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Why buy car insurance in India?

Purchasing car insurance in India is mandatory under the Motor Vehicle Act, 1988 and gives you more benefits that you can imagine.

What does your car insurance cover?

• Third party liability
• Reimbursement for car-related damages and repairs due to accidents
• Hospitalisation coverage in case of a car accident
• Compensation in case of demise of the insured due to an accident

*Note: This is just a general summary of car insurance in India. Please refer to your policy document for details.

The coverages offered in different car insurance plans are as follows:

What’s not covered in your car insurance?

• Any damage caused to your car outside India’s geographical boundaries
• Damages caused to the car under the influence of intoxicating substances like alcohol and drugs
• Damage/loss to vehicle when driving without a valid driving license
• Mechanical breakdown of the car due to negligence
• Damage caused to the car due to wear and tear or ageing

Top 24 companies that provide car insurance

Types of car insurance in India

• Third-party insurance: This insurance is mandatory in India and covers damage/loss caused by you to a third-party person or vehicle. It also saves you from legal implications in case of an accident.
• Comprehensive insurance: This insurance type covers third-party liability as well damage caused to the insured person or vehicle in case of an accident.
• Standalone Own-Damage Car Insurance: This is a bundled cover that offers you coverage for both third-party liabilities as well as own damages incurred by your car in an unfortunate event. Among all the three types of car insurance plans, a comprehensive cover offers you the maximum coverage. You can further extend the coverage of this plan by opting for add-ons like zero depreciation cover, engine cover, etc

Understanding car insurance

• Insured Declared Value (IDV) : Simply put, IDV is the market value of your car. This amount then becomes the maximum amount the insurance company will pay in case of damage/loss to your car. IDV changes each year due to depreciation.

  • For example: If at the time of purchasing insurance your car is valued at INR 10 lac, the insurer will pay a maximum amount of INR 10 lac if you make a claim.

• No Claim Bonus (NCB): This is a discount given to the insured if they don’t make a claim request during a policy year.

  • For example: If you purchased your policy in May 2020 till May 2021 and don’t make any claim throughout the year, you will be offered a discount while renewing your policy for the upcoming year.

• Compulsory deductible: The minimum amount to be paid by the policyholder when a claim needs to be filed is the compulsory deductible. This is a mandatory amount as decided by the Insurance Regulatory Development Authority of India.

• For four-wheelers less than or equal to 1500 cc engine, the amount is INR 1,000. For those with more than 1500 cc, the amount is INR 2,000.

• Voluntary deductible: This is an optional share of claim that the insured voluntarily decides to pay in case of an accident. The only benefit by selecting this amount is that the total premium amount is reduced drastically. However, the out-of-pocket expenditure is higher in case of an accident or damage.

Read more about What is IDV and how does it work

What are car insurance Add-ons?

The additional coverage gives an insured automobile more coverage, thus it comes at a small cost. A car owner has to be paid additional premium payment in accordance with his/her auto insurance policy. As a result, auto prices for the purchase of additional insurance cover increase

Read more to know Ways to renew car insurance

Some common Car insurance add-ons

• Zero Depreciation: Every year, your car’s value depreciates (drops in price). Simply put, it means the value of your car decreases over time, much like any other assets. So, if you purchase a zero-depreciation cover, you will be covered the entire reimbursement cost in case your car gets into an accident. Let us explain with an example to make it simpler. If the total value of your claim amount is INR 10,000 and the car’s depreciation value is INR 4,000. If you make the claim without a depreciation cover, your insurer will pay INR 6,000 and you will have to pay the remaining INR 4,000 out of your pocket. However, if you have the cover, you will have to pay nothing out of your pocket. New Subheading - Every year, your car’s value drops in price (depreciates) much like any other asset. In case your car gets into an accident, you will be covered for the entire repair cost if you have a Zero Depreciation cover. For example,
  • Total repair cost - 10000
  • Car depreciation value 4000
  • Without zero dep, you pay 6000 (Assuming that 40% is paid by the insurer)
  • With zero dep, you pay 0

• Engine Protection Cover: An add-on benefit to your auto insurance, you can purchase engine protection cover to protect your car’s engine against any kind of damage. If you would like yourself to be covered against any kind of financial risk or if you live in a flood prone area, you must purchase this add-on. This is because the first thing impacted in case of a flood is the car engine. Other than rusting and molding that can happen on the engine, the flood water might jam your engine rendering it completely useless.

• Consumables Cover: All things your car consumes other than the fuel is covered in the consumables cover. The components included in this insurance add-on includes grease, engine oil, gearbox oil, washers, oil filters, nuts & bolts, power steering oil, A/C gas oil, coolant and other such items. Usually, the total amount of consumables in your car range from up to INR 10,000 to INR 40,000 depending upon the kind of vehicle you own. If you purchase this cover, you wouldn’t have to worry about this cost.
  
  
• Roadside Assistance Cover: In case your vehicle breaks down in the middle of the journey, you will have a professional technician to the rescue to bring you and your car back home, safe and sound. However, if you have purchased a new car recently, you might have roadside assistance coverage. Check your policy in detail before making a purchase.

• No Claim Bonus (NCB): This is a discount given to the insured if they don’t make a claim request during a policy year. For example: If you purchased your policy in May 2020 till May 2021 and don’t make any claim throughout the year, you will be offered a discount while renewing your policy for the upcoming year.

Why renew your car insurance on time?

You will be liable to pay a heavy fine in case you’re caught driving on Indian roads with an invaild car insurance. Renew your insurance on time to save yourself the hassle of paying a heavy traffic fine. The fine can be INR 2,000 with up to 3 months of imprisonment as per the New Motor Vehicle Act 2019.

Claiming your car insurance

You can either make a claim for cashless insurance or get a reimbursement for payments made due to damage/loss incurred by you due to a car accident.

In either case:

• Call your insurance provider on the helpline number
• Register for your claim
• Provide the necessary documents/proof of accident or damage
• Wait for your insurance company to confirm the claim