Car Insurance Policy – Everything You Ever Wanted to Know

A person spends a good amount of their hard-earned money on buying their dream car. It is important to make sure that the vehicle does not become another heavy expenditure in case of any accidents or mishappenings. Buying a car insurance policy is as important as putting safety gear on while trekking and mountain climbing. It not only pays for your medical expenses but also protects you from financial liability. Along with this, a good car insurance policy offers many other benefits. If you are considering buying four-wheeler insurance, read on to know everything about the best car insurance deals. If you ask the question ‘how to insure my car?’ often, then this is the stop for you. 

What is Car Insurance?

Car insurance is a contract between the car owner and the insurance company that helps the car owner, in case of an accident or theft, pay for losses covered in the contract. The insurance pays for damage to property, vehicle, and medical expenses caused in case of an accident. Also, it provides financial protection against the theft of the four-wheeler and against damages from weather, natural disasters, keying, and collision with stationary objects. It is mandatory to get motor insurance in India. 

Significance- 

A car is an expensive property. Therefore, paying for damages to its parts is also expensive. In case of heavy damage to cars and other property, car insurance saves the day. The legal regulations for vehicle insurance vary in different regions of the world. It is based on a ‘use it or lose it’ concept. One has to pay a yearly premium to avail of the benefits of insurance in case of a serious accident. The car owner loses the premium amount if he/she does not meet any serious accident. In the case of a totaled car, when the expenditure to fix the car is more than the value of the car, insurance is a money saver.  

However, do not claim insurance for minor damages because, in such situations, you lose the ‘No Claim Bonus’. No Claim Bonus is a good amount ranging between 20% of the premium of the first year to 50% in the sixth year when you do not claim insurance. 

Types of Car Insurance

There are two types of car insurance policies in India :

Third-party insurance

This is the most common type of insurance and is mandated by law. This insurance pays for only damages & losses caused to a third-party person, vehicle, or property. It does not cover the damages and liabilities of your own vehicle. Thus, it does not provide full protection. It is a basic insurance policy and does not pay for damages to either the driver or the vehicle.

You can go for this type of insurance cover only when your car has depreciated a lot. Also, if you do not wish to spend a lot of amounts and want your car just to be road-legal, you can go for this basic insurance policy.

Comprehensive insurance

On the other hand, a comprehensive insurance policy offers not only protection against damages to any third party but also coverage for the driver & the vehicle and a lot more other benefits. This contract also pays for a range of other things such as:

• Theft of the four-wheeler
• Vandalism
• Damage from fire, falling things such as tree
• Damage due to man-made or natural calamity
• Personal Accident cover

While it provides complete protection against financial losses, it is also expensive. It also provides a number of add-ons like zero depreciation, roadside assistance, accessories cover, engine protection cover, tire protection cover, return to invoice cover, consumables cover, and many more. Further, this insurance cover provides customized Insurance declared Value as well.

What is Insurance Declared Value?

It is the maximum sum that the insurer pays in case of theft or total loss of the vehicle due to damage. 

IDV of a new car= Market value of the vehicle

But when you renew the insurance policy for your car, the IDV will decrease because of the rate of depreciation.  

Many people quote less IDV to lower the premium amount they have to pay for insurance. But this practice is not recommended because if your car is stolen or meets a horrible accident, the insurance claim will not be enough to pay for your losses.   

However, motor insurance does not offer coverage if:

• You meet an accident while driving someone else’s vehicle
• Someone uninsured meets an accident while driving your car.
• There is a case of drunken driving or lack of valid license,
• Damage to vehicles due to war, mutiny, nuclear risk, general aging, and deliberately by someone happens.
• Damage is caused to accessories inside the car unless it is of real significance to driving such as radio. 
• for unauthorized use of vehicle  

Factors that determine the Car Insurance Policy Premium

There are a number of factors that determine car insurance premiums. Some of those factors are:

• Insurance policy type and coverage-

Comprehensive insurance attracts a higher premium due to its coverage. Basic insurance policy such as third party insurance offers less coverage. Thus attracts less premium.

• Car model, variant, and market value-

 The engine, variant, and market value of the vehicle (Insurance Declared Value) also determines the premium. The higher the market value of the vehicle, the higher will be the insurance premium.

•   RTO- 

 The location of the registration of the vehicle also determines the premium it attracts. In India, there are Zone A and Zone B. The premium is high in Zone A and relatively lower in Zone B. Zone A includes locations such as Mumbai, Kolkata, Delhi, Chennai, Bangalore, Pune, Ahmedabad, and Hyderabad, and Zone B includes the rest of India.  

•  Age of the driver-

Young drivers are charged a higher premium than older drivers. This is based on the assumption that the young are more likely to engage in rash driving than the old drivers. 

• Claim history-

 A discount for safe driving is awarded by the insurance company to the car owner for safe driving if they don’t claim their insurance. This discount is called a No Claim Bonus. This can reach as high as 50% of the insurance.

 You can buy a motor insurance policy both online and offline, in our country. Further installing safety devices for car security, refraining from filing small claims, and opting for add-ons that enhance your insurance benefits will also help in ensuring the safety of your vehicle.  

Also Read: The benefits of Zero Depreciation Car Insurance explained in detail on AutoFlipz Blog page.