Types of motor insurance
Motor vehicles include two-wheelers, four-wheelers like cars and jeeps as well as trucks and busses. They are all an indispensable part of daily life. However, road transport involves multiple risks. A motor insurance policy can cover the financial losses that might be incurred during a mishap with your vehicle. Before you decide to take up insurance, it is important to be aware of the different types of motor insurance available to make a safe and well-informed choice.
Usually, the vehicles are insured at their current value in the market i.e., the IDV or Insured Declared Value. This value depreciates with time and is higher for the new vehicles than the old ones.
Here are the major types of motor insurance plans discussed in detail, this will enable you to recognize the type of insurance you need to take up for your vehicle.
Types of motor insurance based on vehicle owned:
There are different insurance policies available for cars, two-wheelers, and commercial vehicles. They are as follows:
1. Car insurance
This motor insurance is mandatory when buying a new car. It is one of the most important purchases to be made to ensure safe-guarding of the car from natural disasters, accidents, thefts, etc. Insurances also have mandatory clauses such as third-party liability which protects against claims of third-party vis-à-vis damage occurred to another person’s life or property by a motor vehicle.
2. Two-Wheeler insurance
The policy primarily looks into the insurance aspect of motorcycles and scooters. With the help of Two-wheeler Insurance, the insurer can claim damages in the case of an accident that is either caused on the road [while driving] or through some natural disaster. Claims can be made even if the concerned vehicle is subjected to theft. The insurance plan also includes personal accident claims of the concerned rider or passengers involved.
3. Commercial vehicle insurance
The insurance policy takes into consideration all types of motor vehicles used for commercial services such as buses, heavy-duty commercial vehicles, trucks, and ambulances. These insurance policies protect businesses from potential losses arising from damage to the vehicle, theft, accidents, explosion, etc. It also covers the legal liability towards third parties on account of bodily injury or property damage and death.
Types of motor insurance based on coverage
Motor insurance policies based on coverage refers to the type of insurance plan selected, which can be broken down into the following:
- Comprehensive insurance
- Third-party liability insurance
Comprehensive insurance
As the name suggests, a comprehensive vehicle insurance plan extends protection and security to the policyholders for almost any potential situation. This includes any expenses suffered by the policyholders in place of theft, accidents, or damage to the vehicle.
A personal accident cover qualifies the policyholder to claim compensation in the event of death or injury due to an accident. Comprehensive vehicle insurances allow adding on plans to the existing policy without the need to take out several policies.
What does a Comprehensive Insurance Plan Cover?
It is imperative to know the different aspects and situations that are covered by a comprehensive insurance plan.
Some of the different situations are given as follows:
- Theft
- Vandalism
- Any natural disaster causing damage to your vehicle; such as earthquakes, floods, fire, and inclement weather conditions.
- Situations of civil unrest such as riots and protests damaging your vehicle.
- Damage caused by animals
An important point to note about comprehensive insurance plan cover is that it includes third-party insurance by default.
What does a comprehensive insurance not cover?
In the following cases, the insurance coverage won’t be extended to the vehicle or the policyholder:
- Damage to the vehicle caused due to driving under the influence (DUI) of narcotic substances or alcohol.
- Damages caused to the vehicle during collisions.
- Wear and tear of an automobile.
- Mechanical or electrical breakdown.
- Damage to the vehicle when the driver does not have a valid driver’s license.
Third-Party liability insurance
Essentially, third-party liability insurance safeguards against the claims of damage to a third party by the insured vehicle. Hence, these insurance plans protect the interest of the policyholder.
Having a third-party cover for your vehicle helps to lower the risk of the policyholder being implicated in a multitude of situations.
How does a third-party insurance work?
A third-party insurance cover seeks to indemnify the first party against damage claims made by the third party.
There are two broad classifications of third-party insurance:
Liability coverage
Bodily injury liability covers physical injuries caused to another person by the insured. These encompass hospital care expenses, lost wages due to injury or disability, as well as death or permanent disability.
Property damage coverage
Property damage liability covers costs due to the property damage or complete loss of property. It includes claims related to the destruction of landscapes or property – mailboxes, fences, front gardens, gates, etc.
Whenever an accident takes place, the insured individual must notify the insurance company of the situation at the earliest. Some of the following crucial details need to be collected and presented to the insurance company:
- Description of the accident along with date and time of the event.
- Description of injuries sustained by driver and others involved.
- Description of damage to property or vehicle.
- Details of witnesses present at the scene.
- Photographs collected from the accident site for evidence.
Policyholders must cooperate with the police and provide all the necessary details to ensure that a smooth investigation takes place. The insurer must make a note of the First Information Report (FIR) number, if applicable, and impart the name of the insurance company.
In conclusion, before purchasing a policy, individuals must thoroughly read the document to understand what is and is not covered under the policy. The foremost objective of an insurance policy is to protect vehicle owners against financial as well as personal and vehicular damage. The government of India has made it mandatory for every vehicle to have motor insurance before it is taken on the road.
A smart and informed decision must be made keeping all the points in mind to be well protected against unfortunate future incidents.
