Motor Insurance (15)
Auto Insurance or Car Insurance provides you with a cover against loss or damage to your car on account of unforeseen risks such as fire, theft, floods, earthquakes, accidents etc. In addition, a car insurance policy also provides you with protection against death or injury of the insured and covers any third party liabilities that may arise out of injury or death of a third party or damage to third party vehicle/property.
There are two types of car insurance policies available in the market:
1. Third Party Insurance
It is legally mandatory to take a third party insurance cover in India. A vehicle is not supposed to be driven on Indian roads without a valid third party insurance cover. This policy will cover any costs associated with damage that you might cause to an individual or his/her car while driving your own vehicle. If you are involved in an accident with another car, then the insurance company will compensate for any damages to the other car and any medical expenses for individuals in that car.
2. Comprehensive Insurance
Comprehensive insurance provides you with not only Third party insurance but also covers you against ‘Own Damage’ i.e. it also covers damages to your own car and medical expenses for yourself and your car’s passengers subject to applicable terms and conditions. This policy will also cover against loss or damage to your car on account of other risks such as theft, burglary, fire, floods, earthquakes, terrorist activity etc.
While it is only the Third Party Insurance that is legally mandatory, a comprehensive policy provides you with wider protection against a higher number of risks and should be actively considered when purchasing car insurance.
Comprehensive insurance provides you with not only Third party insurance but also covers you against ‘Own Damage’ i.e. it also covers damages to your own car and medical expenses for yourself and your car’s passengers subject to applicable terms and conditions. This policy will also cover against loss or damage to your car on account of other risks
A typical comprehensive policy should cover your vehicle against:
1. Fire, explosion or lightning
2. Burglary or theft
3. Riot and strike
4. Earthquake (fire and shock damage)
5. Flood, Typhoon, Hurricane, Storm, Tempest, Inundation, Cyclone, Hailstorm etc.
6. Accidental external means
7. Malicious Act
8. Terrorist Activity
9. Whilst in transit by road, rail, inland waterway, lift, elevator or air
10. By landslide, rockslide.
Car Insurance policies usually do not cover the following:
• Normal wear and tear or ageing of the vehicle
• Depreciation, wear and tear of consumables like tubes and tyres
• Mechanical/electrical breakdown
• Damage that occur while a person is under the influence of drugs or liquor
• Damages that occur while a person is driving with invalid driving license
• Damage due to a war, civil war, mutiny, or nuclear risk
• Claims arising out of contractual liability
Use of vehicle other purposes than what it is meant for. For example, if a private car is being used as a taxi and gets involved in an accident, the owner will not be able to claim damages.
Add-ons are optional features that you can choose to include in your car insurance policy by paying an extra amount towards the premium. Including some or all of these features can help you get a wider coverage against additional risks.
• Additional personal accident cover for yourself or your passengers
• Additional covers for any accessories that you may have installed in your car such as a music system, air conditioner etc.
• Additional covers for any fitting such as a LPG/CNG kit that you may have installed in your car.
Yes, there is an age limit for vehicles to be insured under the Comprehensive policy. Third Party insurance does not have a limitation related to the Age of the Vehicle to be insured. For Private cars, the age limit for the vehicle for comprehensive cover is 15 years.
Motorcycles and commercial vehicles over 10 years old are normally not considered for comprehensive cover.
Also, insurers maintain an inspection report from a surveyor certifying the condition of the vehicle which could be relied upon at the time of insuring your vehicle.
The base premium calculation for your car insurance depends on the following factors:
i. Insured’s Declared Value (IDV)- IDV is calculated on the basis of the manufacturer’s listed selling price of the vehicle after deducting the depreciation for every year as per the schedule provided by the Indian Motor Tariff. So in case of a new car, IDV will simply be its ex-showroom price while in case of an existing car for which you are renewing insurance, the IDV will be its ex-showroom price less depreciation as applicable to the age of the car. IDV is the maximum that the insurance company will pay in case of a complete loss of or damage to the vehicle. IDV is used only in the calculation of your premium for a comprehensive cover. In case of only a Third Party Insurance cover, IDV is not a determinant of your premium since the liability being covered is not associated with your car but damages to the third party or his/her vehicle.
ii. Geographical zone – India has been divided into 2 zones depending upon the location of the office of registration of the vehicle concerned:
• Zone A: Ahmadabad, Bangalore, Chennai, Hyderabad, Kolkata, Mumbai, New Delhi and Pune.
• Zone B: Rest of India
Premiums for your comprehensive car insurance also depend and vary by the zone in which your car is registered. Zone A cities have a higher premium as compared to Zone B
iii. The cubic capacity (cc) of the engine – Each car differs in respect of its engine size which is measured by its cubic capacity. The size of the engine is the only determinant for a Third Party Insurance cover. Premiums are higher for cars with higher engine sizes or cubic capacity. The classification for engines is done on the following basis:
• Not exceeding 1000 cc
• Exceeding 1000 cc but not exceeding 1500 cc
• Exceeding 1500 cc
iv. Age of vehicle- How old your car is also has an impact on your car insurance premium. With age, the depreciation factor being applied to determine the value of your car or its IDV increases. This results in the insurance cover amount reducing with age, thereby reducing the premium associated with your car insurance. In most cases, value of cars that are less than 5 years old are determined by applying standard depreciation rates as per the Indian Motor Tariff. For cars that are more than 5 years old, the insurance company will arrive at a value for your car taking into consideration not only the depreciation schedule but also the actual condition of your car.
These factors determine the base premium associated with your car insurance policy. You may choose to buy additional optional covers or avail of available discounts to arrive at your final car insurance premium.
Are there any ways through which I can lower my premium amount, i.e. get some discounts on my car insurance premium?
Insurance companies have various clauses under which one can avail of premium discounts:
a. ‘No Claims’ discount/Bonus – if you haven’t claimed in a given year, you get the benefit of no claims discount in the form of a specific percentage reduction in your premium in the subsequent year. No claim bonuses increase with each claim free year and typically start with 20% and goes upto a maximum of 50%.
b. Voluntary Deductible discount – the insurer offers you a discount on your vehicle premium if you bear a certain amount of loss associated with each claim. Voluntary deductible is the amount that you agree to pay yourself towards a claim before the insurance company picks up the balance. The higher the voluntary deductible that you agree for, the lower your premiums.
c. Membership discount – If you are a member of a recognized Automobile Associations in India you are eligible to get a discount on your car insurance premium.
d. Anti-theft devices – If you have installed Anti-theft devices in your vehicle approved by ARAI (Automotive Research Association of India), you are eligible to get a discount of up to Rs. 500 on your premium.
e. Discount For physically challenged persons – a discount of as high as 50% is available on the Own Damage premium for physically challenged persons provided that the vehicle has been modified for use. The discount is also available for institutions exclusively engaged in the service of these people.
Vintage Cars – one can also get a discount if his/her car comes under the category of Vintage cars.
If you have made no claims in a particular year, the insurance company gives a discount in the premium for your car insurance in the subsequent year. This discount in premium is termed as No Claims Bonus. It can be viewed as an incentive provided for safe driving with the Insurers rewarding policyholders by providing a discount on the ‘Own Damage’ part of the premium. This discount increases with the number of no-claim years starting from 20% and going up to a maximum of 50%. No claim bonuses are transferable from one insurer to the other i.e. even if you switch your car insurance policy to a new insurer in a given year, you can be eligible for a No Claim bonus for any claim free years with your previous insurer.
A cover note is a temporary certificate that is issued by the Insurer before the issuance of the actual Insurance policy certificate. This note is valid for a period of 60 days from the date of issue of the cover note and serves as proof of insurance during this period. While most car insurance policies are now available for sale online with policy contracts being issued almost immediately, an offline purchase will typically result in a cover note being issued at the time of purchase followed by the policy contract subsequently.
Most of the leading insurance companies today have networked with a large no. of garages and service centers across the country. If you get your car repaired at any of these garages, you may not be required to pay for the repair charges as the insurance company will directly settle the claims.
Check with your Insurance Company on garages where cashless facility is available prior to getting any repair word done, and follow the procedure set out by the Insurer to ensure you can avail of the facility without problems.
Your insurance provides you with a cover throughout the country. In fact it is also valid in the SAARC countries (e.g. Bangladesh /Bhutan / Nepal / Sri Lanka /Pakistan / Maldives). So, it does not matter where the accident takes place. You just have to contact your insurance company and they shall guide you to the nearest network garage (if they provide cashless claims facility). Otherwise you get reimbursements once you file for a claim.
The documentation requirements at the time of filing a car insurance claim may vary from insurer to insurer but the following will most likely be required:
• Valid R.C. copy of the vehicle
• A copy of the Valid driving license of the person driving the vehicle at the time of the accident
• Repair bills
• A copy of the police FIR
You could lodge a complaint that you may have against any insurer relating to:
i. any partial or total repudiation (rejection) of claims by the insurance companies,
ii. any dispute with regard to premium paid or payable in terms of the policy,
iii. any dispute on the legal construction of the policy wordings in case such dispute relates to claims;
iv. any delay in settlement of claims and
v. non-issuance of any insurance document to customers after receipt of premium.
The contract of insurance is for an amount not exceeding Rs. 20 lacs.
You need to lodge your complaint in writing addressed to the Insurance Ombudsman of the region under which the office of the insurance company falls. For a list of Insurance Ombudsman in India and their contact details including telephone numbers and email Ids please see the attached link. (http://www.irdaindia.org/ombudsmen/ombudsmenlist_new.htm)
You may lodge a complaint with the Ombudsman if:
- You have already lodged a complaint with the concerned Insurance Company and it has either rejected your complaint or you have received no reply on your complaint within one month of your complaint or even if you are not satisfied with the response or action taken by the insurance company in respect of your complaint
- Your complaint to the Ombudsman is not more than one year later after the reply of the Insurance company
- Your complaint is not pending with any court, consumer forum or arbitrator.
The award of the Ombudsman is binding on the insurance companies but not on the complainant who can choose to approach other bodies such as Consumer forums or Courts of Law.
A detailed note on the functioning of the Insurance Ombudsmen in India is available on the Insurance Regulatory and Development Authority of India (IRDA) website. (http://www.irdaindia.org/brief12aug2003.htm)