Car insurance, also known as motor insurance, auto insurance, or vehicle insurance, is the contract between an insurer and an insurance buyer. The insurance company agrees to pay the insured for the losses specified in the policy document, on payment of an annual premium.
Car insurance is one of the best ways to safeguard the car and the owner from financial contingencies. These financial contingencies include traffic collision, any legal liabilities (arising from physical damage, property damage, injury or death of a third party), damage caused to the insured car, bodily injury caused to a pillion or driver, and third-party damage.
Motor insurance or car insurance also cover the loss or damage caused due to natural calamities. The car insurance’s premium amount is decided based on the Insured Declared Value (IDV) of the car. Higher the IDV, the higher will be the premium and vice versa.
- Benefits & Features
- Types of Car Insurance
- Add-on Covers
- Things to Know
Key Benefits of Car Insurance:
Car insurance helps to offset the loss or damage caused to the insured car. The insured does not need to run from pillar to post when an emergency strikes. It offers legal, financial and emotional support in the following manner-
1. Pays for Hospitalization:
Not everyone who meets with an accident is fortunate enough to get away with minimal injuries or no injuries at all. Sometimes it may result in fractures and serious injuries, which need immediate hospitalization. Nowadays, a single hospitalization is enough to wipe off one’s lifetime savings, but with vehicle insurance, one can mitigate such expenses in a hassle-free manner.
2.Pays for Damages:
Cars are not only expensive but their maintenance and repair is also an expensive affair. An accident can take place due to the negligence of a third-party. One might have to pay a considerable amount of money in case of collision, crash, or while swerving to avoid a jaywalker. However, with a car policy, one can remain stress-free during such emergencies.
3. Compensates the Family if the Insured Dies:
Unfortunately, a lot of people lose their lives in India due to road accidents. In case the breadwinner of a family dies during an accident; it gets very difficult for the dependents to survive. However, vehicle insurance can help the family by getting third-party compensation from the other party that was involved in the accident.
So, without car insurance one has to go through – Financial Loss + Stress + Inconvenience + Emotional Turmoil. Car insurance also covers loss or damage caused to the insured car due to an explosion, accident, self-ignition, fire, theft, riots, the act of terrorism, or lightning etc.
4. No Claim Bonus
No Claim Discount is accrued in the name of the insured for the number of claim-free years. People with good driving skills can make most of this benefit. The insured earns this discount if no claim was made in terms of the own damage. No claim bonus is payable at the time policy renewal.
Features of Car Insurance
- Reimbursement of loss or damage caused to the vehicle
- Cashless repair at network garages
- Personal, motor and third-party cover
- Option to choose from add-on risk covers
- No-claim-discount for claim free years
- One can opt for emergency roadside assistance and accommodation
- Coverage is available to both the driver and the passengers
Types of Car Insurance Policies:
There are two types of car insurance policies in India. These policies are generally valid for a year, following which you have to get them renewed.
- Third-party Liability Insurance
- Comprehensive Car Insurance
Third Party Car Insurance:
Third Party Car Insurance protects the insured against any third party legal and financial liabilities arising due to an accident with the insured vehicle.
Third Party Insurance offers limited coverage. It includes bodily injuries, property damage and death of a third party.
Inclusions of Third Party Liability Insurance:
- Liabilities towards damage to the third-party vehicle involved in the accident.
- Liabilities towards bodily injuries to the third-party individual involved in the accident.
- Death of the third party
|Nature of the Injury||Compensation Amount|
|Loss of sight of an eye or loss of a limb||50 percent|
|Permanent total disability from injuries ( apart from injuries mentioned in this table)||100 percent|
|Loss of sight of both the eyes or loss of two limbs||100 percent|
Exclusions of the Third Party Vehicle Insurance:
Third party vehicle insurance does not cover the following –
- Damage Caused to the Insured Car– Third party car insurance doesn’t cover the loss, damage, and theft of the policy holder’s vehicle.
- Injury to self– During an accidental collision, the policyholder doesn’t get any compensation for own damage. Only the damage caused to a third-party is covered.
Comprehensive Car Insurance:
Comprehensive car insurance, as the name suggests, is an extensive car insurance policy with extra benefits. Apart from third party insurance cover, it also compensates for the loss or damage caused to the insured vehicle. It also covers theft of the insured vehicle.
It is recommended to buy a comprehensive car insurance policy as it covers both own damage and third-party damage.
Coverage/Inclusions of Comprehensive Car Insurance Policy:
- Loss or damage due to natural disasters such as lightning, earthquake, flood, typhoon, hurricane, storm, landslide, cyclone etc.
- Loss or damage caused by man-made disasters such as burglary, theft, riots, strike or terrorist activities.
- Damages to the vehicle while in the transit by road, water or train.
- Personal accident cover including the accidental demise of the driver and permanent disabilities resulting due to an accident. Some car insurance providers also provide optional insurance coverage for the co-passengers.
As the comprehensive car insurance provides a wide coverage, it is the first pick despite the higher premiums. Car insurance prices for comprehensive car insurance are usually higher as compared to a third party insurance policy. It is suggested for every car owner to stay protected with a comprehensive car insurance policy.
Comprehensive Car Insurance Also Covers-
- Liabilities towards the damages caused to the third-party car involved in the accident.
- Liabilities towards the injuries caused to the third-party involved in the accident.
Exclusions of Comprehensive Car Insurance Policy:
- This type of vehicle insurance does not offer any coverage if the accident occurs while driving under the influence of alcohol.
- A car being driven by an individual not holding a bona fide driving license
- Mechanical breakdown or wear and tear of the vehicle
- Loss or damage of car tyres unless the car is also damaged.
Car Insurance Add-on Covers
Customize your auto insurance policy with additional coverage
Car insurance benefits can be enhanced further with add-on covers that the insured can buy at the time of policy purchase and renewal. These additional covers can be availed with the existing policy by paying an extra amount of premium. One can easily compare car insurance quotes online based on the add-on covers and choose the most adequate one.
Here are some of the most common add-on benefits that are provided by most of the motor insurance companies in India –
1. Zero Depreciation Cover
The insured gets the total cost of the damage or loss that is caused to the insured car. The depreciation value of the replaced or damaged parts is usually deducted at the time of claim, but with ‘zero-dep’ policy one can claim the full amount.
Usually, it is applicable to vehicles that are less than 5 years of age. It can be availed twice during a policy term.
2. Key Replacement Cover
In case the car keys are locked inside the car or are stolen then the cost of changing the keys will be borne by the insurer.
3. Emergency Roadside Assistance
Immediate help is provided by the insurer, in case there is a breakdown of the insured car in the middle of the road. Services include- towing assistance, change of flat tyre, refuelling, and jump-starting the battery among others. Some insurers also provide emergency accommodation when an emergency strikes.
4. No-Claim-Bonus Protection
The policyholder is entitled to a No Claim Bonus (NCB) on car insurance premium for all the years that he/she has not made any claim. Up to 50% of No Claim Discount can be earned during a policy term.
If a claim is made, then this NCB is not accrued to the insured’s account. But with NCB protection cover, it is secured with insurer even after making a claim.
5. Car Hire Service
In case there is a loss or damage caused to the insured car, and it is sent for repair, the insurer will provide a car on hire for emergency purposes. There is a specified limit to this clause, which may vary from insurer to insurer.
6. Personal Belongings Cover
The loss or damage caused to the insured’s personal belongings during the accident is reimbursed by the insurer if one opts for this benefit.
7. Consumables Cover
Some insurers also provide coverage for repair and replacement of car nuts and bolts, screw, oil etc. For high-end car owners, this one proves to be really helpful.
8. Engine Secure
It also covers the non-accidental damages to a car’s engine. For high-end cars, it is useful during the time of water logging, or at places where the rainfall is more than usual, this add-on becomes quite essential.
9. Return to Invoice
With this add-on cover, the claim amount is not calculated on the basis of the IDV. It is decided on the basis of the price of the insured vehicle at the time of purchase.
10. Daily Allowance Benefit
Some car insurance companies provide this add-on benefit. By opting for this add-on benefit, the insured can get daily transport expenses till the insured car is repaired.
How to Make a Car Insurance Claim?
Car Insurance Claim Procedure
To file a vehicle insurance claim the process goes as follows-
- The insurance company should be informed immediately after the incident to raise a third-party liability claim.
- Duly filled claim form needs to be submitted along with a copy of Policy FIR, driving license, vehicle and registration certificate
- Court summons also need to be submitted to the motor insurance company
Theft Claims –
- File an F.I.R. at the police station
- Provide the copy of FIR to the motor insurance company
- Submit car registration copy and keys to the insurer
- A letter of Subrogation is also required
- Compensation will be provided once the claim is approved
Accidental/Own Damage Claims –
- Report the incident to the nearest police station
- Also, inform the insurer as they may ask to submit the claim form over email or in personal
- Submit the car’s registration certificate and the driving license
- The inspection will be conducted on the spot or a surveyor will be assigned to ascertain the loss or damage. This depends on the nature of the damage.
- Based on the inspection, the report will be submitted to the vehicle insurance company
- The bills will be signed by the policyholder
- The claim will be processed and settled based on the above-mentioned steps within a stipulated time.
Cashless Claim Procedure-
- In case of loss or damage to the insured vehicle during an accident or collision, the insurer should be informed at the helpline number.
- The insurer will survey the damaged vehicle
- The assessment report will be compiled
- The claim amount will be approved and the car will be sent to the network garage for claim settlement
Reimbursement Claim Procedure-
- Intimate the insurance company at their helpline number
- The car will be surveyed
- An assessment report will be compiled
- Some documents need to be submitted such as Police FIR copy in case of theft, accident and third-party damage. Copy of RC, driving license along with a duly filled claim form
- On approval, the claim amount will be reimbursed
Best Car Insurance Companies in India with Incurred Claim Ratio:
|Insurance Provider||Incurred Claim Ratio||Network Garages||Solvency Ratio||Status of Grievances|
|The Oriental Insurance Company||112.11%||3100+||1.11||95.36|
|Shriram General Insurance||102.57%||2000+||1.94||100|
|SBI General Insurance||75.01%||2500+||2.19||95.33|
|Reliance General Insurance||92.23%||3800+||1.68||99.32|
|Universal Sompo General Insurance||70.91%||3500+||1.57||100|
|HDFC ERGO General Insurance||76.90%||5300+||–||100|
|Bharti AXA General Insurance||76.88%||3500+||1.65||99.81|
|The New India Insurance||91.26%||Available||2.19||99.19|
|IFFCO Tokio General Insurance||81.96%||2000+||1.6||99.94|
|Royal Sundaram Alliance General||82.15%||3300+||1.69||99.28|
|Future Generali India Insurance||81.77%||1000+||1.72||99.86|
|Cholamandalam MS General||79.82%||4500+||1.64||99.82|
|TATA AIG General Insurance||79.31%||3000+||1.15||98.51|
|United India Insurance||78.89%||1.15||98.51|
|Magma HDI General Insurance||78.49%||615+||2.07||84.96|
|Liberty General Insurance||77.29%||4000+||2.87||99.06|
|Bajaj Allianz General Insurance||69.91%||2.61||99.28|
* This is a directory and not a chronologically-ordered editorial endorsement. Research all the alternatives before buying.
*Incurred Claim Ratio:
The total of all the claims settled by the car insurance provider divided by the total of insurance premiums collected by the insurance company in the same period.
This ratio is an indicator of the insurance provider’s ability to settle the claims.
Incurred Claim Ratio = Total claims settled/Total accrued insurance premiums
Solvency ratio is the indicator of the insurance provider’s ability to settle the long-term debts.
*Status of Grievances:
The overall percentage of consumer grievances resolved out of the overall registered grievances during the year.
How is Car Insurance Premium Calculated?
Factors that are taken into consideration while calculating Car insurance premium–
- Place of Registration– The cost of the premium is higher in all the major cities like Delhi, Bangalore, Mumbai, Chennai, Ahmedabad, Kolkata and Pune as compared to other cities.
- Sum Insured or Insured’s Declared Value (IDV) – It is the current market value of the insured car from which the depreciation is deducted while calculating the premium.
- Engine Type: The premium of vehicles with higher cubic capacity is comparatively higher than those with an engine with lower cubic capacity.
- Installation of accessories– Premium for car accessories and additional features is calculated separately.
- Coverage Type-The rate of premiums also depend on the type of coverage you opt. Comprehensive car insurance is likely to have higher premiums than the third-party car insurance.
- Personal Factors-Personal factors also play a vital role in determining the premium rates. Women are likely to pay lesser premium amount than men.
- Vehicle Age is also taken into consideration.
- Fuel type– Whether it is a diesel, petrol, CNG, electric car, it is an important factor in deciding the premium
- Add-on covers like the personal belongings cover, zero depreciation cover, roadside assistance etc. also decide the premium.
How to Save on Car Insurance Premium?
- By comparing different car insurance quotes based on the premium amount, one can choose a policy with minimum car insurance premium
- Installation of anti-theft devices helps reduce car insurance premium
- Do not claim for small damages to earn a No-claim-bonus
- Opt for higher voluntary deductibles as it lowers the premium. If one is capable of paying a portion damage themselves at the time of claim, then only opt for voluntary deductibles
- Car modifications also affect the insurance premium
- Missing the policy renewal date may attract a higher cost of insurance premium as well as vehicle inspection
- Buying vehicle insurance online can get some discounts
- Members of Automobile Association of India can also avail discount on auto insurance premiums.
How to Compare Car Insurance Online?
To enjoy the policy benefits continuously, one must compare vehicle insurance online. However, at the time of car insurance renewal also, one must consider the following pointers-
1. Type of Plan:
As discussed above, there are two types of car insurance; it depends on the insured whether he/she needs third-party liability insurance or comprehensive car insurance.
2. Cashless Facility at Affiliated Garages:
One must check the list of the network garages the insurance provider has a tie-up with. If yes, the insured can avail cashless claim settlement facility. At network garages, the insurance company directly settles the claim amount. At the time of car insurance renewal also, one must check for the network garages.
3. Add-on Features:
There are a few additional benefits or riders, which are available with comprehensive car insurance policies. One must compare car insurance quotes based on these add-on covers and choose the most adequate one. The policy seekers should go for the insurer that offers maximum add-on benefits.
Voluntary deductibles are a certain percentage of the claim amount that the insured chooses to pay from his/her own pocket at the time of claim. Whereas, compulsory deductibles are decided by the insurer at the time of policy purchase and renewal. Higher the deductibles, lower will be the premium. However, one must choose a deductible that is affordable.
5. Insured Declared Value (IDV):
The Insured Declared Value (IDV) is the basic amount that the insurer fixes for the current market value (of that year) of the car, which is provided in the event of total loss of car or if the car is stolen.
Benefits of Comparing Car Insurance Policies Online
- One can easily compare car insurance policies from top car insurance companies. It is easier to go through the policy benefits, features and limitations.
- One can check out numerous options and choose the one that offers maximum discount and at a lower premium amount
- Broker’s cost is eliminated
- There is transparency in terms of the purchase and renewal process. Customer reviews can also help in making the purchase decision
- One can make an informed decision and choose the best car insurance plan by comparing all the available options
Why do You Need Car Insurance?
Uncertainties come without a prior notice. Placing god’s idol or other superstitious belief may prevent uncertainties sometimes but a car insurance policy will help you out of any such unfortunate event on the roads.
Moreover, The Motor Vehicles Act, 1998 makes it mandatory for every car owner to have car insurance in India. Any vehicle plying on the Indian roads must have a valid car insurance policy, with at least third-party liability cover.
Third party car insurance covers the damage caused to a third person, property or car. Whereas, a comprehensive car insurance covers the own damaged caused to an insured vehicle. Commercial vehicles, on the other hand, need to buy commercial vehicle insurance.
Eligibility Criteria for Car Insurance
- The insurer must have a valid driving license
- Car’s registration copy is mandatory
- Minimum age criteria are 18 years
How to Buy Car Insurance Online?
Buying car insurance policy online is a simple process as compared to purchasing it online. Here’s a quick rundown of the online process-
- Submit the insured cars’ make and model in the online claim form
- Get the car insurance quotes and premium estimate based on the details provided
- Enter personal details like the insured’s name, contact number, geographical location, address etc.
- Make the payment online and car insurance purchase is completed
- Policy can be downloaded as well emailed on the registered id
Documents Required While Buying Car Insurance:
Buying a car insurance policy requires minimal documentation. Following documents are required-
- ID Proof: A driving license is a legal document, therefore, qualifies to buy a car insurance policy. It also allows insurance providers to assess the driving record before they offer the insurance policy. The insurance premiums can be trimmed down by holding a good driving record. One can present PAN card also as an ID proof.
- Address Proof: Adhaar Card, electricity bill, Voter Id, rent agreement etc.
- Details of the Vehicle: The insurance provider will require the details of the insured vehicle to decide the premium.
- Bank Information: Insurance providers might run a credit check before they issue the policy. For this, the details of the bank accounts are important.
- Other Information: The insurer will also ask for personal information such as date of birth, address, name, contact number etc
Zero Depreciation Car Insurance Vs Comprehensive Coverage
Table with the basic difference between car insurance policy with zero depreciation car insurance policy and a basic comprehensive car insurance policy –
|Features||Zero Depreciation||Comprehensive Insurance|
|Claim Amount||Covers total loss or damage without deducting the depreciation||Depreciation of the car parts is deducted from the IDV|
|Age of the car||Up to 5 years||Up to 15 years|
|Own Expense||Less burden on the policyholder at the time of claim||The policyholder has to bear some of the expenses|
|Cost of Plastic Parts and Repair||Maximum coverage||Comparatively less|
What is IDV?
Insured Declared Value (IDV) is the current market value of the car. It is the maximum Sum Assured that insurance provider decides after deducting the depreciation cost of the car. The IDV is offered in case of total loss of the car or theft.
Insured Declared Value = (Listing price of the manufacturers – Depreciation) + (Accessories excluded from the listed price – Depreciation)
The schedule of depreciation is mentioned in the following table:
|Vehicle Age||Depreciation to adjust IDV (%)|
|Less than 6 months||5|
|Between 6 and 1 year||15|
|Between 1 year and 2 years||20|
|Between 2 and 3 years||30|
|Between 3 and 4 years||40|
|Between 4 and 5 years||50|
What is Cashless Car Insurance?
If one buys a cashless car insurance policy, then the insured vehicle has to be repaired at the network garage. The insurance companies have tie-ups with these garages. The damage repair cost is paid by the insurer directly and the policyholder is not required to pay anything. Cashless car insurance offers a quick, convenient and hassle-free service to the insured.
How to Transfer Old Car Insurance Policy to Your New Car?
The policyholder can send an application to the motor insurance provider for substitution of the current car with a new car of the same or different class. The policy shall be continued for the remaining policy period. The difference in the premium amount should be paid to the insurer.
Mistakes to Avoid When Buying Car Insurance
These things should be taken care off in order to purchase the best car insurance plan-
- Not comparing car insurance quotations from top insurance companies on the basis of policy features, benefits, premium, claim settlement and limitations
- Choosing a vehicle insurance policy with minimum premium might not always be a good idea
- Opting for higher deductibles just to lower the premium amount. Add-on covers are optional and should be chosenonly if one can pay a higher premium against enhanced protection
- Opting only for third-party liability insurance. It is made mandatory by law, but a comprehensive insurance plan covers own damages as well.
Factors affecting Car Insurance Prices:
Car insurance premiums are not just arbitrary numbers made up by the car insurance providers. These are thought-out calculations. One must be aware of the vital factors affecting car insurance rates.
The determinants that contribute to reducing the car insurance premiums are as follows:
- Geographical Location: The geographical location has a great impact on the premium rates. Low traffic areas are likely to have lesser premiums and vice-versa.
- Engine Type: The premium of vehicles with higher cubic capacity is comparatively higher than those with an engine with lower cubic capacity.
- Personal Factors: Personal factors also play a vital role in determining the premium rates. Women are likely to pay lesser premium amount than men.
- Coverage Type: The rate of premiums also depend on the type of coverage you opt. Comprehensive car insurance is likely to have higher premiums than the third-party car insurance.
- Customized Plan: A customized plan fulfilling all the key requirements might have come with a higher premium
How to File A Claim for Car Insurance?
If you find yourself stuck in an accident, theft or road emergency, here’s what needs to be done next-
Inform the Insurer
It is important to communicate timely and effectively with your insurer if you want to settle your claim quickly. Try to notify your car insurer as early as possible with all the necessary details. The later you inform, more the chances of your claim being rejected.
Inform the Police
In case of an accident or collision, you should inform the cops about the damage. It is compulsory to provide a Police FIR report for accidental and theft-related claims. Refrain from having an argument with the other driver and let the police decide.
Evaluate the Damage
A surveyor will be allotted to assess the loss and damage caused to the insured vehicle and the third-party during the accident. A report will be created and sent to the insurer and the garage before the repair work. In case of theft, a police report is required declaring the vehicle as ‘total loss’.
On approval, the car will be sent for repair and if you have opted for cashless repair the vehicle will be fixed at the network garage. The insurer will pay off the garage. And if the vehicle is repaired at some other workshop, the amount will be reimbursed. And you can enjoy driving your car.
Top Car Insurance Companies in India 2018
|Insurance Provider||Benefits & Features||Available Add-on Covers||Cashless Repair at network garages|
|Tata AIG Car Insurance||
|Bajaj Allianz Car Insurance||
|Reliance General Car Insurance||
|SBI Car Insurance||
|Royal Sundaram Car Insurance||
|HDFC Ergo Car Insurance||
|Cholamandalam Car Insurance||
|Iffco Tokio Car Insurance||
|Oriental Car Insurance||
|Shriram Car Insurance||
*This is a directory and not a chronologically-ordered editorial endorsement. Research all the alternatives before buying.
Car Insurance Companies
Why Do You Need Car Insurance?
Third-party insurance is mandatory in our country. Whereas, the choice to buy a comprehensive car insurance policy with the car owner. Out of 18 crores vehicles, only 6 crore drivers have third party insurance policy. Victims of road accidents do not get compensation as vehicles do not have third party cover.
Third-party insurance covers damage caused to a third-party person, property or vehicle. Comprehensive car insurance covers third-party and own damages along with special benefits like roadside assistance, personal accident cover, zero depreciation cover etc. To enhance road safety it is essential to buy car insurance.
1.5 Lacs/YearDeaths due to Road Accidents
18 croreTotal Vehicles Plying on Roads
50%Total Vehicles without Insurance
70%Numbers of Insured Cars
Car Insurance Frequently Asked Questions (FAQS)
Q1. What is Motor Insurance?
Motor insurance is bought for automobiles including bikes, trucks, cars and other commercial road vehicles. Vehicle insurance policy is a contract between the insured and insurance company, wherein the insurance provider agrees to compensate the insured in case of any loss or damage. In return, the policyholder agrees to pay the car insurance premium regularly.
Q2. What is a No Claim Bonus (NCB)?
No Claim Bonus or No-Claim-Discount is accrued to the insured’s account every year or not making a single claim during the policy term.
Q3. What is Cover Note?
A temporary proof of insurance issued to an insured before the issuance of the actual document of an insurance policy is referred to as Cover Note. It is valid for 60 days from the issuance date and the original document replaces it.
Q1. What is own damage cover in motor insurance?
Comprehensive car insurance includes own damage cover. The insurer compensates for the damages that occur to the insured car during an accident.
Q2. What is a personal accident cover?
In the case of disabilities and death resulting due to an accident, the insurance provider compensates for the financial loss.
Q1. How is the motor insurance premium calculated?
A lot of factors are taken into consideration while calculating car insurance premium-
- Age and type of the vehicle
- Insured Declared Value
- Geographical zone
- Engine’s Cubic Capacity
- Car make and model
- Add-on covers
- Car modifications
Q2. What is Insured Declared Value (IDV)?
IDV is equal to the sum assured value that the policyholder gets in case of theft or total loss of the insured vehicle. It is the current market value of the vehicle minus the vehicle registration cost and depreciation value of the vehicle parts.
Q1. What are the documents required to file car insurance in India?
The following documents are required at the time of filing vehicle insurance claim:
- Insurance copy
- Claim form
- Police FIR
- Driving License
- Registration Certificate
- ‘No trace report’ in the case of car thefts
Q2. What is ‘No Claim Bonus’?
NCB is earned by the insured for not making a claim during the policy period. The discount is applicable on the insurance premium at the time of policy renewal. For every claim free year, the No-claim-bonus is accumulated as mentioned in the table below –
|Claim Free Years||No-Claim-Bonus (%)|
|5 years||Up to 50%|
|Claim Free Years||No-Claim-Bonus (%)|
|5 years||Up to 50%|