What is Car Insurance?

Car insurance, also known as auto or motor insurance, is a contract between you and an insurance company that protects you from financial losses in case of an accident or other covered event. In exchange for paying a premium, the insurance company agrees to cover certain costs, such as:

Damage to your car: If your car is damaged in an accident, by vandalism, or by a natural disaster, your insurance can help pay for repairs or replacement.
Injuries to yourself and others: If you or someone else is injured in an accident involving your car, your insurance can help cover medical expenses.
Damage to other people's property: If your car damages someone else's property, such as their car or house, your insurance can help pay for the repairs.

Car insurance is important because it can help you avoid financial hardship in the event of an accident. Even a minor accident can result in thousands of dollars in damages, and a major accident can be even more costly. Without insurance, you would be responsible for paying all of these costs yourself.

In most states, car insurance is required by law. This is because it is important to protect yourself and others from the financial consequences of an accident. Even if you are not required to have car insurance, it is still a good idea to get it.

Types of Car Insurance Coverage

There are various options available regarding car insurance, each offering different levels of protection. It is important to consider your individual needs and circumstances when selecting the right type of insurance coverage for your vehicle.

Third-Party Liability Only Cover

The Motor Vehicle Act 1988 requires all motorised vehicles on Indian roads to have a third-party liability-only cover, which specifically covers damage to any property, person or vehicle affected by the insured’s driving. This type of insurance is one of the more cost-effective options for car owners in India due to its limited coverage.

Own Damage (OD) Cover

Collision damage cover insurance policies in India offer reimbursement for the repair costs incurred on a damaged vehicle. The insurance premium is determined by considering factors such as the vehicle’s age and its insured declared value (IDV). The IDV represents the market value of the car.

Personal Accident Cover

Personal accident cover is essential for protecting car owners from the financial burden of medical expenses after an accident, providing coverage for both drivers and passengers. Regardless of who caused the accident, the insurance company will handle the medical bills and offer a lump sum to the family in case of death. It is a crucial aspect of motor insurance to consider for comprehensive protection.

Comprehensive Car Insurance

Comprehensive car insurance offers the most extensive coverage for your vehicle, including protection against damage from third parties and to your own vehicle. Despite being more expensive than third-party liability-only cover, it provides unparalleled protection against various risks on the road. These comprehensive policies guarantee complete protection for your peace of mind.

Commercial Vehicle Insurance

Commercial vehicle insurance offers specialized coverage for vehicles used for business purposes. It includes protection against third-party liabilities and damage to the vehicle while engaged in commercial activities. This insurance is designed to meet the unique needs of businesses and ensure adequate coverage for their commercial vehicles.

Uninsured Motorist Protection

Uninsured motorist coverage safeguards the insured driver by providing financial protection in the event of an uninsured driver. It covers medical costs and vehicle damages, preventing the policyholder from facing financial hardship caused by the other driver’s lack of insurance.

What is the Difference Between Comprehensive and Third-Party Car Insurance?

The following table provides a clear overview of the main differences between comprehensive and third-party vehicle insurance coverage.

Feature	Comprehensive Car Insurance	Third-Party Car Insurance
Coverage	Covers insured vehicle damage and third-party liabilities	Only covers damages and injuries to others caused by the insured vehicle
Legal Requirement	Coverage is not mandatory	Mandatory by law in Ind ia to operate a vehicle.
Premium Cost	Borader coverage leads to higher prices	Reduced premium due to limited coverage
Add-Ons Available	Various add-ons available	No add-ons available.
Own Damage Coverage	Covers theft, fire, natural disasters, and accidents.	No add-ons available.No coverage for damage to the insured vehicle
Ideal For	For those in search of comprehensive protection, whether it be for new or high-end vehicles	Older cars or occasional drivers seeking basic legal requirements
Claim Process	The complexity can increase as a result of various coverage aspects	Simplified process for third-party damages claims
Policy Exclusions	Damages incurred due to driving under the influence, negligence or driving without a valid license are not covered	Coverage for damages to the insured vehicles is not included

Benefits of Buying Car Insurance

There are several benefits that you can avail of with car insurance. It provides risk cover against various risks. The sections below highlight the key benefits of having car insurance in India.

Protection Against Financial Damages

Car insurance is essential for protecting the insured vehicle from various damages like accidents, theft, fire or natural disasters. Repair costs for new or luxury vehicles can be expensive, so having insurance is crucial. Comprehensive policies also cover damages to third-party property or individuals, relieving the policyholder from financial burdens in case of an accident.

Compulsory Third-Party Liability

In India, it is mandatory to have third-party insurance to comply with the Motor Vehicles Act of 1988, ensuring that vehicle owners are protected from legal liabilities related to injuries or damages caused to third parties. This type of coverage is a legal requirement to operate a vehicle on Indian roads and is designed to provide financial protection in case of any unfortunate events.

Accidental Injury Coverage for Self

Vehicle insurance policies often include personal accident coverage, compensating the insured for death or permanent disability resulting from an accident. This coverage also extends to passengers, providing extra safety for everyone in the vehicle.

No Claim Bonus (NCB)

No Claim Bonus is a great way for policyholders to save on their premiums by being rewarded for not making any claims. This promotes safe driving and can lead to substantial long-term savings on insurance expenses.

Cashless Repair Services

Insurance providers often work with a network of affiliated garages that can offer cashless services to policyholders. This can be a huge relief as it means getting vehicle repairs without having to make upfront payments, which can significantly simplify the claims process and provide a great deal of convenience during stressful situations.

Add-On Covers

Insurance companies offer a range of add-on covers that can enhance the basic policy. Examples of these include zero depreciation cover, which ensures that the policyholder receives full compensation for repairs without considering the vehicle’s depreciation and roadside assistance, which provides help in case of breakdowns or emergencies. These add-ons can provide additional peace of mind and protection for policyholders, especially in unexpected situations.

Safeguarding From Theft and Natural Disasters

Car insurance policies that provide comprehensive coverage include protection against theft and damages from natural disasters such as floods or earthquakes. This makes it an intelligent option for vehicle owners residing in high-risk areas, as it expands the range of protection offered.

List of Companies Offering Car Insurance Policies in India

This comprehensive table provides a detailed overview of essential information regarding several prominent car insurance companies in India (as per IRDAI), such as their founding year, headquarters, claim settlement ratios, network garages and notable features.

Car Insurance Company	Claim Settlement Ratio	Key Features
National Insurance Co. Ltd.	93%	Government-owned and a wide product range
Go Digit General Insurance Ltd.	96%	Repair Anywhere, Simplicity and digital processes
Bajaj Allianz General Insurance Co. Ltd.	98.50%	Variety of products with a strong online presence
Cholamandalam MS General Insurance Co. Ltd.	96%	Partnership with Mitsui Sumitomo
Bharti AXA General Insurance Co. Ltd.	97%	Insurance solutions made simple
HDFC ERGO General Insurance Co. Ltd.	99%	Elevated claim settlement ratio with a wide network
Future Generali India Insurance Co. Ltd.	96.30%	Partnership with the Generali Group
The New India Assurance Co. Ltd.	95%	One of the oldest insurers, government-owned
Iffco Tokio General Insurance Co. Ltd.	95.80%	Joint venture with Tokio Marine
Reliance General Insurance Co. Ltd.	98%	Wide range of insurance products
Royal Sundaram General Insurance Co. Ltd.	98.60%	First private sector insurer licensed in India
The Oriental Insurance Co. Ltd.	94%	Government-owned, diverse product offerings
Tata AIG General Insurance Co. Ltd.	N/A	Joint venture with American International Group
SBI General Insurance Co. Ltd.	100%	High claim settlement ratio, extensive network
Acko General Insurance Ltd.	97.20%	Digital-first approach, low premium products
Navi General Insurance Ltd.	N/A	Wholly owned subsidiary of Navi Technologies
Zuno General Insurance Ltd. (formerly Edelweiss)	98%	Focus on customer-centric products
ICICI Lombard General Insurance Co. Ltd.	96.75%	Comprehensive coverage options
Kotak Mahindra General Insurance Co. Ltd.	98%	Diverse insurance products, strong customer service
Liberty General Insurance Ltd.	97.30%	Quick claim settlements, focus on customer service
Magma HDI General Insurance Co. Ltd.	92.34%	Transparent operations, various product offerings
Raheja QBE General Insurance Co. Ltd.	92%	Focus on corporate and retail insurance
Shriram General Insurance Co. Ltd.	96%	Strong presence in rural insurance
United India Insurance Co. Ltd.	95%	Government-owned, extensive product range
Universal Sompo General Insurance Co. Ltd.	96%	Joint venture with multiple partners

More Information About Car Insurance Coverage

Affordable Insurance

Cars produced by brands such as Maruti Suzuki and Hyundai typically boast some of the lowest insurance premiums in the market, primarily because their repair costs are more affordable and there is greater availability of spare parts. This trend is especially noticeable with hatchbacks from these manufacturers, which tend to offer much lower insurance rates in comparison to luxury or high-performance vehicles that often incur higher repair expenses and may have limited parts availability.

IDV, or Insured Declared Value

IDV, or Insured Declared Value, represents the maximum sum that an insurance company will disburse in the event your car is stolen or irreparably damaged. This value reflects the current market worth of your vehicle, taking into account various factors such as its make, model, variant, age and depreciation.

Frequently Asked Questions (FAQs)

A: Car insurance is an important aspect of vehicle ownership, providing financial security in case of accidents. In a country like India, it is mandatory under the Motor Vehicles Act, aiming to ensure that all vehicle owners can cover damages to third parties. This requirement helps promote road safety and holds drivers accountable for their actions on the road.

A: There are three broad types of car insurance policies available in India, which include:

Third-Party Liability Insurance - - This is a type of coverage that is required by the law and specifically protects individuals or entities from damages incurred by third parties.
Comprehensive Insurance -This provides coverage for both third-party liabilities and damages to your own vehicle, offering a high level of protection in various situations. It can be a valuable investment for mental peace on the road as it can help cover repair costs for your vehicle and liabilities towards others in case of an accident.
Own Damage (OD) Cover - This only provides cover for damages to the insured vehicle.

A: In car insurance, third-party coverage only includes protection for damages caused to others, while comprehensive coverage offers a broader scope of protection. Comprehensive insurance not only covers third-party liabilities but also includes damages to the insured vehicle.

A: Car insurance premiums in India are determined by several factors, including the age and model of the vehicle, the Insured Declared Value (IDV) and the driver’s history. Other elements that impact the premium cost are the type of coverage chosen and any add-ons selected. These factors collectively contribute to the overall calculation of car insurance premiums in the country.

A: Yes, it is possible to transfer your car insurance policy when selling your vehicle. In most cases, you can easily update the policy to include the new owner, or you may need to cancel it and acquire a brand-new one.

A: The No Claim Bonus (NCB) is a reward given to policyholders who do not file any claims in a policy term. With each claim-free year, the NCB accumulates and can result in a reduction of premiums by up to 50%. However, if a claim is made, the NCB resets to zero and can affect future premium rates.

A: A comprehensive car insurance policy provides extensive coverage for accidents, thefts, fire and natural disasters. It also includes protection against vandalism and personal accident coverage, offering financial security to the policyholder.

A: You should notify your insurer as soon as possible after an accident to start the process of claiming car insurance. If necessary, file an FIR with the police and gather all the required documents and photos of the accident scene, then submit them to your insurer. This will help ensure a smooth and efficient claim process.

A: The necessary documents for making a car insurance claim in India consist of the insurance policy copy, FIR driver’s license, vehicle Registration Certificate (RC), filled claim form and medical receipts for any injuries sustained. It is important to ensure all required paperwork is complete and accurate to facilitate the claims process.

A: You can easily find out the status of your car insurance claim by reaching out to your insurance provider through their customer service number or website. Additionally, many insurers provide online tracking tools that allow you to enter the claim number and receive instant updates on the progress of your claim.

A: Cashless car insurance eliminates the need for policyholders to make upfront payments for vehicle repairs. Instead, the insurance company directly pays the authorized garage for the repair costs. This simplifies the claims process and relieves policyholders from immediate financial burdens.

A: Policyholders do not have the freedom to select their preferred garage for repairs unless it is an off-network garage. Insurance policies usually mandate repairs to be done at authorized network garages, where the insurer has agreements to streamline cashless claims.

A: Zero depreciation car insurance is a valuable option for newer vehicles. It provides full coverage for replacing damaged parts without considering depreciation. Although it may come with higher premiums, it offers peace of mind and comprehensive protection during repairs.

A: Yes, you have the option to incorporate extras such as roadside assistance or engine protection into your car insurance policy. These additional features bolster your coverage and offer extra advantages, delivering improved protection against unexpected events.

A: Consider increasing your deductible, maintaining a clean driving record, bundling policies and taking advantage of discounts for safe driving or low mileage. It is also beneficial to regularly review and compare insurance quotes to find more competitive rates.

Car Insurance

What is Car Insurance?