Car Insurance Coverage

About Car Insurance Coverage

Car Insurance is an agreement that a car owner (or anyone with an insurable interest in a car) enters into with an insurer. Through the agreement the insurer pledges to provide financial protection against losses arising from any damages sustained to the car in a traffic collision and against any third-party liabilities arising from any incidents involving your car. Protection is also extended to losses resulting from theft of the car and damage sustained due to causes other than a traffic collision. In exchange, the insured is required to pay a premium to the insurer before the car insurance coverage commences.

The government of India mandates that every motor vehicle on public roads in India be covered by at least a third-party car insurance. Further, all drivers must also have a personal accident cover.

Insurance contracts are unilateral in nature. This means that only the insurer’s promises are legally enforceable. The insured can at any time decide to not pay the premium and the insurance cover would cease without any penalties for the insured, whereas as long as the premium is paid – the insurer is legally bound to provide the car insurance coverage as per the contract terms and conditions. Further, unlike most ordinary non-insurance contracts, the value of the exchange between the insured and the insurer is unequal and depends on uncertain future conditions.

Instances when you get coverage on physical damage for your car

Instance 1: You are driving down the highway in the rain when you skid on a bad patch of road and hit an electricity pole. Your insurer would pay for any physical damage your car sustains in this incident as it is a road accident in which you collided with an object. Remember that the collision need not just be with other vehicles.

Instance 2: You have parked your vehicle at your regular parking spot, which is reasonably secure. Due to an earthquake a boulder hits your car and it sustains physical damage. Most comprehensive car insurance would pay this damage as it is caused by a natural calamity against which car insurance coverage is provided according to the policy terms and conditions.

It is important to remember that in both these cases any deductible would have to be paid out of your pocket before the insurer pays for the rest of the covered expenses. The deductible to be paid out of pocket includes both the compulsory deductible mandated by IRDAI and any voluntary deductible opted by you.

Type of car insurance coverage under comprehensive car insurance

While the actual cover under comprehensive car insurance policy may vary with the provider, at the very minimum it provides coverage against:

• Bodily injuries caused to people (both the insured and third-party) involved in an accident

• Property damage sustained by a third-party including damage to another person’s vehicle

• Damage sustained by the car due to a collision

• Non-collision damage sustained by the car include damage due to a storm, fire or other natural calamities

• Losses due to man-made calamities like burglary, theft, strike or riot.