Vehicle Insurance

Vehicle Insurance is Important

Many a times people often ignore to renew their vehicle insurance. At the time of purchase of new motor vehicle, we get the vehicle insured which is billed by the dealer to the buyer. Vehicle insurance is very important and it is also mandatory according to the Motor Vehicles Act, 1988. Many people often select cheapest motor vehicle insurance and regret their decision when their vehicle gets stolen or is involved in an accident. Like any other form of insurance, it ensures that interests of the policyholder are protected in a variety of situations. Some of the major reasons of investing in motor vehicle insurance and timely renewal cover the following:

  • Pays for the damages.

  • It reduces liability.

  • Pays for hospitalization.

  • Family receives compensation in the event of death.

Necessity for Insurance Against Third Party Risk

According to section 146 of the Motor Vehicles Act, 1988 motor vehicle insurance is mandatory against third party risk. The section 146 of the act describes that:

  1. No person shall use, except as a passenger, or cause or allow any other person to use, a motor vehicle in a public place, unless there is in force in relation to the use of the vehicle by that person or that other person, as the case may be, a policy of insurance complying with the requirements. Provided that in the case of a vehicle carrying, or meant to carry, dangerous or hazardous goods, there shall also be a policy of insurance under the Public Liability Insurance Act, 1991.
  2. Sub-section (1) shall not apply to any vehicle owned by the Central Government or a State Government and used for Government purposes unconnected with any commercial enterprise.

Driving an uninsured motor vehicle is a punishable offence according to section 196 of the Motor Vehicles Act, 1988. According to the Gazette Notification issued by the Government of Rajasthan a fine of Rs. 1,000/- is payable for driving a two or three wheeler vehicle and Rs. 2,000/- for driving other than above vehicle which is not covered by a valid motor vehicle insurance.

Types of Motor Vehicle Insurance

Along with basic coverage under the policy, one can choose a number of add-ons to enhance the protection available under these policies. There are following types of motor vehicle coverage available in India:

  1. Third-Party Liability Only Cover

    According to the Motor Vehicles Act, 1988 third-party insurance coverage is mandatory to drive a motor vehicle. The sum assured should be according to the driving conditions and sufficiently high to avoid out-of-pocket payments from your side. Under this type of insurance coverage, one will get the following benefits:

    1. Cost of repairs/replacement of the damaged vehicle of third parties.
    2. Cost of hospitalization and treatment of third parties.
    3. Liabilities arising out of death of third parties.
  2. Own Damage (OD) Cover

    When one opts for own damage insurance coverage, the cost of repairs to your vehicle is reimbursed. To determine the cost of collision coverage, its age and Insured Declared Value (IDV) are taken into account to arrive at the premium. The IDV is based on the market value of the vehicle. When a claim is lodged under collision coverage policy, the maximum amount payable under the policy is given by the IDV less accumulated depreciation. If you have purchased your vehicle on a loan, one should opt for collision cover.

  3. Personal Accident Cover

    When one wishes to protect oneself, i.e., the owner-driver of the vehicle, by opting for reimbursement of medical expenses after an accident, you are using personal accident insurance coverage.

  4. Zero Depreciation Insurance

    This coverage is generally offered as an add-on to the insurance policies in India. Suppose your vehicle is damaged and you need to replace the parts. The insurer will consider the depreciated value of the parts for claim settlement. A Zero Depreciation Cover will help you get the complete claim amount without accounting for any depreciation in the costs.

  5. Comprehensive Car Insurance

    This type of coverage gives the highest level of protection as it includes liability for third parties, damage to own vehicle, personal accident cover, and all non-collision damage such as storms, floods, fire and theft. One can further enhance a comprehensive car insurance policy with a choice of add-ons.