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How Does Car Insurance Work in India?

Car insurance is a necessity for every car owner, and in the last five years, there have been many positive changes, which has made buying car insurance very easy and less time-consuming. For example, digitisation has simplified the process of purchasing car insurance online. But, despite this, many still find it too complex to understand the benefits and claim related processes.

Before we get into an overview of how car insurance works in India, you must know the significant changes made applicable from September 1st, 2018.

All insurance companies should offer only three-year third-party insurance for new cars and five-year third-party insurance for new two-wheelers.

Third-Party Car Insurance

Third-party car insuranceis also known as legal liability insurance as it provides coverage against any legal liabilities, arising due to accidental damages caused to the third party i.e. person or property by the policyholder’s vehicle. It does not provide coverage against damages caused due to accident or theft to the policyholder's car.

Third-party car insurance coverage includes:

  • An accident resulting in permanent injury/death of a person
  • Damages caused to the property, other than insured
  • Personal accident cover for driver/owner There is no limit on liability coverage on injuries or death of a third party, but liability coverage for third-party property damages is fixed at Rs 7.5 lakhs.

Comprehensive Car Insurance

Comprehensive car insuranceis a combination of both first-party (own damage coverage) and third-party insurance and offers the highest form of protection to any policyholder for their car. In this type of car insurance, the insured is fully covered against any risk of loss arising out of damage due to accidents or theft of the car.

Comprehensive car insurance policy coverage includes:

  • Third-party injury or death
  • Damage to third-party property
  • Damage to your own vehicle arising out of accident, theft, man-made disaster or natural calamities
  • Personal accident cover for driver/owner

Factors Affecting the Car Insurance Premium

There are a lot of factors which go into determining the car insurance premium and the total coverage amount. In the case of third-party car insurance, the premium amount is determined by the Insurance Regulatory and Development Authority of India (IRDAI). The factors taken into consideration are the engine's cubic capacity along with many other points. The premium amount is revised every year. Following are the factors affecting the insurance premium of a comprehensive car insurance policy:

Insured Declared Value (IDV)- The insured declared value (IDV) is the market value of your car calculated by your insurance company, depending on the car's age, make, model and engine's cubic capacity. It is the total amount that you shall receive in case of total damage or theft of your car. Higher the IDV of the car, higher will be the amount of premium and vice versa.

Safety and Security- Safety device installations like an anti-theft alarm system, gear lock, steering lock, etc. help to lower the premium rate. All safety devices should be certified by a certification agency, like in India, it is Automotive Research Association of India (ARAI).

Claims History- A claim-free year results in "No Claim Bonus", and in the next year car insurance renewal, it translates into a lower premium amount.

Add-ons on Car Insurance- The premium amount also depends on the add-ons you have selected for enhanced car insurance coverage. For example, zero depreciation, roadside assistance, engine protection, passenger coverage, etc.

Making Car Insurance Claims

It is the most complicated part and often involves lengthy legal procedure. Let's check out how the claim filing process works for both the types of car insurance policies:

Third-Party Insurance

Under this, the claim can only be filed by a third-party against the policyholder. Since it only covers accidental damages, the third party has to file a first information report (FIR) with the nearest police station of the accident. It is followed by collecting the charge sheet. After that, the case will get lodged and heard in the Motor Accident Claims Tribunal and settled accordingly.

Here, the third party or the person making a claim has to do everything on his own, as the insurer will not help in the process. The insurer's liability is just to pay for the damages as determined by the tribunal due to policy.

Comprehensive Car Insurance Policy

For third-party claims under a comprehensive policy, the process is similar to third-party insurance. Now, for making own damages claim, the policyholder has to contact the insurance company to make a claim. If you have purchased car insurance online, you can file a claim on the insurance company website or mobile app.

Once the claim is intimated, the insurance company appoints a surveyor, who will inspect your car to determine the validity of the claim and extent of the damage. Once the surveyor gives a go-ahead, you can get the car repaired at a network garage through the cashless mode or at your own preferred garage and then get the costs reimbursed as per the surveyors approved amount.

Buying Car Insurance Online

Compared to any other modes,buying car insurance onlineoffers multiple benefits to users. Following are some of the advantages of buying car insurance online:

Lower Premium Rates- As there is no broker involved in the transaction, the insurance company passes the benefits of the lower cost to the customer.

Easy Comparison- When you purchase car insurance online, you can easily compare the pros and cons of all plans and select the plan that offers maximum benefits.

Simple Documentation- As the documentation is handled electronically, there is no need for physical verification of the documents.

Online Services- The online platforms are not only limited to selling car insurance online but offer a range of online services such as renewal premium payment, filing claim request, tracking claim status, etc.

One of the major advantages of buying car insurance online is that you do not have to depend on anyone to complete all the insurance-related tasks. Additionally, it's hassle-free and less time-consuming, too.

Final Words

Car insurance works just like any other forms of insurance in India, "use it or lose it" policy. Therefore, before buying your car insurance online, compare every plan and make an informed choice, so that you get the maximum risk coverage from your car insurance.

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