How to Choose the Best Car Insurance Plan in India?

Owning a car is not enough. You must protect it with the right insurance policy to be able to take it out onto the roads. In fact, it is mandatory to have third-party insurance to drive your car on Indian roads. While third-party insurance protects you from third-party liabilities in case of an accident, it does not cover your damages or medical costs. For that, you must choose a different type of policy. Yes, there are different types of car insurance and you must get the one that meets your needs and budget. Understanding car insurance and its benefits would help you in selecting a policy that offers you ideal financial protection without being heavy on your pocket. Here’s what you must know about the various kinds of car insurance:

• A third-party liability policy

Indian law mandates every car owner to have a third-party liability policy. To ensure everybody can afford it, its premium is fixed by the IRDAI or Insurance Regulatory and Development Authority of India. The policy offers basic coverage and is limited to covering losses related to the third party only. The insurers do not have any control over the premium. Simplifying the insurance terminology:

• First party – policyholder or buyer of the policy
• Second party - insurance company or the insurer
• Third-party - an individual who demands compensation against damage to himself or his property, caused by the first party

Also known as a liability-only policy, it compensates for the following:

• Damage to vehicle or property of the third party

Any damage to the vehicle or property of a third party caused due to an accident involving the insured car is compensated by the insurer up to a specific amount.

• Injury to the third party

If an individual is injured in an accident caused by your car, he would get compensated. The policy would cover the financial expenses for their hospitalization and treatment. The amount paid would depend on the Motor Accident Claims Tribunal’s decision.

• Death of a third-party individual due to an accident

In the unfortunate event of the death of a third party due to an accident caused by your car, a lump sum financial amount would be paid by the insurer to the family of the deceased.

• Legal liabilities Your insurer will also take care of all the legal liabilities faced by you, the policyholder, in case of an accident. 

The policy works fine as long as your car is not damaged since the policy does not cover that. The entire repair or replacement cost for your car has to be borne by you. If you have an old car that you are planning to sell off, the basic third-party policy would be sufficient. However, you need to reconsider your decision if you have a high-end or brand-new car. In these cases, you may want to check car insurance of different types such as an own damage policy or a comprehensive policy.

• Own damage (OD) policy

It covers damages to your car due to accidental or non-accidental causes. Some of the damages covered by it include:

• Damage due to accidents

After an accident, take the help of your insurer to tow your car to the nearest network garage and get it fixed. Under a cashless claim, the insurer will directly pay the workshop for the repair work.

• Natural calamities

Under OD policy, the car would be financially covered against natural disasters such as floods, landslides, rockslides, and severe weather conditions such as storms, cyclones, and earthquakes.

• Manmade hazards

Damage caused due to manmade incidents such as riots, strikes, civil disturbances, torching the car, and vandalism is covered under the OD policy.

• Theft

In case your car gets stolen, you will get the sum insured equal to the IDV (Insured Declared Value) that was specified in the policy document.

• Damage during transit

If the car gets damaged during transit by rail/road/lift/elevator, you will get compensation for the cost of repair or replacement of parts. An additional own-damage policy would require an extra premium, and there still would be exclusions such as depreciation, regular wear and tear, and certain non-accidental damages. You can find them on the policy document. So, a combination of third-party and own damage policy may not be adequate if you want to extend the cover. You can buy specific add-on policies for this purpose.

• Comprehensive car policy

A comprehensive cover contains the features of both third-party and own damage covers. It is also known as a package policy and provides extensive coverage under a single policy. Besides, you can buy add-on covers based on your requirements. For imported or expensive cars such as Mercedes, BMW, Audi, or even a brand-new sedan or SUV, the cost of replacement or repair would be quite high. So, investing in comprehensive car insurance with suitable add-ons would be a good option. For damage beyond repair or car theft, your insurer would pay the entire sum insured, which is equal to the IDV (Insured Declared Value) or market value of the car. Comprehensive car insurance is best for a high-end or brand-new car.

Since you know the car insurance basics now, you can choose a specific policy and add-on covers based on your needs. Research online and visit the websites of different car insurance companies or quote comparison websites. Choosing plans with the lowest premium may backfire as they do not cover most situations. In case of damage, you will have to pay a major part of the expenses out of your own pocket.

Therefore, depending on the condition of your car, decide which car insurance to buy and select one that provides maximum coverage as per your need and budget. While buying offline or online insurance, note that it is not a good decision to buy the cheapest policy as it has limited coverage.