Motor Insurance

Motor insurance is the smartest way to take care of your vehicle.

As per IPC stats, there were 2,33,727 cases of motor theft from 2018 to 2020- which accounted for 4.6% of the total crimes. And the number of road accidents was 1,35,051- which accounted for 2.8% of the total crimes. Looking at the statistics of theft and accidental cases in the country, it is extremely crucial that you purchase an insurance plan for your vehicle. It is mandatory by the government for every person who owns a motor vehicle to buy a third-party motor insurance policy - so it is really a matter of law.

Let’s learn in detail about motor insurance - its benefits, types, categories, and more- in this article.
 

What is Motor Insurance?

As the name suggests, motor insurance is insurance for motor vehicles. It offers financial protection against loss or damages caused to the motor vehicle because of an accident, theft, a natural calamity, etc. It provides cover to you, the insured vehicle, a third-party person, and their property.

Two Important Things You Should Note

• As per the Motor Vehicles Act, 1988, it is mandatory to purchase third-party motor insurance. Driving a motor vehicle without insurance in a public place is a punishable offense under the Motor Vehicles Act.
• Irrespective of whether you’re purchasing motor insurance online or offline, it is important that you purchase it from a company authorized by the Insurance Regulatory and Development Authority of India (IRDAI).
   

Why Should You Purchase A Motor Insurance Policy?

• Legal Compulsion

  As per the Motor Vehicles Act, driving a motor vehicle without insurance in a public place is a punishable offense. The fine for driving without insurance starts from Rs. 2,000 for the first offense and Rs. 4,000 for the subsequent offense. It could also lead to imprisonment for 3 months within the law's discretion.

• Financial Security

  Now a days, cost of purchasing a new vehicle is high but cost of repairing a vehicle is also very high. A motor insurance policy provides financial protection to you against any unforeseen events like accidents, theft, or any other serious damage to your motor vehicle.

• Covers A Wide Range Of Risks

  A motor insurance plan offers protection against a variety of risks e.g. from thefts to accidents, from manmade disasters to natural calamities, etc. Further, it won’t just provide protection to your own vehicle; but you will also be protected against any legal liabilities owing to damages or financial losses caused to a third party person or property.
   

Benefits Of Buying Motor Insurance Policy Online

Here are some benefits of purchasing a motor insurance policy online-

• The buying process is simpler. You don’t need to go through the hassles of submitting documents by standing in long queues and filling out forms.
• You can easily research, and compare the various options available - and then make an informed decision.
• You can avail discounts and special offers on the premium amount.
• The policy can be purchased and renewed from anywhere at any time - and in just a few clicks.
• The policy issuance, too, is quick. You don’t need to wait for days or weeks to receive the policy papers.
   

 

Types Of Motor Insurance Policies In India

You will come across various types of Motor Insurance policies in the market, such as -

• Comprehensive Insurance Policy

  As the name suggests, it gives you complete enhanced insurance coverage. This type of insurance policy covers the third-party liability as well as the damages caused to your own vehicle. The best of both worlds!

• Third-Party Insurance Policy

  This is the most basic vehicle insurance and a statutory requirement. Without this policy, it is illegal to drive your motor vehicle in India. This policy covers any injury/losses caused to a third party individual or property by your insured vehicle.

• Own-Damage Insurance Cover

  This covers the damages caused to your own vehicle due to fire, rain, theft, etc. You can raise a claim under this policy to get compensation for the expenses incurred for repairing your vehicle.
   

Categories Of Motor Insurance Policies In India

There are three main categories of motor insurance in India -

• Private Car Insurance

  This insurance covers motor vehicles that are used for private or personal purposes against mishaps like burglary, accidents, man-made disasters, natural calamities, etc.

• Two-Wheeler Insurance

  As the name suggests, this insurance covers two-wheelers , like bikes, scooters, etc., and offers protection against accidents and other mishaps such as fire, theft, etc.

• Commercial Insurance

  This insurance policy covers all types of vehicles that are used for commercial purposes - and not for personal purposes. Examples include buses, cabs, auto-rickshaws, trucks, agricultural vehicles, ambulances, etc.
   

Add-Ons Available With Motor Insurance Plans

The motor insurance comes with certain add-ons in case you want extra protection for your vehicle.

• Zero/Nil Depreciation Cover

  With time, the value of your vehicle depreciates. If your motor vehicle gets damaged following a collision, and you have this add-on in your policy, you can claim the total cost of wear and tear of your car. The depreciation value of your vehicle won’t be deducted from your claim amount. This cover is applied to vehicles that are less than 5 years-old.

• Engine Protector Cover

  This protection covers you against the damages caused to the engine due to water seeping into the vehicle, leakage of lubricating oils, differential parts, or gearbox/engine failure.

• Return To Invoice Cover

  This add-on provides you with compensation equal to the car's invoice value i.e. the original value of the car when you purchased it. The claim applies when a car is stolen or when it is beyond repair.

• NCB Protect Cover

  NCB means "No Claim Bonus", which is a discount that is offered on the premium if there is no claim made in the previous policy tenure. You can get a maximum discount of 50% if you don’t make a claim for 5 consecutive years. However, if you do make a claim, the NCB will reset to 0%. This protection cover helps you in making a claim without affecting your NCB discount.

• Consumable Cover

  With this add-on, the insurance coverage is expanded to the consumable parts of your vehicle, such as engine oil, coolant, grease, nuts, bolts, etc.

• Roadside Assistance Cover

This add-on is a blessing in the case of an emergency. If your vehicle breaks down in the middle of the road, leaving you stranded, this cover helps you get roadside assistance. All you need to do is contact the insurance company toll-free no.

Here are some services available under roadside assistance -

1. Changing a flat tyre
2. Minor on-site repair
3. Car towing
4. Fuel delivery
5. Arrangement of replacement of car keys
6. Battery jump-start

• Tyre Protection Cover

  This add-on cover provides coverage for the repair and replacement cost of the vehicle tyres. It also covers the labour charges incurred during the process of repairing.

• Key Replacement Cover

  If your vehicle key is lost, damaged, or stolen, this cover comes to your rescue. It gives financial compensation for the costs incurred while replacing or repairing the key and lock-set.

• Loss Of Personal Belongings Cover

  This add-on provides financial coverage for any damage caused to your personal belongings or possessions kept inside the insured vehicle.

• Personal Accident Cover

  This add-on cover provides financial protection against death, permanent total, and permanent partial disability caused due to an accident. There are three types of personal accident covers available -

  • Personal Accident Cover For The Owner-Driver

This offers protection to the owner-driver against any accidental disability or accidental death.

• Personal Accident Cover For Passengers

This provides protection to the passengers travelling in the insured vehicle against any disability or death caused due to an accident.

• Personal Accident Cover For The Paid Driver

At the time of mishappening, if the vehicle is driven by an outside paid driver, then taking this cover will provide protection to the driver of the vehicle against any accidental disability or death.

Motor Insurance is unique and important. You need to buy this insurance, even if your vehicle is off-road. Whenever you buy a new vehicle, take out some time, read the vehicle insurance details thoroughly, and invest in the cover that fits your needs to the best.
 

Motor Insurance Policy Types

Motor insurance plan have a variety of options among which you can select the best one according to your specific needs. Some may find comprehensive motor insurance beneficial, while others may find the plan unsuitable depending upon their needs.

Let's dive right in.

• Third-Party Liability Only Cover

According to the IRDAI, third-party insurance is mandatory in India for all registered vehicles. The third-party liability insurance shields you from any financial losses that may arise as a consequence of bodily injury, death, and property damage to a third party.

third-party liability cover damage caused to another person and their property in an accident involving your vehicle. The maximum compensation for property damage is limited to Rs.7.5 lakh and there is no limit to the compensation amount in case of death or disability.

The amount to be paid by the insurance company both in the case of damage to third party property as well as to the person is decided by the Motor Vehicle Accident Claims Tribunal.

• Own Damage (OD) Cover Or Collision Damage

Own Damage Insurance is designed to protect your vehicle in case of an unexpected mishap. This policy covers the damages incurred to your vehicle resulting from any kind of loss or damage due to reasons like accidents, fire, natural calamities, etc.

A standard policy will pay the cost of repair after deducting depreciation for the age of the car, the cost of consumables, and a standard deduction called a compulsory deductible.

For example - Rahim purchased an Own Damage Cover for his car with an IDV of Rs. 5 Lakhs. After a few months, while driving, another driver swerved and bumped into his car. This collision severely damaged his car, and the repair costs are estimated to be Rs. 1.5 lakhs. The repair costs will be covered and paid subject to the terms of the policy.

• Comprehensive Car Insurance

The purpose of comprehensive car insurance is to provide coverage for the loss and damage incurred to both parties involved in the accident. If unpredictable event results in any loss or damage, this policy will help you get monetary assistance from your motor insurance company.

The policy includes comprehensive coverage for damages that your vehicle faced, as well as liability coverage for the third party.

The risks involved in driving in India are well known. Furthermore, an increase in private vehicles can increase the likelihood of road accidents and the violation of traffic laws. Even with the increased protocols taken by the government, accidents continue to occur. It is important that you choose a policy that provides adequate coverage so that you are protected physically and financially.

Now that you are aware of the various types of Motor Insurance policies available, we're sure you can go ahead and decide which policy serves your needs the best.
 

Type Of Coverage

A person saves their hard-earned money to purchase the car of their own choice and does every possible thing to take care of it. If you drive carefully, park your vehicle under the shade to protect its glasses and interior from direct sun rays and wash it regularly to keep it clean. You put so much of efforts just to take care of your newly purchased car.

Don’t you think you should put the same amount of effort into selecting an insurance plan to protect your car? A sudden accident, breakdown, natural calamity, man-made disaster, and other unexpected contingencies could damage your vehicle within minutes. And a motor insurance policy is a small price to pay for immeasurable peace of mind. It is mandatory to purchase an insurance plan for your vehicle. Driving without an active insurance plan can lead to legal repercussions and financial ones too- if your vehicle happens to face any damage.

All types of risks are not covered under a motor insurance policy. The policy will provide insurance coverage against specific hazards subject to certain terms and conditions.

In this article, let’s learn about all the risks that are covered under a motor insurance policy.

Coverages Under Motor Insurance

• Loss Or Damage Of The Vehicle Due To

1. Accidents caused due to negligence.
2. Natural calamities like earthquakes, floods, storms, cyclones, hurricanes, tempests, inundations, hailstorms, frost, landslides, lightning, etc.
3. Theft, burglary, riots, strikes, etc. resulting from human intervention.
4. Malicious acts like hostilities, an explosion of war weapons, terrorism, etc.
5. Damage while in transit by rail, road, inland waterways, lift, elevator or air.
6. Fire, explosion, self-ignition.

Please note: This is just an indicative list. The types of risks covered under motor insurance may vary across insurance companies. Ensure you read all the relevant policy documents so that you’re well-informed before making the purchase.

• Coverage For Accidental Disability And Death

  It is compulsory for insurance companies to offer personal accident cover in motor insurance policies. This cover offers protection to the owner of the vehicle in case they get injured in an accident.

  For instance, Aman’s friend Jay recently visited him. Aman and Jay went for the drive and suddenly his car meets with an accident in which both of them got severely injured and succumb to their injuries. Here the insurance company will provide compensation to Aman’s family but not Jay’s.

  Insurance companies also allow you to opt for personal accident cover for the passengers as well.

  So, in the above example, if Aman had opted for a personal accident cover for passengers at the time of buying the motor insurance plan, the insurance company would have provided compensation to Jay’s family as well.

  • Third-Party Legal Liability

    A motor insurance policy also provides a third-party liability cover. It offers protection to the policyholder against legal liabilities that may occur due to the loss/damage caused by them to a third party.

    Basically, it covers the vehicle owner’s legal liability to pay compensation for -

    Death or bodily injury to a third-party individual.

    Damage to the third-party property.

    For instance, say Sachit buys a motor insurance policy that offers coverage for third-party legal liability. After a few days, Sachit while driving his vehicle, meets with an accident that damages Mr. Rai’s scooter. The motor insurance cover purchased by Sachit will cover the repair costs for the damage caused to Mr. Rai’s scooter.

Important:

In case of injury or death of a third party, the amount that will be paid to the third party or their family will be decided by the court. There is no compensation limit.

In case of damage to third-party property, the amount that will be compensated cannot exceed the limit of Rs. 7.5 lakhs.

Let’s take Sachit’s example again. Say Sachit has caused damage worth Rs. 10 lakhs to Mr. Rai’s property. In this case, Mr. Rai will only be compensated for Rs. 7.5 lakhs.

So, these are some of the things covered under a motor insurance policy. A motor insurance plan offers protection against the financial expenses of the damages caused to the insured vehicle, the policyholder, or to a third party depending upon the type of policy.

It is important to understand the inclusions and exclusions of the policy. Generally, mechanical or electrical breakdowns of the vehicle, wear and tear of the vehicle’s tyres or tubes, and damage to the engine due to oil leakage are some of the situations not covered under a motor insurance policy.

Apart from these core coverage’s, a motor insurance policy also offers multiple customizations in the form of add-ons or riders.
 

 

Insured Declared Value - Overview

Suppose you want to purchase a car.

How much would you pay for a car that has run only 100 kms in 3 months? Would you pay the same price as a brand-new car? Obviously no? Now, what about a car which is one year old?

A car like your smartphone, or your house furniture is a depreciating asset. The market value of these assets changes significantly with age and usage.

The car insurance company will value your car w.r.t. its current market value i.e. the value after depreciation at the time of policy renewal. This value is called "Insured Declared Value" or "IDV".

The Insured Declared Value (IDV) is the approximate market value of the vehicle you own. In simpler words, it’s the price you might receive in the event you raise a claim in case of theft or total damage to the vehicle. And you, as the owner will get the declared IDV from the insurance company.

IDV is one of the most important aspects of motor insurance. It is crucial to understand how it affects coverage, premiums, and claims.

Let’s have a look!

• IDV – How It Relates With Premium?

Premium rates are determined based on the IDV. The insurance premium is directly proportional to the IDV of your vehicle. When your vehicle’s IDV value increases, your premium shall also increase. When your IDV decreases, your premium shall also decrease.

• Factors Impacting IDV

Insured Declared Value is calculated based on the following parameters -

Make, model, and a variant of the car. Of course, the car’s value will be based on its manufacturer, make, and model like a BMW has a higher value than a Maruti Swift Dzire. The IDV will also differ for different types of cars. For instance, Maruti's IDV will be different from BMW’s.

Cubic capacity and ex-showroom price of the vehicle. Ex-showroom price is the base price of the vehicle before adding the cost of registration, insurance, and road tax. The ex-showroom price varies from city to city due to logistics and state government costs. Correspondingly, the IDV will vary depending on the ex-showroom price. For example, Chennai and Pune may have different ex-showroom prices.

The age of the car: The value of the car decreases as it gets old. This decreasing value due to wear and tear is called depreciation. The older the car, the higher the depreciation, and the lesser your IDV. This includes depreciation of accessories too.

• How Do You Calculate IDV?

To calculate the Insured Declared Value, the formula used is -

(Manufacturer's listed price - depreciation) + (Cost of accessories not included in the listed price - a depreciation of these parts, if any.)

Computing Depreciation

All vehicles depreciate over time. Depreciation begins as soon as you take the vehicle out of the showroom. This happens because of the age, and wear and tear of the vehicle.

For example - Rahul and his brother Rohan own the same Honda City model. Rahul bought his car in 2018, whereas Rohan bought his car in 2019. Even though the make and model of both vehicles are the same, Rahul’s car will be more depreciated as compared to Rohan’s. This is because his car is older.

The depreciation is computed based on the age of the vehicle and is decided by each insurer as per their method. Here is an indicative example of how depreciation would be calculated by an insurer -

*Depreciation is not taken into account for calculating the IDV of vehicles aged more than 5 years.

The depreciation rate and its current market value play an important role while calculating your IDV. The amount of the claim will be determined by these factors. So, your car's IDV decreases every year from the time it is purchased.

• How Do You Calculate IDV?

Things You Should Keep In Mind

1. The IDV is the maximum amount of compensation that you will receive in case of the total loss or theft of the car. This is to ensure that you get a sufficient amount to meet the financial losses incurred when the car is damaged beyond repair or the car is stolen.
2. Choosing a lower IDV can cut down your expenses, but this can prove to be a big headache during the claim settlement process as there might be situations wherein the loss or damage goes beyond the chosen IDV, for instance, if your vehicle is stolen.
3. Don’t overstate the IDV of your vehicle. This will increase the premium and your claim will be settled based on the quantum of loss and not the IDV you have chosen.
4. Avoid making random calculations to fix the IDV. Stick to the formula mentioned above to determine your IDV as this shall help you avoid any kind of trouble that can happen during claim settlement.

Note:The IDV and other values can vary from insurer to insurer. Do read the policy wordings before purchasing it.
 

Let Us Understand The Concept Of IDV Better With An Example

Harsh purchased a luxury car worth Rs. 30 lakhs. His driving style is safe, and he follows all traffic laws. Due to that, he has an impeccable driving record and no claims against him. After two years, as per the depreciation chart, the car's value declined by 30%, and now the IDV of the vehicle is Rs. 21 lakhs.

Scenario 1: While renewing his car insurance , Harsh set the IDV at Rs. 12 lakhs to save up on premiums. Unfortunately, a few months later, his car gets stolen. Now, when he raises a claim, he will be eligible to receive only Rs. 12 lakhs instead of the IDV he should have set, i.e. Rs. 21 lakhs. While he saved some money on the premiums, he will face a huge loss of approximately Rs. 9 lakhs.

Scenario 2: Now, Harsh did a simple market analysis before renewing the policy and discovered that a used car of the same manufacturing year and model is being sold for approx. Rs. 22 lakhs currently. Considering the depreciation factor, Based on the market analysis, he estimated the IDV to be around Rs. 21,00,000. He can claim this amount if his car is stolen or completely damaged.

Pro Tip: Find the second-hand value of your car from a credible source, and ensure you fix your IDV around this value - since you need sufficient coverage in the event of total damage or loss of your vehicle. This is to ensure that you don’t face any sort of hassles later. Also, check whether the policy document you receive from the insurer contains the exact values you discussed with the insurer as per the requirements mentioned above.

 

Exclusions Under Motor Insurance

• Wear And Tear Of Vehicle

Losses caused to the vehicle because of ordinary wear and tear of the vehicle do not fall within the ambit of the policy’s coverage.

And, if the vehicle undergoes any damage in the regular course of action due to the following conditions, the same will not be covered by the policy -

1. Mechanical or electrical breakdowns
2. Engine/body part failure
3. Breakage because of rust or weather

• Damage To Tyres, Tubes, Or Electrical Components

  Tyres, tubes, and electrical components face damage due to regular use and severe weather conditions. Electrical components such as wires, battery, engine, etc. may also malfunction or stop working because of short circuits, oil leakage, or rodents. These damages will not be covered by the policy.

• Damage Caused To The Vehicle If The Driver Doesn’t Have A Valid Driver’s License

  Possessing a valid driving licence in India is a compulsory requirement. It is issued by the Regional Transport Authority (RTA) or the Regional Transport Office (RTO).

  Any damage caused to the vehicle if you do not have a valid driver’s license will not be covered by your policy.

• Damage Caused To The Vehicle If The Driver Is Under The Influence Of Drugs Or Alcohol

  You can face legal repercussions under the Motor Vehicles Act if you drive a vehicle under the influence of alcohol or narcotics. Any damage caused to your vehicle during the course of such driving will not be covered by the insurance policy.

• Damage Caused If The Vehicle Is Being Used For Any Other Purpose

  If the vehicle is used for a purpose other than the one specified in the insurance certificate, and it gets damaged as a result - the same won’t be covered.

• Violation Of Vehicle Manufacturer’s Guidelines

  Each vehicle comes with a manual with information about the vehicle and guidelines that should be followed by the user. For instance, there may be instructions on how you should deal with overheating, etc. If you use any methods beyond these guidelines and as a result, violate them - any damage sustained by the vehicle will not be covered by the policy.

• Damage Caused By War

  Any damage to the vehicle due to war, terror attack, civil war, radiation, or nuclear material/weapons, is not included within the scope of the policy coverage.

• Damage Caused Beyond The Specified Geographical Area

  The coverage may also depend on the geographic location, in the following ways -

  Insurers may be licensed to issue policies for a certain geographical area, or

  The insurance policy may state a certain geographical area within which the coverage will be in force.

  Any vehicular accident that happens outside these areas will not be covered under the policy.

  Note: If you want to take your vehicle outside India, you need to cover the risks with a separate insurance policy.

• Any Accident That Happens After The Insurance Policy Expires

  A motor insurance policy is a mandatory requirement, as stated by the Motor Vehicles Act and needs to be renewed within the specified due date. If any damage or loss, even if covered under the old policy, happens after the policy expires - it will not be covered.
   

How To Calculate Motor Insurance Premiums

Imagine you and your neighbour own the same model of vehicle. And recently, both of you purchased motor insurance plans for your vehicles from the same insurance company, too. Your neighbour’s motor insurance premium amount, however, is lower than yours.

Wondering why?

Besides the model of the vehicle, many other factors affect the premium of a motor insurance policy - such as the add-on covers you opt for, the age of your vehicle, your claim history, the deductible opted under the policy, your geographical location, etc.

Factors That Affect Motor Insurance Premium Rates

• Make, Model, Variant

The make, model, and engine capacity of your vehicle are one of the most important factors that affect your motor insurance premiums. Premiums of a sports car will be higher than standard cars. Similarly, vehicles with bigger engine sizes are more prone to accidents. Hence, the premiums will be higher.

For example- The premium of an insurance policy for a Honda City car will be more than that of a Maruti Swift car. On the other hand, the premiums of an insurance policy for a Maruti Swift ZXi will be more than that of a Maruti Swift LXi.

• Location

Motor insurance premiums will be higher if your car is registered in an area that experiences dense traffic, or has high cases of vandalism, etc.

• Age Of The Vehicle

The age of the motor vehicle is another important factor that calculates motor insurance premiums. The older the vehicle, the higher will be the depreciation (reduction in the value of your vehicle). This means that the premium amount will be less if you insure an old vehicle and more if you insure a new vehicle.

• Any Previous Claims

Insurance companies check whether you have made any claims in the past. If you have taken a claim, your policy will not be eligible for an NCB, which will increase your premiums- and vice versa.

• Fuel Type

The type of fuel affects the motor insurance premiums. For instance, if you own a petrol or a diesel car, the premiums will be relatively lower than a CNG car- because the cost of maintenance of CNG cars is higher comparatively.

• Insured Declared Value

IDV represents the estimated market value of the vehicle. It is the maximum amount the insurance company will pay in case a person files a claim under the policy.

Formula to calculate IDV:

IDV = [Showroom price of the car + Cost of accessories (if any)] - Depreciation value as per IRDAI

IDV is exclusively used for a comprehensive motor insurance policies, and the higher the IDV, the higher will be the premium amount of the policy.

• Voluntary Deductible

Insurers offer you the option to voluntarily opt for a deductible and as a result, reduce your premium amount. A deductible is the amount you will have to pay before the insurance company starts paying you.

For instance, you buy a motor insurance plan and opt for a deductible of Rs. 2500 and you get a discount of Rs. 750 on your own damage premium. A few weeks later you file a claim for Rs. 10,000. In this case, you will have to pay Rs. 2500 of the cost along with the compulsory deductibles out of your pocket every time you make a claim.

Voluntary deductible is one of the measures used to control premiums of a motor insurance policy. Generally, the motor insurance premium will be lower if you opt for a higher deductible and vice versa.

• Type Of Coverage

The premium will also be affected based on the coverage, add-ons, etc. you opt for. The more covers you opt with your base motor insurance plan; the higher will be the premium amount.

• Where Do You Compare Car Insurance From?

Premiums may vary for the same car value, with the same customizations, add-on coverage, etc. from platform to platform, agent to agent.
 

Components Of A Motor Insurance Premium

• Premium Of Own Damage Cover

  Damages caused to the insured vehicle because of an earthquake, storm, fire, accident, etc. are covered under the own damage cover. The premiums for this type of cover will vary across insurers.

• Premium Of Third-Party Liability Cover

  A third-party insurance policy is mandatory for every vehicle owner in India, as per Motor Vehicles Act, 1988. It offers you financial protection against legal liabilities that occur due to the loss/damage caused to a third-party individual or property. The premiums of a third-party liability cover are decided after taking into consideration the cubic capacity of your vehicle engine.

• Compulsory Personal Accident Cover

  Looking at the increase in cases of road accidents, the government has made it mandatory for vehicle owners to purchase a personal accident insurance cover. This cover provides financial protection against death, permanent and partial disability caused due to an accident.

• Riders/ Add-On Covers

  Riders are ready-made extensions that provide an extra coverage under specific situations. There are several add-ons you can buy with a motor insurance policy like zero depreciation cover , engine cover, lock and key replacement cover, No Claim Bonus protection cover, etc. The premiums will be higher if you opt for more add-ons and vice versa.

• Other Components

  Other than the above-mentioned components, several discounts will also affect your motor insurance premiums. These will include the discounts you get for -

• No Claim Bonus Percentage
  Insurance companies offer a discount on premiums if you don’t make a claim under the motor insurance policy in the previous policy year. You can earn a discount of around 20% to 50% in 5 years if there are no claims made.
   
• Being A Member Of Automobile Association
  You can get a discount on your motor insurance premiums if you are a member of a recognized automobile association.
   
• Installing Recognized Anti-theft Devices
  Installing anti-theft devices in your vehicles can help you fetch discounts from the insurance company. Anti-theft devices help to prevent theft. For example, a thief will prefer to steal a car that doesn’t have any security rather than stealing a car with a tyre lock. Anti-theft devices use multiple technologies that enhance the security of your vehicle.

• Formula To Calculate The Overall Motor Insurance Policy Premium

  Overall Premium = [Own Damage Cover + third-party liability cover + Add-ons (eg. bonus coverage)] – [Discount & Benefits (No Claim Bonus, Theft Discount, etc.)]

 

How Do You Renew Your Motor Insurance?

The insurance company generally gives you reminders when your existing insurance plan is about to expire.

• If you want to renew your policy, contact and inform your insurer by phone or e-mail.
• Share all the details about the current condition of your vehicle with your insurer.
• Then, your insurer will analyse and inform you if any physical inspection of the car is required. An inspection will be required if -
  • Your current policy is expired, or
  • Any addition has been made to the car which needs to be insured (like a CNG kit, etc.).
• If an inspection is required, the insurer will ask for an appointment at your convenience.
• You will be then required to provide your car insurance documents to the Inspection Inspector.
• After inspection, the insurer will share the renewal premium amount with you - which you will have to pay.
• Once you make the payment, you will receive all policy papers from your insurer.
• If you want to switch your insurer at the time of renewal, you can contact your preferred insurer before the policy expires.
• Some insurers might also send you a renewal link via email, SMS, or WhatsApp. You can easily renew the policy using the link.
   

How Can You Reduce Motor Insurance Premiums?

Here are some tips that you can follow to lower your motor insurance premium without lessening your coverage and other important benefits -

• Compare Available Policy Options

  Compare the policies available with different insurers and check out the premiums charged by them. You can make use of various online platforms that provide a comparison of premium rates and other benefits.

• Choose the deductible wisely

A deductible is an amount you need to pay from your end during a claim before your insurance company starts paying up. There are two types of deductibles -

•  Compulsory deductible - A fixed amount set by IRDAI that must be paid from your end.
•  Voluntary deductible - You can voluntarily choose to pay this from your own pocket.

The higher the deductible, the lower the premium. At the time of policy purchase, if you know you are a safe and responsible driver, you can choose a high voluntary deductible amount and can save on the premiums. You must note that you will have to pay the deductible amount you have selected voluntarily each time you make a claim.

• Keep your eyes on the road and save with discounts

  Driving safely will reduce your chances of getting into an accident. No accidents is equal to no claims. So, if you don't raise a claim during the policy year, your insurance company shall reward you with a No Claim Bonus, i.e, a discount you get from your insurer for not filing claims during your policy term. It can range from 20% to 50%.

• Avoid raising a claim for minor damages

  It may seem pointless to file a claim for minor damages, like a cracked headlight, small scratch, etc. If you raise a claim, even for such a small amount, you will lose out on the No Claim Bonus at the time of renewal. You can save quite a bit by not filing claims for smaller amounts which can be paid by you.

• Move NCB to your new policy

  If you are planning to sell your car and get a new one, the new one will require an insurance policy as well. Save up on the new policy's premium by transferring the NCB from the old policy to this new policy. You can do this by obtaining an NCB retention letter from the old insurance company, which will retain the discount on your premiums for your new policy.

• Become a member of the Automobile Association

  Insurers give discounts to drivers who are members of certain automobile associations in India. By joining the Automobile Association of India (AAI) or Western India Automobile Association (WIAA), you can receive discounts on your motor insurance premiums.

• Install certified anti-theft devices

  Installing certified anti-theft devices will lessen the chances of your vehicle being stolen. You can do this by installing certified anti-theft devices like gear locks, anti-theft alarms, steering locks, etc. from registered manufacturers. This will give you a discount on the premium.

• Keep the policy up-to-date

  Renew your policy on time to prevent any lapses. The insurance company may charge you a higher amount on premium for renewing a policy that has already expired, as non-payment of premium is considered risky. You might also lose out on your No Claim Bonus.

• Don't needlessly opt for every available add-on

  An add-on cover for motor insurance offers additional protection for your vehicle. You can buy these add-ons at a certain extra cost. It’s important that you pick the add-ons after analysing your needs and requirements. Every add-on may not be essential, and you can lower your premium by eliminating those and choosing the ones you actually require.
   

How Can You Purchase Motor Insurance Online?

Purchasing a policy has become very quick and easy. You can follow these steps to purchase a motor insurance policy online:

• Visit any insurer's website or the website of any web aggregator or broker.
• Select the type of vehicle you need to insure (car, bike, or commercial vehicle)
• Enter the details of your vehicle like registration number, registration date, make and model of the vehicle, etc.
• Once these details are filled you will be re-directed to the quote page where you will see the quotation for your vehicle.
• If you are purchasing insurance on a web aggregator/broker’s website you can see multiple quotes from different insurers.
• You select the desired add-ons and IDV as per your requirement and proceed.
• Once the coverage is decided, you can proceed to make the payment.
• Before making the payment make sure all the details filled in by you are correct.
• Once the payment is done, you will receive the policy copy on your registered email address.
   

What Should You Consider While Purchasing A Motor Insurance Policy?

Check the following before you buy the motor insurance policy -

• Understand your requirement

  First and foremost, assess your requirements. Decide on the type of cover you want to buy, and whether you need any additional features and add-ons.

• Third-party or Comprehensive?

Once your requirements are clear, you can choose between a Third-party policy and a Comprehensive policy. A third-party policy is a good choice if you -

• Don’t drive frequently
• Are confident you won't damage your car
• Don’t want to pay large insurance premiums

In all other cases, you should ideally go for a comprehensive policy.

• Coverage

  The Insured Declared Value (IDV) is the estimated market value of your vehicle. It is the maximum amount the insurance company will pay in case a claim arises under the motor insurance policy. So, make sure you select a policy that provides an adequate IDV.

  Choosing a lower IDV can lessen the premiums, but this can prove to be troublesome during the claims as there might be situations wherein the loss or damage goes beyond the chosen IDV, for instance, if your vehicle is stolen.

• Customisation

  You can select several features and benefits with your base motor insurance policy so that it is perfectly tailored to your needs. You can also opt for a variety of add-ons, like NCB Protector Cover, Zero Depreciation Cover, Roadside Assistance Cover, Personal Accident Cover, etc. These add-ons will provide extra protection to your vehicle.

• Network Garages

  There are two ways you can make a claim under motor insurance - either on a cashless or a reimbursement basis. The cashless claim facility will only be available at the insurer's network garages, i.e., the garages listed with the insurer. So, when you're buying a motor insurance policy, check the network garages listed with the insurance company. Ensure you buy a policy in which at least a few preferred network garages located near your house and workplace are covered.

• Understand The T&Cs

  Go through the policy documents and brochures and understand the terms and conditions of the policy you’re planning to buy. Understand the inclusions and the exclusions of the policy.

• Personal Accident Cover

  As per government norms, it is mandatory to have a personal accident (PA) cover for the owner-driver. Make sure you add it to the policy if you don’t have one already. Not having a PA cover for the owner-driver may lead to a rejection of claims as well.

As you can see, there is something for everyone. Motor Insurance is unique and important. You need to buy this insurance, even if your vehicle is off-road. Whenever you buy a new vehicle, take out some time, read the vehicle insurance details thoroughly, and invest in the cover that fits your needs the best.
 

How To Apply For A claim?

Imagine you have purchased your dream car after extensive research and have insured it with an optimum motor insurance policy. You are out on a relaxing drive, but another driver tries to blindside you and as a result, damages your car’s trunk and tail lights.

Yes, accidents happen uninformed. Despite being a safe driver, you may still encounter these kinds of unfortunate incidents.

Motor insurance comes to your rescue to help you deal with the financial losses resulting from any loss or damages that occurred to your vehicle in case of theft, accidents, etc. It also covers third-party liabilities.

However, the entire process of filing a claim and getting the desired coverage amount is quite arduous. A seamless claim process depends upon following certain steps, failing which your claim may get declined by your insurer.

What are the steps involved in filing a claim for motor insurance? What documents are required to submit? What can you do to avoid any problems down the road, at the time of claim settlement?

Let’s see!

 

Making A Claim

If your vehicle faces an unfortunate event like an accident, theft, or any similar mishap - you need to file a claim in order to get the cover amount to take care of the costs.

If your vehicle has faced any loss or damage, you need to contact your insurance company immediately and inform them about the situation to initiate the claim settlement process.

The insurance company will require necessary documents during this process like the vehicle registration certificate, your driving license, payment receipt, etc. The list of documents differs for different types of claims. So, make sure your motor insurance company gives you a list of documents at the time of policy purchase to avoid any trouble during the claim settlement process.
 

Steps You Need To Follow To Make A Claim

There are various steps which need to be followed while filing a claim. The steps may vary depending upon the type of damage caused.

(1) Own Damage Claim Process

Step 1: Inform The Insurance Company

It is crucial to notify the insurer within a span of 48 hours or as soon as possible after the damage is caused. You should contact your insurance company to provide a detailed description of the extent of the damage caused to your vehicle. Make sure to not withhold any information from your insurer since this may hinder the settlement of your claim.

Step 2: Report The Incident To The Police

It is necessary to file an FIR to substantiate your claim if you suspect your vehicle has been stolen, if there was an accidental death or if there was any third-party involvement. The FIR will contain all the essential information about the driver, the vehicle, passengers, witnesses, time and date, journey route, etc.

Step 3: Evaluation Of Damages

After you inform your insurance company, they will send a surveyor to the location to inspect the vehicle and the intensity of the damage. Once the evaluation is conducted by the surveyor, the reports are sent to the insurance company for the claim process. An open and transparent procedure is maintained by the insurance company to ensure a streamlined claim settlement process.

Step 4:Submission Of Documents

Here are the documents required to submit while filing your own damage claim.

• Duly filled and signed claim form
• Copy of the insurance policy
• Tax payment receipt
• Estimate the cost from the mechanic incurred to repair the damaged vehicle. This should be signed and stamped by the garage.
• Original repair invoice and payment receipt - signed and stamped by the garage. In the case of a cashless claim, only a repair invoice needs to be submitted.
• Claims discharge cum satisfaction voucher signed across a revenue stamp
• Vehicle inspection address details if you have not taken the vehicle to the nearest garage
• License copy of the driver who was driving the vehicle when the accident occurred - a verified photocopy to the surveyor along with the original
• Registration certificate - a verified photocopy to the surveyor along with the original
• Pan Card
• Aadhar Card
• Pollution Under Control Certificate - a photocopy
• Cancelled Cheque/ Passbook - in case of a reimbursement claim

Please Note:This is just an indicative list. The documents that you may need to submit while filing your own damage claim may vary across insurance companies.

Step 5: Claim Settlement

After inspecting the damage, the service provider shall issue the estimated cost for repair. On receiving the cost, the insurance company will give its approval for the amount for the repair of the vehicle.

According to the coverage chosen, you may have to pay deductibles and depreciation charges for the parts while filing a claim. A deductible is part of the claim amount that you need to pay from your own pocket. You can refer to our article on Deductibles for more information. Motor Insurance Deductibles.

(2) Third-Party Liability Claim Process

Step 1: File An FIR

Go to the nearest police station, file an FIR, and collect the charge sheet. Keep a copy of the report that outlines the order of events and the parties involved.

Step 2: Submit The Required Documents

At the time of filing a claim, keep all the mandatory documents handy and provide them to the insurer.

Here’s a list of documents you will need to submit in case of a third-party liability claim -

• First Information Report (FIR)
• Duly filled and signed claim form
• Copy of the insurance policy
• Tax payment receipt
• Estimate the cost of repairing the vehicle from the mechanic. This should be signed and stamped by the garage
• Original repair invoice and payment receipt - signed and stamped by the garage. In the case of a cashless claim, only a repair invoice needs to be submitted.
• Claims discharge cum satisfaction voucher signed across a revenue stamp
• Vehicle inspection address details if you have not taken the vehicle to the nearest garage
• License copy of the driver who was driving the vehicle when the accident occurred - a verified photocopy to the surveyor along with the original
• Registration certificate - a verified photocopy to the surveyor along with the original
• Pan Card
• Aadhaar Card
• Pollution Under Control Certificate - a photocopy
• Cancelled Cheque/ Passbook - in case of reimbursement claim

Please Note:The documents that need to be submitted in case of a third-party liability claim may vary across insurance companies. This is just an indicative list.

Step 3: Visit The Nearest Motor Accidents Claims Tribunal

All third-party liability claims are settled in the Motor Accident Claims Tribunal (MACT).

File a claim -

• At your nearest tribunal if the incident took place close to your residence
• At the tribunal closest to the place of the accident, if the incident happened in some other area

The tribunal authority shall examine the entire situation before determining the course of action.

Step 4: Claim Settlement

If the third party has faced any loss or damage as a result of an accident, the maximum amount you shall receive to compensate for any property damage is Rs. 7.5 lakhs. Any expenses above this amount will be your responsibility.

However, in the event of an injury or death, there is no specified limit to the claim amount being paid to the injured.

(3) Theft Claim Process

Step 1: File An FIR

Report the theft incident by filing an FIR at the nearest police station by providing information about the vehicle, such as the chassis number, the registration number, the model, the colour, scratches, dents, etc. so the investigation can be conducted.

Step 2: Inform The Insurer

You should inform your insurance company about the theft by filing a claim. Disclose the entire situation to them without hiding any details.

Step 3: Inform The RTO

Inform the Road Transportation Office (RTO) about your vehicle being stolen. The RTO is the authority responsible for vehicle ownership transfer, and the sooner you inform them the lesser the chances of any unauthorized change in ownership by the person who has stolen your vehicle.

Step 4: Document Submission

Here are the documents you will need to submit in case of a theft claim.

• Insurance policy document
• Tax payment receipt
• Letter of subrogation
• Official intimation about theft and discontinued use of the vehicle to the RTO
• Form 28, Form 29, and Form 30
• Previous insurance policy details like policy number, insurance office/company, duration, and time of insurance.
• Additional information about booklets, duplicate keys, warranty cards, and other accessories
• Registration book
• Claim discharge voucher signed across a revenue stamp

Please Note:The documents that need to be submitted in case of a theft claim may vary across insurance companies. This is just an indicative list.

Step 5: Investigation By The Police

Once you have informed the police about the theft, the police department will try to locate the stolen vehicle with all your furnished details. In case your vehicle cannot be traced even after six months from the date of the complaint, you are entitled to receive a No-Trace Report from the police station.

Step 6: Transfer Of RC

You must show the No-Trace Report to your insurer for the approval of your claim. After that, the registration certificate of the stolen vehicle will be transferred to the insurance company.

The process for submitting a claim, as well as the documents needed, varies across insurance companies. So, when buying a motor insurance policy, make sure you ask the insurance company about the claim process as well as the paperwork you will need to submit to receive the claim amount to avoid any problems during claim settlement. Follow the steps mentioned above systematically to ensure a smooth claim process.
 

Frequently Asked Questions

1. Which type of motor insurance is mandatory in India?
According to Motor Vehicles Act, 1988, third-party liability insurance in India is mandatory for all vehicle owners. It protects you against damages caused to third-party property or bodily injury caused to them in an accident.

2. What is the difference between uninsured and underinsured motorist coverage?
Uninsured motorist coverage protects you in case you met an accident with a faulty driver who does not have third-party liability insurance. Underinsured motorist coverage protects you when the other driver has the insurance policy but liability limits are too less to cover the expenses incurred to the third person.

3. How can you get the best insurance policy for yourself?
To avail best insurance policy, one should compare the premium amount, coverage provided, inclusions, exclusions, hidden charges, etc. from different websites. After comparison, one should go for the policy that fulfills all their requirements.

4. What is the tenure of the motor insurance policy?
Any motor insurance policy is generally issued for only one year from the date of policy issuance. However, Supreme Court in July’2018 mandated that all new motor insurance policies will cover third-party liability insurance for three years.

5. Does the insurance policy get transferred in case the vehicle is being sold off?
Yes, as per section 157 of the Motor Vehicles Act, it is mandatory to transfer the insurance policy within 14 days of purchase. It can be transferred to the new owner by raising the request with the motor insurance provider and by submitting the required documents.