What Is Motor Insurance?
Motor insurance for cars, two-wheelers, trucks, and other vehicles. The main purpose is to provide financial protection from injuries due to road accidents and to provide for legal expenses incurred in such cases. As per the Motor Vehicles Act, 1988, all vehicles on Indian roads must be insured. Based on the end-use, Motor Insurance can be of the following types:
- Private Motor Insurance: This is for individuals who have vehicles for private purposes. It usually covers accidents and also offers third party liability protection.
- Commercial Motor Insurance: This is for businesses that use vehicles for commercial purposes. It usually provides third party liability and accident cover for the driver of the vehicle.
Types of Motor Insurance
Based on the type of coverage provided in the policy, Motor Insurance can be of the following types:
- Third-Party Liability Cover: This type of insurance provides compensation to the third party if it suffers loss or injury due to an accident for which the policyholder is responsible. This type of insurance is compulsory for all vehicles on Indian roads.
- Comprehensive Cover: This type of policy provides third party liability cover, compensation for theft, damage to the vehicle, and personal accident cover to the individual if he is injured or has died in an accident.
- Add on Covers: These supplements a Motor Insurance Policy, by providing other benefits. They are also known as car insurance riders or car insurance additional riders. These add-ons are available at a nominal premium, but they increase the scope of insurance coverage as per the insurance expectations of the insurance buyer. In general, additional riders are offered for cars which are not more than 5 years old. Below we have briefly described the various kinds of Add-on Covers:
- Nil Depreciation Cover: A vehicle's value depreciates as it ages. Thus, when a policyholder files a claim, it is processed after subtracting the applicable depreciation, and if the policyholder opts for the nil depreciation cover, it leaves out the depreciation factor from the coverage. You will then get complete coverage.
- Engine Protection Cover: When the engine is damaged, its repair/replacement expenses will be borne by the insurance provider.
- Return to Invoice Cover: If total damage occurs, the cover qualifies the policyholder to obtain the original on-road cost of the insured car.
- NCB Protect Cover: In a policy year, if the policyholder files a claim, he/she isn’t entitled to get. Thus, opting for this cover enables the policyholder to be eligible for No Claim Bonus even if they have filed a claim.
- Consumables Cover: A few components/consumable parts/substances like nuts, bolts, ball-bearings, engine oil, AC gas, coolant, and grease are not covered under the car insurance. Hence, with this add-on, the insurance coverage is extended to such consumables.
Inclusions of Comprehensive Car Insurance
Comprehensive car insurance offers the following coverage:
- Damages caused due to riots, accident, strikes, malicious acts, earthquake, flood, storm, etc.
- Loss or theft of the insured vehicle
- Third-party liability
- Personal accident cover for the driver
Exclusions of Comprehensive Car Insurance Coverage
Comprehensive motor vehicle insurance excludes the following coverage:
- The ageing, wear and tear of the motor
- Mechanical or electrical breakdown
- Damages caused under the influence of alcohol, drugs, and any other intoxicating substance
- Damages caused by the driver while driving without a valid driving license
- Consequential loss
- Loss damage outside the geographical boundary of India
Factors that Affect Motor Insurance Policy Premium
Various factors affect the motor insurance policy premium. Here are some of them:
- Type of Insurance Premium: Comprehensive car insurance offers comprehensive insurance coverage, and attracts higher insurance premium. Third-party insurance provides basic insurance coverage and attracts basic insurance premium.
- Car Model, Make, and Variant- As these qualifications differentiate a car from one another, it's based on these differences, that the insurance premium is determined and charged.
- RTO- Car registration RTO determines the insurance, and in India, car insurance premiums are computed on the basis of the location of vehicle registration. Locations are categorized as Zone A and Zone B. Cities like Mumbai, Delhi, Chennai, Bangalore, Kolkata, Pune, Ahmedabad and Hyderabad come under Zone A, and the rest of India comes under Zone B. If vehicles are registered under Zone A, they'll have higher premiums when compared to vehicles registered under Zone B.
How to Reduce Premium for Motor Insurance Policy?
Various insurance buyers/ renewers will definitely wish to know how to reduce the premium for their motor insurance.
Well here is the catch- If you opt for less insurance premium, you'll get less insurance coverage. The insurance experts advise not to compromise on the coverage because if you do so, although you'll save some pennies on the insurance premium, but when you do a claim, you may end up spending more from your own pockets. This will nullify the whole essence of having motor insurance.
Fintra suggests a few ways to reduce the premiums for motor insurance without having to compromise on the insurance coverage:
- Install Safety Device(s)- By installing a safety device(s) in the vehicle, you'll enhance the vehicle’s security, this will then diminish the risk of vehicle theft. In turn, this reduces the risks associated with the vehicle, and the insurance provider gives a discount on the insurance premium.
- AAI or WIAA Membership: Getting membership of Automobile Association of Upper India or Western India Automobile Association has its own privileges. The insurance buyers having AAI or WIAA Membership can get discounts on their vehicle insurances.
- Refrain from Filing Small Claims- Aviode filing small claims, because then you won’t be eligible for No Claims Bonus. As a result, you’ll have to pay higher insurance premiums.
- Judiciously Opt for Add-ons- Add-ons do provide enhanced insurance coverage, but they also attract an enhanced insurance premium. Thus, opt for only those add-ons which fulfil your insurance expectations.