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Auto insurance: Frequently asked questions

December 22, 2008
Now that most auto companies have reduced the cost of their cars and with interest rates also on a downswing isn't that often-dreamt-about car within your reach? While you may know what car best suits your needs, taste and budget you may not yet be worrying too much about insuring your dream car right now.

If you really haven't thought about insuring your car yet, then it is about time you did. For according to a 2007 data released by World Road Statistics -- an independent global organisation that compiles road accident statistics -- as many as 94,985 Indians died in road accidents in the year 2005.

While motor insurance may not help save lives, it can help in saving you a lot of trouble in case -- God forbid -- your vehicle is involved in an accident. Hence the need for motor insurance.

What is motor insurance? Is it mandatory for a vehicle to be insured?

Motor or car insurance is a contract between a vehicle owner (you) and the insurance company (any insurance company that offers auto insurance) where the insurance company agrees to pay a sum of money to compensate for loss arising from accidents.

There are two types of motor insurance covers: Third Party and Comprehensive insurance.

Third party insurance covers only damage caused by the vehicle to other people or property.

The third party car insurance policy covers a vehicle owners legal liability for any compensation to be paid arising from any accident caused by the use of the vehicle. These include:

  • Death or physical injury to a third party person
  • Damage to third party property

    The liability is covered for an unlimited amount in case of death or injury. Damage to third party property is covered by the insurance policy as follows: up to Rs 1 lakh for private vehicles, scooters, and motorcycles and up to Rs 7.5 lakh for commercial vehicles.

    In addition to the cover provided by the Third Party car insurance plan, the Comprehensive insurance policy protects you against any loss or damage caused to the vehicle and its insured accessories due to natural and man-made calamities.

    Another mandatory feature is the third party legal liability cover. It protects the owner against legal liability arising from an accident causing any permanent injury or death as well as any property damage.

    This insurance policy also pays for towing charges from the place of accident to the workshop, subject to a maximum of Rs 300 for scooters and motorcycles and Rs 1,500 for private cars and commercial vehicles. Also available is a restricted cover for fire and theft but only for vehicles that are laid up in a garage and not in active use.

    All said and done, the India Motor Vehicles Act, 1938 has made it mandatory for every owner of a vehicle to obtain a motor insurance policy, either a comprehensive or a third party insurance. As evidence, a Certificate of Insurance must be carried at all times in the vehicle.

    Text:

    Apnainsurance is a comprehensive guide to insurance in India. It enables customers search and apply for all their insurance needs.

    Illustrations: Uttam Ghosh

    Also see: 7 golden home loan rules
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