What is Car Insurance?

Car insurance is an agreement between an individual and the insurance company under which the insured person pays regular premiums to the insurer in exchange for protection against financial or legal liabilities that may arise from accidents.

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How Does Car Insurance Work?

Car insurance provides financial protection against vehicle damage, injuries, and liability claims resulting from unexpected events. When you pay the premium for your car insurance policy, it safeguards your insured vehicle against accidents or other incidents that could incur significant financial losses.

In return for this premium, the insurance company covers repair costs, medical bills, and legal expenses in various situations mentioned in the policy's terms and conditions. In the event of an accident, the policyholder can file a claim against their motor insurance policy. The insurer will evaluate the damage to the insured vehicle and cover the repair costs, minus any deductibles. In India, the main coverage options under a car insurance policy include third-party or liability-only, comprehensive, and standalone own-damage.

Why is Car Insurance Important?

According to Indian motor laws, every vehicle owner is required to have at least a third-party car insurance policy to drive legally on the roads. If you are found driving without a vehicle insurance policy or it has expired, you will have to face a penalty. Moreover, your driving licence may also be temporarily or permanently suspended if you are repeatedly found driving without a valid four-wheeler insurance policy.

Car insurance protects you from any financial or legal liabilities arising from an accident involving your vehicle and injuring someone or damaging their property. Additionally, with a comprehensive car insurance policy, own damages and injuries are also covered by the insurance provider. Besides road accidents, if your insured vehicle suffers any damages due to natural calamities, man-made acts, fire, etc., or is stolen, your insurer will cover the expenses.

Factors That Affect Car Insurance Premium

The premium of third-party car insurance is fixed by IRDAI (Insurance Regulatory and Development Authority of India) based on the vehicle engine's CC (cubic capacity). However, the premium of a comprehensive car insurance policy is determined by several factors. Some of the major ones are cited below:

• Insured Declared Value(IDV): IDV is the current market value of the insured car. It is the amount your insurer will pay you if your vehicle is stolen or suffers a total loss in an accident. A higher IDV results in higher car insurance premiums.
• Vehicle Age: Another important factor that affects the car insurance premium is the age of the vehicle. Older vehicles have a lower IDV, resulting in lower policy premiums due to higher depreciation.
• Driving History of Car Owner: Your driving habits significantly affect your motor insurance premiums. Drivers with a clean and safe record are considered less risky and are more likely to pay lower policy premiums. However, the insurance company charges higher premiums for drivers with records like drunk and rash driving, accidents, and too many claims.
• Vehicle's Registration Location: The location where the vehicle is registered also plays a role in determining car insurance premium rates. Urban areas, specifically metropolitan cities, have higher policy premiums as there are more chances of accidents and damages due to heavy traffic conditions. On the contrary, a tier-2 city has less costly premiums.
• Type of the Vehicle: The type of the vehicle also determines its policy premium. A sedan or an SUV will have significantly higher insurance costs than a hatchback. This is because of aspects like the vehicle's make, model, variant, and engine's cubic capacity, among others, which directly impact the vehicle insurance policy premiums.

What Does Car Insurance Cover?

While 3rd party car insurance only covers damages or losses to a third party person or property, cited below are the essential inclusions in a comprehensive car insurance policy:

• Third-party liabilities: A motor insurance policy offers coverage for the injury or death of the third party person or property damages in an accident involving the insured vehicle.
• Own-damages: Cover for damages to the insured car in an accident or collision.
• Personal Accident (PA) cover: Death, bodily injuries, or permanent/partial disability of the owner of the insured vehicle.
• Fire and Theft: Damages or losses to the insured vehicle in the event of fire or explosion or if the vehicle is stolen.
• Natural calamities: Damages due to natural disasters like floods, earthquake, landslide, cyclone, etc.
• Man-made acts: Any damage to the insured vehicle due to human-induced disasters such as terrorism, vandalism, riots, etc.

What Does Car Insurance Not Cover?

The following are certain scenarios under which a car insurance policy doesn't offer coverage:

• Damages to the insured vehicle due to driving under the influence of alcohol/toxic substances or without a valid driver's licence.
• Damages due to usual wear and tear of the insured vehicle or mechanical/electrical failures.
• Damages due to war-like situations or nuclear perils.
• Damages occurred when driving with an expired vehicle insurance policy.

What are Car Insurance Add-Ons?

Add-ons in car insurance are extra benefits the insurer provides to vehicle owners for an additional premium. It helps policyholders enhance their coverage beyond a standard four-wheeler insurance policy. Car owners can opt for add-ons only with a comprehensive car insurance policy. Some of the top add-ons you can consider opting for are listed below:

• Zero Depreciation: Also known as bumper to bumper or nil depreciation cover, this add-on provides complete cover to policyholders on vehicle repair or part replacement (except tyres and batteries) without deducting any depreciation costs.
• 24x7 Roadside Assistance (RSA): With the RSA add-on, the insurance company provides emergency assistance to policyholders in the event of a car breakdown or other issues, such as mechanical or electrical faults, running out of fuel, flat tyres, minor repairs, dead battery, etc.
• Engine Protection: This add-on covers damages to the insured vehicle's engine or its parts, such as gearbox, crankshaft, pistons, etc., arising out of water ingression or oil leakage.
• Consumables: The consumables add-on cover ensures that the insurer will pay the cost of consumables, such as the oil filter, engine oil, lubricants, nuts, etc., in case of their replacement or refiling due to an accident.
• Invoice Price Cover: Also known as Return to Invoice (RTI) cover, this add-on guarantees that the insurer will compensate you for the original invoice value of your vehicle car in case of theft or total loss.

How to Get Car Insurance?

Buying a car insurance policy is easy and can be done online in just a few minutes. Here's the process:

• Step 1: Go to Policybazaar.com and select 'Car Insurance.'
• Step 2: Enter your car's registration number in the given form and fill out the proposal form.
• Step 3: Now, you will find car insurance quotes from different insurers.
• Step 4: Choose the one that fits your coverage needs and budget.
• Step 5: Here, you can also select add-ons as per requirement.
• Step 6: Complete the policy purchase via cards, netbanking, or UPI.
• Step 7: Once the payment is successful, your policy papers will be emailed to you instantly.