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This guide will help you understand the basics of motor insurance

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Published on July 16, 2021. EST READ TIME: 3 minutes


No matter where you live in India, if you have bought a car or bike and plan to hit the roads with it, getting motor insurance is essential. While a third-party liability policy is mandatory as per law, a comprehensive one can protect you financially in case of multiple emergencies like accidents, theft, natural or manmade calamities and so on. To know more about how motor insurance works and benefits you, read on.

What do you get from motor insurance?

Whether it is a two-wheeler insurance or car insurance, the policy is meant to offer financial protection in case of any accident or theft. The insurance is a way to create a common risk pool by getting small contributions from all vehicle owners in the form of premiums. In case of accident or theft of the vehicle, you can make a claim for repair cost or compensation to reimburse the value of the stolen car or bike. This creates a risk sharing model where many people help each other when needed.

Motor Insurance Types in India

There are two main kinds of motor insurance policies available in the country. These are the third-party policy and comprehensive motor insurance policy. The third-party policy is meant to cover the risk and cost in case any third-party is affected in an accident involving your vehicle. It does not cover any damage done to your own vehicle though. On the other hand, a comprehensive policy combines third-party cover with protection for your own vehicle. So, if your vehicle is damaged or stolen, you can register a claim under a comprehensive policy.

What kind of damage coverage is available? 

Any comprehensive insurance for vehicle allows you to get protection for different kinds of damages. With a comprehensive policy, you will be compensated in case of an accident, if your vehicle is stolen, in case of fire damage or any kind of explosion. Further, any damage caused by a natural calamity is also covered. In addition to this, your insurance policy will cover expenses arising out of personal accident or any third-party liability arising from motor accident claims tribunal. 

What is not covered under a motor insurance policy?

Your motor insurance policy will not cover the following:

1. Depreciation, though this can be alleviated by purchasing zero depreciation cover.
2. Illegal driving or riding, which means driving or riding without license or drunk driving or riding.
3. Electrical and mechanical breakdowns during regular usage of the vehicle.

Premiums and Sum Insured

The concept of sum insured in motor insurance is known as insured declared value or IDV, which is the monetary value of your car or bike. You purchase the insurance policy by paying a premium amount. This is calculated by taking into account the IDV of your vehicle, any applicable no-claims bonus and adding the cost of any add-ons that you may want to buy with the policy.

Dos and Don'ts of Motor Insurance

Things to do:

• Always make sure that you get the policy renewed on time. Driving or riding with expired insurance or no insurance will invite challan of thousands of rupees.
• Always make sure that you keep a copy of the insurance for vehiclewith you while you are driving or riding.
• Always buy necessary add-ons like zero depreciation and return to invoice cover for new vehicles.
• Always buy add-ons like engine and transmission protection cover for vehicles which are out of warranty because these parts can cost too much to replace.
• Always check that your No Claims Bonus has been accounted for in the premium cost.

Things to avoid:

• Avoid making small or spurious claims because they hurt your no-claims bonus.
• Avoid switching insurance companies if you are satisfied with their service, just because of cheaper premium.
• Avoid choosing only a third-party policy unless you are really short of money or plan to sell the vehicle in a month.

Duration of motor insurance policy in India

Motor insurance policy is generally issued for the duration of one year. Further, you can buy third-party car insurance for 3 years at once. For two-wheeler insurance, you can buy a five-year third-party cover in one go.

A few general guidelines

1. Long-term third-party cover policies are a great way to save money because their prices and applicable taxes tend to increase frequently.
2. Buying motor insurance online is cheaper that taking the traditional route.
3. You can buy new car insurance or two-wheeler insurance online directly. You do not need to buy it from the vehicle showroom.
4.  It is best to renew your policy before its expiry, otherwise you will have to deal with hassles related to vehicle inspection.

To wrap up, it is very important for everyone who owns a bike or car to be well-aware of all the basic aspects of motor insurance, so you can make the most out of your policy! Also, compare different insurers before taking a decision.

Disclaimer: The above information is for illustrative purpose only. For more details, please refer to policy wordings and prospectus before concluding the sales.

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