As per the Motor Vehicles Act of 1988, it is mandatory to have motor insurance to drive legally in India. But we wish it was as easy as getting a simple policy for your car or bike and being done with all the hassle. With a variety of plans offered today, it can be difficult to choose the right one that suits your needs. So, read ahead as we simplify all the types of motor insurance policies and guide you to choose the perfect one.
Why Is Motor Insurance Important?
Motor insurance safeguards your vehicle and your life in case of an accident.
But that’s not all it does!
A good motor insurance policy would give you immediate help in case your vehicle experiences difficulties such as sudden engine failure.
It would also give you financial compensation for vehicle repairs or even if there has been a theft.
Types of motor insurance (based on vehicle)
Depending on the vehicle you drive, there are 2 main types of motor insurance –
1. Private Insurance
This type of insurance is for private vehicles such as cars and bikes. It is further divided into 2 types.
- Private Car Insurance
- Two Wheeler Insurance
2. Commercial Vehicle Insurance
Commercial vehicle insurance is required for taxis, trucks, ambulances, buses, and autos.
This type of motor insurance is slightly different, where the coverage focuses on compensating for business loss.
This is because there are more financial risks with commercial vehicles as the driver, passenger, and the vehicle owner are all involved.
Difference between Private & Commercial Motor Insurance
| Features | Private Vehicle Insurance | Commercial Vehicle Insurance |
| Vehicle Type | Cars, bikes, and scooters | Taxis, autos, trucks, buses, ambulances, commercial cars, other utility vehicles |
| Coverage | It provides compensation if there are damages due to accidents, natural calamities, fire or even theft to the vehicle or the driver.
Depending on the plan you choose, it will provide third party and own vehicle damages. |
It mainly covers business loss that has happened due to damages to the insured vehicle.
It provides driver and passenger coverage as well. It also gives compensation for vehicle damages due to accidents or calamities |
| Compulsory Cover | Third Party liabilities | Third party liabilities, driver & passenger cover. |
| Exclusions | 1. No coverage for passengers unless you opt for an add-on
2. No coverage for commercial vehicles.
3. Excludes regular wear and tear of the vehicle |
1. Does not cover the driver who is not covered or mentioned in the insurance policy
2. No coverage if the commercial vehicle is used for personal purpose. 3. Excludes regular wear and tear of the vehicle |
| Premiums | Premiums are lower as the private vehicle runs less kms. | Premiums are generally higher as the commercial vehicle runs for longer distances. |
| Claim Process | An FIR is not compulsory. | The claim process only begins if you get an FIR or there is an inspection done by the insurer. |
Types of Motor Insurance Policies (Based on Coverage)
There are 2 main types of motor insurance policies offered by most agencies in India –
third party & comprehensive.
Check out all their features below –
| Features | Third Party Insurance | Comprehensive Insurance |
| What is it? | This is a basic policy that covers damages you may cause to a third party vehicle, driver, or property. | This policy gives all third party benefits, while also covering damages to you and your vehicle. |
| What are the benefits? | It covers damages under ‘no fault liability’.
This means that the insurance policy will cover financial compensation to the third party vehicle & driver, even if you are at fault. |
The main advantage is that it covers damages to you and your vehicle!
This includes car theft & damages due to fire or natural disasters. Most companies also give you a ‘no claim bonus’ benefit – If you don’t file any claims in the policy year, you get a discount in the next year’s premium. |
| Is customisation possible? | Customisations are usually not offered under third party policy. | You can opt for many add on benefits and customise the policy as you desire it. |
| What are the exclusions? | 1. Drunk Driving
2. Driving without a licence 3. Consequential damages that happen after the accident 4. Damages to your own car |
1. Drunk Driving
2. Driving without a licence 3. Consequential damages that happen after the accident (unless covered by an add on) 4. General wear and tear of your car. |
| What are the premiums like? | Third party insurance plans are affordable and generally lower than comprehensive plans. | Expect the premiums to be higher as comprehensive plans give much better coverage than third party ones. |
| Which insurance plan should I opt for? | You should opt for a third party motor insurance if –
1. You drive a really old model 2. You don’t drive your car for everyday commutes 3. If the value of your car is really low. |
You should opt for a comprehensive party motor insurance if –
1. Your car is brand new and repairs would be expensive 2. You use your car for daily commutes |
Types of Motor Insurance, Riders & Add-Ons
1. Zero Depreciation
Remember that the value of your vehicle starts depreciating as it ages.
When you file a claim, the insurance company will take its depreciated value into account rather than the original value you paid for the vehicle
Hence, you could be paying a portion of the claim for vehicle repairs yourself.
This is where a zero depreciation cover will help you!
Under this add on, the insurance company will pay the entire amount of the claim without considering any deductions based on the vehicle’s depreciation value.
Remember that some companies may only offer a limited number of zero depreciation claims.
So, it’s important to read the fine print before you opt for such a plan.
2. Engine Protection
An engine protection plan provides compensation, if there is a sudden mechanical breakdown of the car engine.
It can be pretty damaging for your car or bike if water enters its engine or if there is an oil spill.
Instead of paying hefty fees to get it repaired or changed, you can opt for such engine protection rider plans.
3. Roadside Assistance
This cover can be quite useful if your car breaks down suddenly while driving.
The roadside assistance cover provides on-site help and you can immediately get your car towed, jumpstarted, or repaired.
4. Return To Invoice
In case of a theft or complete breakdown of your vehicle, the return on invoice cover provides complete financial compensation.
Instead of getting the depreciated value of the vehicle, return to invoice ensures that you get the on-road amount as compensation.
This includes the entire amount you had paid while buying the car or bike, including additional charges such as registration!
5. Consumables Cover
This add on cover includes the consumables used while servicing your vehicle. It includes things such as nuts and bolts, engine oil, oil filters, and more.
6. Tyre Protect Cover
Remember that most insurance companies do not provide compensation for tyre damage, unless your car has been in an accident.
But if you opt for a tyre protection cover, the insurance company will pay for all tyre repairs, right from punctures to replacement.
7. Personal Accident (PA) Cover
The Personal Accident Cover provides compensation in case of injuries, disability, or death of the vehicle owner.
It is a mandatory cover you must get while getting motor insurance.
As per the motor vehicles act 1988, only getting a third-party cover was compulsory.
However, the personal accident cover was made mandatory to consider the safety of the owner-drivers.
As per January 2019, IRDAI has reformed its policy for this cover and has provided 2 conditions when it is not mandatory –
- If you already own a stand-alone insurance policy with coverage of 15 lacs.
- If you already have a PA cover for your existing vehicle, you don’t need to buy it again for a new one.
Note – Remember that most of these add-ons are only valid if your vehicle is within 5 years old.
FAQs
| Is it compulsory to have motor insurance?
Yes. It is legally compulsory to have motor insurance as per the Indian motor vehicles act, 1988. |
| How to reduce premium on car insurance policy?
1. Opt out of add-on benefits you don’t require 2. Don’t put a claim for small repairs to benefit from a ‘No claim bonus’ 3. Avoid expensive modifications in your car 4. Buy insurance plans online at better deals |
| How to file a car insurance claim?
1. Call your car insurance firm and register a claim 2. You will receive a claim registration number 3. Take the vehicle for repairs 4. Submit the required documents at the car garage. 5. The insurance agency confirms for damages and reimburses you. |
| What are the types of motor insurance?
There are 3 types of motor insurance in India – private car insurance, two wheeler insurance, & commercial vehicle insurance |
| What are the types of motor insurance policies in India?
There are 2 main types – third party insurance and comprehensive motor insurance. |
| Which is the best motor insurance?
HDFC ERGO, Royal Sundaram, ICICI Lombard, Go Digit, & SBI General Insurance provide the best motor insurance policies in India. |
| What is the difference between third party and comprehensive motor insurance?
Third party insurance only covers the third party vehicle or driver. A comprehensive insurance covers your car and personal safety along with third party liabilities. |
| Is it possible to switch from third party to comprehensive insurance?
Yes, you can switch to a comprehensive insurance plan while renewing your policy. Make sure to switch before your third party policy expires! |
| Which is better, comprehensive or third party insurance?
Third party insurance is good if you drive an old vehicle, while comprehensive motor insurance is better if you have a new vehicle and use it everyday. |
