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India has over 22 cars per 1000 people. This number is expected to grow to over 175 cars per 1000 people. Total vehicles stand at 297 million as of FY-19. This is one of the largest markets for the insurance sector in India. Further, having a motor insurance policy has been made mandatory for Indians wanting to drive or ride on Indian roads.
Further, There have been over 1.5 lakh fatalities where Indians have lost their lives due to motor accidents in 2019. This makes it imperative that vehicle owners get insured without exception.
This content piece will discuss the most important aspects of motor insurance and everyone intending to purchase or renew a motor insurance policy should read this page. The following important topics will be discussed:
- What is motor insurance?
- Importance of motor insurance
- Benefits of motor insurance
- Types of motor insurance
- Motor insurance companies
- Motor insurance addons
- Motor insurance claims process
What is motor insurance?
Motor insurance is a contract between a vehicle owner and the insurance company. The insurance company will indemnify the vehicle owner against damages in exchange for a premium. This concept is similar to that of health or life insurance. That being said, let us understand the concept of motor insurance with the help of a simple example.
Example: Let us assume that Mr. Verma has bought a comprehensive motor insurance policy from HDFC ERGO. The company provides him a coverage (IDV) of Rs 5 lakhs on his new car. Mr. Verma now, unfortunately, crashes his car against a tree and totals the vehicle. As he is covered by vehicle insurance, the insurance company will bear the total loss of the car and pay Mr. Verma his sum assured.
Had Mr. Verma not been insured, he would have to bear the entire loss himself.
Importance of motor insurance
It is mandatory
Third-party motor insurance has been made mandatory by the government. Everyone who owns a car, truck, or bike and intends to drive it on Indian roads has to purchase third-party motor insurance.
Protection against liability
Third-party motor insurance protects the policyholder against any medical or legal expenses that the opposite party demands. This protection is also provided to the policyholder under a comprehensive vehicle insurance policy.
Protects your savings
A vehicle accident can play havoc on your savings. The expenses related to a motor accident could be massive on certain occasions and can drain the savings of a person. Motor insurance provides a cushion and protection against such expenses.
Benefits of motor insurance
Many insurance companies provide their policyholders with the benefit of a no-claim bonus. This means that if the policyholder does not make a claim in a calendar year, the company will provide a discount on his renewal premium.
A comprehensive motor insurance policy will generally provide for hospitalization expenses resulting from a road accident.
Many vehicle insurance companies provide the benefit of cashless garages. This is where the vehicle owner does not need to spend money out of this pocket initially, the insurance company will directly pay the necessary expenses to the affiliated garage. This is a very convenient feature that most new motor insurance companies provide.
Protection against natural disasters
A motor insurance policy will generally provide you protection against natural disasters like floods and earthquakes.
Protection against vandalism and theft
A motor insurance plan will also provide you protection against acts of vandalism, strikes, burglary, theft, etc.
Types of motor insurance
There are two primary types of motor insurance policies. They are comprehensive motor insurance policies and Third-party motor insurance policies. Let us understand both types and point out the differences between the both.
Comprehensive motor insurance
A comprehensive motor insurance policy is where the policyholder has the protection of both owner driver protection and third-party protection. It is a holistic insurance policy that protections the owner’s health, the vehicle’s health, third-party liabilities, and even the passenger’s health in some cases. It is not compulsory like third-party insurance but is recommended.
Third-party motor insurance
A third-party motor insurance policy protects only third parties. It does not provide protection and coverage to the policyholder or the vehicle owner. If the policyholder or his vehicle is met with an accident, the insurance company will not provide any protection in this case. But if the policyholder’s vehicle damages another person or vehicle then the insurance policy will come into effect. Let us understand this with a simple example:
Example: Mr. Laxman bought a motor insurance policy from ICICI Lombard. Shortly after buying the policy, he, unfortunately, meets with an accident where his vehicle bumps into a pedestrian. The pedestrian claims monetary expenses for damages caused. The insurance policy will come into effect in this situation and settle the claim, thereby providing indirect protection to the policyholder.
Difference between comprehensive and Third-party insurance
Comprehensive Motor Insurance
Third-party Motor Insurance
Coverage extends to owner, owners vehicle and the third-party.
Coverage only extends to third-party.
Generally more expensive than third-party insurance.
Cheaper than comprehensive insurance as the coverage is limited.
Is it mandatory?
Does it protect against natural disasters?
Is it customizable?
Motor insurance addons
There are a variety of motor insurance add-ons that you can purchase while purchasing a comprehensive motor insurance policy. These add-ons provide more customization and flexibility. Let us look at some of the popular addons that one may consider opting for while purchasing a motor insurance policy.
Return to Invoice
A return to invoice cover protects the vehicle owner in the event the vehicle gets totaled. The IDV of the vehicle will be the same as the on-road price of the car. This means that in case the vehicle gets totaled, the owner will receive the on-road price of the car and not the depreciation-adjusted price.
There are times when an owner may lose his original car keys. This is not usually covered under your regular policy, but if you have opted for a key replacement add-on, the insurer will bear this expense.
The engine is the heart of the vehicle. If anything happens to the engine, the vehicle is never the same. Most comprehensive motor insurance policies do not cover the engine. That being said, they do offer an engine protection add-on that extends the coverage to the engine as well. A prudent individual will generally opt for an engine protection add-on along with his policy.
This add-on provides protection if the baggage in your vehicle is lost or stolen. It would be wise to opt for this addon if you travel with expensive equipment like cameras, laptops, etc.
This is where the insurer bears the expenses for any depreciation that has occurred. The owner will not have to bear any depreciation charge from his pocket. This addon is usually just available for cars under the age of 5 years. Understand what is zero depreciation cover here.
There are occasions where a vehicle owner will need roadside assistance. These expenses are only covered if you have opted for a roadside assistance add-on.
There are two primary types of claims, owner damage claims, and third-party claims. Let us understand both of these claims processes.
Owner damage claim processing
This is where your own car is damaged due to an accident and you want a reimbursement for the same from the insurance company.
Step 1: Intimate your motor insurance company
First, you will need to intimate your insurance company about the accident. If possible kindly take pictures of the accident and keep them handy.
Step 2: Fill the claim form
You can download the claim form from your insurance provider’s website. You will have to duly fill this form accurately and without error. Once filled, kindly submit this form to the agent or insurance company. Remember, all fields must be filled truthfully, any falsification can cause your claim to be rejected as it goes against the principles of insurance.
Step 3: The insurance company sends a surveyor
The insurance company will now send their surveyor to assess the damage caused. It is the surveyor’s job to make a report on the cause of the accident along with the extent of the damage. The surveyor will then present this report to the insurance company. You will also get a copy of the same.
Step 4: Repair your vehicle
You can now submit your vehicle to a garage for repairs. Ensure that you submit your car to a networked garage if you wish to avail of cashless service.
Step 5: Submission of bills and reimbursement
Remember to collect all bills and receipts by the garage. You will have to submit these documents to the insurance company to get reimbursement. Once submitted, the insurance company should reimburse you the amount within 15 working days.
Third-party claim processing
A third-party claim is where someone other than the policyholder is impacted by the accident. The third-party claims process is slightly different from owner damage claims. Let us understand its steps.
Step 2: Help the affected person wherever possible
We understand that this could be a stressful situation, but you should ensure that you make available any medical help that the opposite person requires.
Step 2: Intimation of accident
You will have to intimate your insurance company about the accident. Claim intimation should be done as soon as possible.
Step 3: Send FIR copy and other documents to the insurer
You will have to send the FIR copy along with the RC book copy, insurance policy copy, Photo ID, and address proof to the insurance company.
Step 4: The third party sends legal notice
If the third party wants to file for damages, he will send a legal notice to you. Ensure that you do not respond to their legal notice directly, kindly send the notice to your insurance company. They will do the needful.
Step 5: The insurance company appoints a lawyer
The insurance company will vet your submitted documents and then appoint a lawyer on your behalf that will represent you in court.
Step 6: The insurance company will pay the third party
The insurance company is bound to pay the court-ordered financial compensation to the third party. It will do so, thereby closing the matter.
Popular Motor insurance companies
|Name||Claims Settlement Ratio|
|Kotak Mahinda Insurance||98.6%|
Frequently asked questions about Aditya Birla Health Insurance
A Motor insurance policy is a contract of indemnity between the motor insurance company and the policyholder.
A comprehensive motor insurance policy covers owner’s vehicle damage, owner damage, third party damage.
A third-party policy only covers damages to the third party.
A motor insurance policy can protect against the following:-
- Theft of vehicle
- Coverage against accidental damage to your vehicle as well as third party vehicle
- Coverage against bodily harm caused to you as well as third party
- Passenger protection
- Landslide, flood, hurricane, cyclone, etc
Third party motor insurance is mandatory as per The Motor Vehicles Act passed in 1939 (later amended in 1988, 2017).
Yes, motor insurance can be availed for both two-wheelers and four-wheelers both.
Your premium is calculated on a host of parameters, they include the type of vehicle, age of vehicle, condition of the vehicle, driving history, previous claims, location etc.
Are you looking for a new insurance policy or a policy renewal? Reach out to us and let us assist you.