Consider this. You buy a brand new car, take it out for a spin and some jerk comes and bumps you from behind. The damage done to the car will be secondary but you would first feel as if someone has shattered your dream. The next thoughts that cross your mind would be - Is the damage irreparable? How much would it cost?
A Car Insurance is an arrangement between the Insurer and the Vehicle Owner wherein the insurer provides coverage against any financial loss happening because of damage to the car. This is applicable in situations where the damage has been caused either through an accident or because of any natural calamity or any liability that could result as a part of an accident or theft.
A Car Insurance policy is usually of two types
a) Third Party Liability cover and
b) Comprehensive Cover policy
Third Party Liability Policy: As the name suggests, it covers you against any legal liability resulting from accident of your vehicle. The coverage includes death, injury or property damage to third party. This cover does not include damage to the vehicle. A Third Party Liability cover is legally mandatory in India under the Motor Vehicles Act.
Coverage in a Third Party Liability Policy
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General Exclusions
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Liability is covered for an unlimited amount with respect to death or injury and damage to third party property for up to Rs.7.5 lakhs under commercial and private car and up to Rs.1 lakh for two wheelers.
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Damage to your personal property
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Legal protection for death or injury claims from third parties, including occupants of your vehicle
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Legal protection for damage to third party property
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Personal accident benefits for you, your paid driver and occupants of your vehicle
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Legal costs and expenses
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Protection of your legal liability towards your paid driver
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Comprehensive Package Policy: Comprehensive cover is designed to offer protection to you and your vehicle. A typical comprehensive cover comprises the following:
a) Damage to your vehicle, i.e., any loss or damage caused to your vehicle or its accessories due to natural and manmade calamities as defined in the scope of coverage; b) A third party legal liability cover and lastly; A personal accident cover to driver (owner) of the vehicle for up to Rs.2 lakhs for a premium of Rs.100.
Coverage in a Comprehensive Policy
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General Exclusions
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Accidents & external damage
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Wear & tear, depreciation, mechanical or electrical breakdown
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Damage due to Fire & explosion, Storm and Flood
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Driving without valid driving license
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Burglary / Theft
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Damaged caused consequential loss
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Damage in Transit
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A voluntary excess (if opted)
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Malicious act including Riots & strikes
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Loss due to vehicle being driven by a person under the influence of alcohol or drugs at the time of the loss
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Natural calamities like Earthquake
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Apart from the above mentioned two types of policies, in 2010 a few insurers also added a host of additional rider benefits which allowed the customers to add a few extra protective gears to their Car Insurance Policies. Each of these riders has their own USP and helps you get more out of your Car Insurance policy at a little extra cost.
Depreciation Shield
In case of a partial loss to your car, the insurer promises to cover the depreciation amount on the damaged parts which are allowed for replacement. For eg: For a mid-sized car new car, a Zero Depreciation cover would cost a consumer Rs. 2,500 approximately.
24x7 Spot Assistance
Driving through a crowded road and getting stranded due to a Flat Battery, Flat Tyre or a Minor Repair can be a troublesome issue. 24x7 spot assistance helps you resolve all such queries and fuel assistance in some cases too. In addition to this you also get Towing Facility, Legal Advice, Medical Co-ordination, Accommodation Benefits and Taxi Benefits too in case of immobilisation of your car. It is also one of the cheapest riders available to a consumer for Rs. 365 only.
Engine Protector
In case the engine of your car gets stalled due to either water ingression or leakage of lubricating oil resulting from an accident or as a result of damage to the gear box due to leakage of lubricating oil resulting from an accident the insurance companies still ensures that your claim is settled as per normal procedure. In case of standard policy, your claim would have been rejected.
Vehicle Replacement Advantage
If your car gets stolen or is damaged to a bad accident or a natural calamity, this rider helps you replace your car with a new equivalent or near equivalent car of similar make, model, features, specifications and colour.
Accident Shield
In case your car meets with an accident and you are not the sole individual in that car the insurer will compensate you and the other occupants of your car in case of both death and/or permanent total disability arising out of an accident while travelling in your car.
Similar to the toppings in a Pizza, these additional riders make the policies more beneficial for the owner. Though on the face of it, every rider might look important and handy, a careful thought regarding the same will let you know what your actual requirements may be. Car Insurance protects you from being financially responsible for an accident, as correctly putting it, it is a ventilator support which your car lives on.
The author is CEO, Policybazaar.com