Car Insurance India

Car Insurance India

Why is Car Insurance Compulsory?

Vehicle insurance protects you from being financially responsible for an accident. By law you must have car insurance if you want to drive on the road and without it you can be fined, lose your license, go to jail and also be sued depending on the seriousness of the accident you caused. Even if you're pulled over without car insurance you can be fined though which means you must have and maintain Vehicle insurance. It is compulsory under the Motor Vehicles Act 1988.

It is not compulsory to insure your vehicle but third party insurance for your vehicle is compulsory. To give a scenario that you you hit a person with your vehicle and he dies. His family members lose a member on whose earnings the family runs. Now, It is the responsibility of the vehicle owner to compensate the loss to the family. A claim in such cases is calculated by as 

Claims or Damages to be Paid to the Dependents

 = 

Expired Person's Monthly Salary X 12 months X Number of Years He can Work for

Such claims run into lakhs and crores. Third Party Insurance covers you from this claim. Third Party Insurance companies are liable to pay for the damages to the dependents/family members who sue the owner for damages.It can go into lakhs and crores depending on the income of the person who dies or is disabled in the accident.

Types of Insurance


There are mainly two kinds of insurance covers: Motor Policy A (Act Only Policy or Third Party Insurance) and Motor Policy B (Comprehensive Policy)

• Motor Policy A: Liability is unlimited in case of an injury or death, with added premium. Fire and Theft can also be covered. A specific claim for this must be made in the Motor Accident Claim Tribunal by the injured or legal heir of the deceased against the owner of the vehicle and his insurance company.

• Motor Policy B: This is a comprehensive policy wherein the Insurance company compensates the injured against loss/damage to the vehicle as a result of accident, fire, theft, earthquake, riots, strike, floods, terrorism, loss during transit by road, rail elevators etc. Extra fittings such as music systems, air-conditioners etc. can also be covered.

Frequently Asked Questions on Car Insurance

Car Insurance: 3rd party Car Insurance cover ?

3rd party insurance covers you against death or injury, by your vehicle, to people outside your car like passengers in other car or people walking on road.

Comprehensive insurance cover ?

Comprehensive insurance covers 3rd party plus any loss or damage to the car or 2 wheeler etc due to accident and other imaginable acts like earthquake, terrorism also . It includes towing cost too.

Significance of a certificate of Insurance?

It is the Document you are suppose to carry to show to police and is the proof issued by Insurance company. New certificate is to be issued every year for before renewal date.

What if I don't receive my Insurance certificate right away?

You are given a cover note. Its a temporary Insurance document establishing proof of Insurance. A cover note is valid for 60 days from the date of its issuance and is replaced by an Insurance policy.

Can Motor Policies be issued for a longer term than a year?

No , its for 1 year only. However, for motor cycles and scooters only, may be issued on a long term basis.

Do I need a FIR in case of any accident?

Yes for following cases :

Any 3rd party personal injury or death , involving your car.

Any personal injury or death of a paid driver/ owner-driver/ passenger.

Any 3rd party property damage.

Theft of the entire vehicle/accessories, stereo-recorders, other vehicle parts.

Any loss or damage to the vehicle by miscreants, rioters, terrorists, arsonists, etc.

What should i check in my Car Insurance Renewal Notice?

• IDV is reduced by a minimum of 10% from last year, 
• Vehicle Registration No. is correct; 
• Premium is less than the last year (If you have not made any claim.) 
• NCB (If applicable) is more than last year’s NCB. (Maximum 50%)
• Sometimes the Third Party insurance premium may get revised. This is very rare and it may cause the premium to go up.

How is Insurance Premium Calculated for a Car?

It's based on the cubic capacity of your vehicle's engine, its age, place of registration and value of the motor vehicle. For extended coverage to include Personal Accident, accessories, etc. - you may have to pay an additional premium. The premium is also subject to certain deductions including No Claim Bonus, Automobile Association and Anti-theft Device discounts.

Depreciation on metal parts is calculated as under: -

• 0 to 6th months – 0%
• 7th month to 1st year – 5%
• 1st year to 2nd year – 10%
• 2nd year to 3rd year – 15%
• 3rd year to 4th year – 25%
• 4th year to 5th year – 35%
• 5th year to 10th year – 40%
• More than 10 year – 50%

Everyday hundreds of motor insurance companies come forward claiming that they are offering the cheapest car insurance. Today many insurers also offer many value add on‘s like Towing Facility, Depreciation cover, etc. Such add on‘s have a lot of value along with the regular motor policy, but these advertisements never tell you that. Also, what they do not tell you is you can save up to 55% on your car insurance renewal premium and new car insurance premium. You get No Claim Insurance Bonus (NCB) whenever you do not make Insurance Claim against your policy in a Year. Thus it becomes more necessary for the policy buyer to do a car insurance comparison before purchase.

Source : RTA Hyderabad and MVA Act 1989