulsorily while lending a car until the dues are paid off. If the actual value of the car is less than the money due to it, GAP insurance can be really beneficial.
It is also important to know that even the broadest car insurance policies are made ineffective by certain acts like:
- Not carrying a valid Driver’s License.
- Driving under the influence of alcohol or drugs.
- Accident taking place beyond the Geographical limits given in the policy.
- While car is used for illegal purposes.
- Electrical/Mechanical Breakdowns.
Different types of Car Insurance policies offer varying benefits. Hence, the key lies in a careful comparison and understanding of the terms and conditions of such policies. In the end, the policy most suitable as per your circumstances shall be bought.