Car Insurance

Car Insurance is a safeguard against the damages that follow the events of an unfortunate accident or a natural calamity to your vehicle and the inhabitants of the car. Additionally, Car Insurance covers the protection in case of legal claims of a third party due to an accident caused by you

The Motor Vehicles Act, 1988, under section 146, dictates that every vehicle in the country must be insured for third party risk. The ever increasing number of accidents, the casualties and disability among the victims, desperately needs to be curbed and thus, car insurance is considered as a must for car owners.

Yes. According to the Motor Vehicles Act 1988, it is mandatory for every car buyer to get its vehicle proper insurance at the time of purchase in the country.

There are two types of car insurance options available to the buyers - Third party Insurance and Comprehensive Insurance.

  1. Third party Insurance
  2. It covers the damages incurred by the policy holder in case of an accident or physical injury/death to a third party. The law dictates every buyer should have a third party insurance. However, this option does not include insurance coverage for you, your co-passengers and your vehicle in case of an accident.

  3. Comprehensive Insurance
  4. Safety cover allows compensation for losses incurred by you, your co-passengers and your car along with the third party safeguard.

Comprehensive Car Insurance - It is more appropriate since it covers the Third Party Insurance and also provides compensation for damages to one's own car, co-passengers and self in case of an accident.

You must inform the insurer of all the past history and details of your driving, users of the vehicle, details of the vehicle and the locations where the car had been used. The insurer will then suggest the best option for the insurance of your car according to your requirements. People, who refuse to share details by not being completely honest, run the risk of having their insurance cover getting discarded.

Every vehicle insurance company has its own compiled data and methodologies to carry out the calculation of premium amount, which adheres to the strategy devised for attracting customers to its doors. Taking into account of the bestowal of discounts, every insurance company comes up with different premiums and consumers have to decide which way to go for, according to their needs.

Every vehicle insurance company before deciding the premium, considers the maker and model of the car, the year in which the vehicle was assembled, place of registration, current showroom cost and the category of client - individual or corporate owner. The price of the vehicle also affects the principal insurance amount, thereby influencing the consequent premium cost.

For the customers applying for the renewal of the policy, the insurance company takes into consideration the compensation claim records of the policy owner. If the claimant has applied for reimbursement few times in the past, the company lowers the prescribed premium amount. Accordingly, if the policy owner has not claimed for compensation during a specific period, then the insurance firm reward the owner with a 'No claim bonus'. Usually the period is of five years.

If the insurance certificate is not provided by the insurer at the time of purchase, the buyer gets a provisional insurance document called 'cover note', which acts as an insurance proof and a vehicle can be registered in accordance with it. The temporary cover note holds validity for 60 days following the issuing date and afterwards, the original policy certificate is issued to the buyer.

Legal Liability provides legal reimbursement claimed by a third party against the driver for physical damage/loss in the event of an accident. The car insurance covers the driver for an amount equal to his salary during the policy period along with the occupational hazards and accidents.

Yes. Anyone can buy insurance on behalf of the person insured.

Yes. It can be done if the policy is renewed between the period commencing two months prior to the expiry date and six days following the expiry of previous cover.

The Car Insurance policy is valid throughout the Indian Territory regardless of where the accident had happened.

In the event of an accident, how does the insurance firm pay for the reimbursement of the following -

(I) Sum of depreciation according to the rate prescribed
(II) Reasonable cost of salvage (in case it is not repaired at the facility)
(III) Voluntary deductions mentioned in the policy, if you have opted for any
(IV) Mandatory excess levied by the insurance firm
(V) Advance payment by the company according to an approximated damage sum

Every motor vehicle insurance company operates with their own formulae and manner in handling the compensation mechanism. Most firms provide cashless claim facility and handle the reimbursement procedure themselves, enabling the client free from paying towards repairs.

Besides the cashless alternative, companies also provide a non-cashless service, which entitles the claimant to be compensated once all the details of payments towards repairs and service bills have been submitted to the company by the him. Once the bills are submitted, the company evaluates them and then compensates the claimant.

Further, in non-cashless if the claimant couldn't cover the entire payment, then it must notify the insurance representative and the company will provide the excess payment.

A Certificate of Insurance issued at the time of purchasing formalities proves that owner of the vehicle has a valid car insurance and only the owner of the vehicle can apply for an insurance claim. The insurer has to be made aware prior to the claim announcement. Further, if the certificated is found to be deformed, scratched or lost, then a replica of the original can be obtained by paying a fee and submitting an affidavit stating the requirement of the replica.

Regional Transport Office issued Driving License proves that the claimant is authenticated to drive a particular vehicle type and it is illegal to drive a vehicle without a valid license. Those who fail to comply with the regulation are liable for a penalty.

Registration Certificate of a vehicle proves that a motor vehicle is duly registered by the claimant and follows the Indian Motor Vehicle Act, 1988. The Law dictates that the owner of a vehicle must carry the Registration Certificate or an attested copy in person while driving.

Depreciation, substantial losses, mechanical and electrical failure of the vehicle along with driving under influence (DUI) or vehicle driven by some one other person than the one stated in the insurance cover, such situations are not covered by Car Insurance. Further, vehicle insurance does not provide damage compensation, if the vehicle is used outside the geographical area mentioned in the insurance agreement.

Voluntary excess is an option provided to the client to bear a fraction of the damages in every claim amount. The insurance firms provide some discount on the premium amount, if the client opts for voluntary excess at the time of insurance formalities.

The primary objective of the vehicle insurance policies is to ensure that the injured victims and legal dependants of the fatal victims, are rewarded a compensation for their losses. Car insurance is beneficial as the company takes care of the damages, while both vehicle owners and the victims of an accident are saved from dispensing money from their own pockets, as compensation. Further, without the car insurance there's no compensation whatsoever, for the owner of the vehicle or the accident victims.

Compensation can be claimed if the vehicle is protected by a valid insurance cover and the driver must hold a valid Driving Licence issued by the Regional Transport Office (RTO). Further, if the accident features a Commercial Vehicle then the permit validity is taken in consideration along with the observation of fitness of the driver.

Following the aftermath of an accident, an investigation by the local police is required for claim purposes. The procedure starts when the Police officers prepare a spot panchnaama and charge-sheet for the vehicle owner, mentioning the accident details and driver, victim identities. Further, important documents like insurance records, driving license of the vehicle owner and certificate of registration are needed to be submitted to the insurer, in order to apply for the damage compensation, as per the Indian Motor Vehicle Act, 1988.

Insurance can only be claimed by the registered owner of the vehicle, or as per the name stated in the insurance clause. If there is a fatality claim, age and income proofs need to be submitted, whereas for injury, medical and employment proofs are required. All the above documents have to be given to the insurance company.

In case of a fatality claim, the insurer obtains the age and income proof of the deceased victim and then proceeds with further formalities. Upon the completion of all the processes and verification, the insurance company compensates the victim's family.

In case of an claim following an injury incurred by a victim due to the accident, proper medical receipts and employment proof of the victim, needs to be submitted to the insurer. The insurance company then evaluates the documents and determines the damage compensation amount according to its self devised formulae. The company reasons the compensation sum in accordance with factors like age and income of the deceased, besides the person who deserves the claim sum. Also, the medical expenses and treatment duration of the victim are taken into account for the determination of compensation sum.

Apart from fatality and injury claim, a functional disability claim is also acknowledged by the insurance company. The functional disability claim applies in the case, when a victim suffers injuries that could result in disability or could impact his/her earning capacity. The insurance company then provides suitable compensation according to the scale of damages incurred by the victim.

For purchasing the best insurance policy for your vehicle several factors should be carefully evaluated, such as Insured Declare Value (IDV), voluntary excess and No claims bonus among others. Further, it is suggested that one should not blindly follow the insurance broker and must cross-check everything clause on the hard-copy of the insurance agreement. Insurance companies advice their clients to refrain from withholding any important information and must declare all the relevant details on the proposal form. One can also obtain additional personal accident insurance for the driver and co-passengers, which is a great option to provide security to the inhabitants of the vehicle.

Consider the 'Cashless' insurance cover option and currently, many of the car insurance firms have mutually beneficial tie-ups with several partners in the city, which take no compensation money from the claimant and do all the transactions directly with the insurer.

Further, it is highly convenient to buy insurance from a professional insurance broker, as they are well versed with the policies of different firms and could be helpful in deciding the best policy according to one's needs and requirements. The brokers are not biased to any firm, as regardless of the company they are paid a commission on the sale of every policy. You can also ask the insurance broker for his license number and can verify the same on the IRDA website.

Insured Declared Value or IDV in monetary terms is basically the present market value of the insured vehicle. It is the greatest assured compensation decided by the car insurance firm that is awarded in case of theft or the total loss of the vehicle. Following the loss of an insured vehicle, the insurance firm is obliged to provide the IDV sum as compensation to the claimant

IDV is regularly revised according to the vehicle maker's listed selling price after subtracting the depreciation, besides the registration and insurance costs are not included in the calculation of IDV. The depreciation system is described below :

Age of Vehicle % Depreciation for revising IDV
Less than 6 months 5%
More than 6 months but less than 1 year 15%
More than 1 year but less than 2 years 20%
More than 2 years but less than 3 years 30%
More than 3 years but less than 4 years 40%
More than 4 years but less than 5 years 50%

Additionally, the IDV of cars more than 5 years old is calculated by a mutual agreement between the insurance firm and the policy owner. During the calculation of IDV of cars aged more than 5 years, depreciation is not used but the insurance company devises the premium amount based on a report after a thorough inspection of the car's condition by surveyors and car dealers.

IDV= (Vehicle maker's listed selling price - depreciation) + (Cost of accessories, excluding the listed selling price - depreciation) and minus the registration and insurance costs.

Insured Declared Value (IDV) is maximum compensation amount dispensed by the company to the policy holder, in case of the loss of a vehicle. Hence, it is very important to ask for the amount closest to the market value of the vehicle. Motor vehicle insurance companies offer their clients, options to decrease the IDV by 5 to 10 per cent. Further, smaller the IDV amount goes, the lesser will be the premium.

No Claim Bonus (NCB) is a discount presented to the car owner / policy holder on the motor vehicle insurance premium by the insurer. Usually the No Claim Bonus is acquired over a period of time, for example a policy holder can claim the NCB if no compensation was awarded by the insurance company during the previous policy year. Further, if a policy owner is eligible for NCB, he/she can get a 20-50 per cent discount on the Own Damage Premium sum.

All Insurance firms help the policy owners in saving money on the motor vehicle insurance and also reward them for their good driving skills.

The table below summarises the discount on the insurance premium according to the number of claims in consecutive years.

No Claim Bonus evaluation period % Discount on Premium Amount
No claim made or pending during 1 year succession of insurance 20%
No claim made or pending during 2 year succession of insurance 25%
No claim made or pending during 3 year succession of insurance 35%
No claim made or pending during 4 year succession of insurance 45%
No claim made or pending during 5 year succession of insurance 50%

Yes, an insurer can forfeit the NCB and two scenarios govern this decision:

  1. The company will not provide NCB in the next year, if a damage compensation claim is made by the policy holder during the current policy period. The policy owner is not eligible for NCB for the following year, if a claim is filed in the ongoing year.
  2. If the policy holder fails to get the renewal of the insurance cover within 90 days of the expiry date, the insurer holds the right to forfeit the NCB.

Yes, it is possible to transfer the NCB from an old vehicle to a new vehicle, provided that the transition occurs within the same class and type of the vehicle. It is advisable to consider certain things before commencing the transfer procedure.

While selling the old vehicle, one must ensure that the ownership transfer is done and the record must be kept as a photocopy in the Registration Certificate for future insurance requirements.

Secondly, the NCB certificate should be obtained and a duplicate copy of the delivery note must be forwarded to the insurance company office. Then, the policy holder must get the new NCB certificate or a holding letter, which remains valid for three years. Last of all, while purchasing the new vehicle, the policy holder must submit the NCB certificate to the insurance company for the new vehicle protection policy.

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