According to the Indian Motor Vehicles Act, all vehicle owners – bikes, scooters, cars, trucks – must hold a valid insurance policy. Here, in this introduction, we provide you with a clear picture of motor insurance in India – what is it, types, things to know before purchasing a vehicle insurance policy and more.
Let’s get started.
What is motor insurance?
Also known as vehicle insurance, motor insurance is just like all other insurance policies. However, unlike life insurance or health insurance, motor insurance is a must in India for all vehicle owners. Regardless of the type of motor vehicle you own – car, jeep, truck, van, bike or scooter, you must hold a motor insurance policy. Failing to do so leads to fines and other penalties by the traffic police.
The government of India makes motor insurance mandatory in the country for the safety of the vehicle owner as well as others. The best part – when compared with other insurance policies, the cost of motor insurance is meagre. Despite its lower prices, motor insurance acts as a lifesaver in many situations.
Classification of Motor Insurance
One of the biggest myths regarding motor insurance is that it offers financial coverage only for motor vehicles. Wrong! Motor insurance policies provide coverage not just for the insured vehicle but also for a third-party property, and third-party persons.
Motor insurance in India is classified based on two factors:
The type of vehicle
The coverage required
First, let’s take a look at the types of motor insurance policies in India based on the type of vehicle.
Types of Motor Insurance in India: Based on the Vehicle
It’s the insurance that needs to be taken by all private car owners. It includes coverage for the vehicle in an
- Natural disasters like cyclones, floods, storms, landslides, etc.
- Man-made disasters like theft, riots, etc.
Besides coverage for the vehicle, it also offers coverage for injuries to the owner of the car, third-parties, passengers, due to a road accident.
Also known as two-wheeler insurance, it is similar to car insurance. The one significant difference is that it applies only to motorised two-wheelers like bikes, scooters, etc. Depending on the type of policy chosen, it offers coverage for:
- Third-party property and bodily injuries to third-parties
- Damages to the motorcycle in an accident, natural disaster or man-made disaster
- Damages/total loss of the bike due to theft
Most bike insurance policies offer the option of personal accident cover for the rider of the vehicle. If desired, you can opt for a personal accident cover for the pillion rider as well.
Commercial Vehicle Insurance
As the name implies, it's the motor insurance policy that applies to all vehicles that are not used for personal use. It can include – load-lifting trucks, passenger plying buses, agricultural vehicles like tractors, light and heavy commercial vehicles, ambulances, taxis, cabs and auto-rickshaws. The features of a commercial vehicle insurance policy are similar to that of car insurance.
Types of Motor Insurance in India: Based on Coverage
It's the most common vehicle insurance in India. According to the Indian Motor Vehicles Act, all vehicle owners must hold at least third-party insurance. It offers coverage for damages and losses incurred by the third-party person, vehicle or other property in an accident. It does not provide coverage for losses incurred by one's own vehicle or property.
As the name implies, it offers comprehensive coverage – both third-party liabilities as well as damages incurred by one's own vehicle. As comprehensive coverage provides extended coverage, it's the most preferred type of vehicle insurance.
Let's make a side-by-side comparison of third-party and comprehensive vehicle insurance.
|Coverage||Comprehensive Vehicle Insurance||Third-party Vehicle Insurance|
|Losses/damage to own vehicle in an accident||✔||🗶|
|Losses/damage to own vehicle due to fire, natural disasters, man-made disasters||✔||🗶|
|Damages to third-party property||✔||✔|
|Damages to a third-party vehicle||✔||✔|
|Injuries/Death of a third-party person||✔||✔|
|Personal accident cover||It depends on the policy chosen||It depends on the plan chosen|
|Theft of the vehicle||✔||🗶|
Popular Add-Ons available with Comprehensive Motor Insurance
Besides the coverage offered by comprehensive motor insurance, policyholders can further extend the coverage using add-ons. Here are the popular add-ons that can be included with your motor insurance for a slight increase in the premium cost.
It’s a great option that offers you expert assistance during emergencies. With the roadside assistance rider, the insurer will rush a team of mechanics to you, when your vehicle breaks down. The team will come to your spot and repair the vehicle immediately. If it’s not possible, the team will arrange for a tow truck to tow your vehicle to the nearest garage.
Zero Depreciation Cover
A motor vehicle is a depreciating asset. It means the resale value of the vehicle decreases with age. The older the vehicle is, the more the value of the bike reduces. With the zero depreciation cover, the insurer does not consider the depreciation while settling claims.
This cover reimburses the service costs of the vehicle including the cost of changing the engine oil, replacing the missing nut on the engine cover and other miscellaneous expenses.
Engine Protection Cover
The engine and gearbox are one of the highest valued parts of a car or bike. Most vehicle insurance policies do not cover the cost of the replacement engine. With the engine protection cover, you can claim the damages caused to the engine of the vehicle due to water entering the engine, lubricating oil leaks, etc.
Return to Invoice Cover
In case of theft or total damage to the vehicle, the return to invoice cover helps you claim the total cost of damage including the registration costs of a new vehicle, road tax, and so on.
Tyre Protect Cover
Generally, the cost of replacing tyres are not reimbursed by the insurer. However, with this add-on cover, you can claim the cost of replacing tyres from the insurance provider.
Few Points to Keep in Mind before Purchasing Motor Insurance
Be Aware of the Exclusions
Different vehicle insurance policies have varying exclusions. Make sure to understand the policy document carefully to find out the exclusions in the plan. It helps you avoid surprises later on.
Choosing between Comprehensive and third-party liability only insurance
You can opt for third-party liability-only coverage if you use your vehicle sparingly and not daily. Also, if you plan to sell your car or bike in the next few weeks or months, then you can save on the premium costs by opting for third-party insurance.
In all other cases, comprehensive motor insurance is most preferred as it helps to keep your vehicle protected from all contingencies.
Do not under or over insure the vehicle
Very often, vehicle owners under insure their vehicle to lower the premium costs. However, this is not the smartest option as, during an accident, the insurer will only cover costs up to the declared value of the vehicle. The remaining costs have to be borne out of pocket.
Similarly, avoid over-insuring the vehicle. As the insurer pays only up to the market value of the bike and not more than that.
Make an Informed Decision
The basic idea behind motor insurance is to cover for damages caused to your vehicle and third-parties in an accident. Make sure to understand the different types of coverage, riders and choose the best motor insurance policy that fits you the best.