Insurance is the fastest growing market across the world. It provides coverage against the insured event.
For example, life insurance covers the insured against death, health insurance provides reimbursement for medical expenses incurred in the hospital.
Similarly, auto insurance or motor insurance covers against accidental damage to the vehicle and third parties. Motor insurance is part of general insurance.
Today we will discuss the types of vehicle insurance.
In our daily life, we use certain types of vehicles to travel from one place to another. Although no one wants to be hospitalized, in reality, everyone is in danger while traveling on the road.
Auto insurance helps us to incur a financial loss in case of an accident.
As per the law, if you are the owner of any vehicle (car, motorcycle, commercial vehicle) then it is mandatory to have third-party insurance.
You are legally liable to pay damages if the vehicle hits a person or his property.
This is where motor insurance comes in handy.
In today’s post, we will see how many types of vehicle insurance are there in India, what it means, why it is necessary, and which policy should we take.
Importance of Motor Insurance
An automobile is a valuable part of our life we can travel anywhere with its help. .
Even if you are following all the traffic rules and regulations but due to your fault or someone else’s fault, an accident can happen at any time.
You must have seen some people who drive recklessly on the road so imagine what would happen if they hit you or your vehicle?
In the second case, acknowledging the fact that you drive very carefully but a mistake can happen at any time which may cause damage to a third person or his/her property.
In the event of an accident, you suffer financial loss or physical loss, or both due to the accident.
Motor insurance helps in reducing financial loss.
When your vehicle damages a person or his property, then by law you have to compensate for his loss.
In this situation, having motor insurance, the insurance company compensates for the loss of another person on your behalf.
But if the vehicle is not insured, then you have to cover all the damages out of your own pocket.
Now you must have understood the importance of this insurance.
So let us now know what are the types of auto insurance.
Types of auto insurance
Auto insurance is grouped into different types and different perspective perspectives
- Types of Motor Insurance based on benefits
Based on the benefits, basically, two types of vehicle insurance exist in India.
- Third-Party or Liability Only Policy or Third Party Insurance
- Package Policy or Comprehensive Policy or Comprehensive Policy
What is Third Party Insurance?
As per the Indian Motor Vehicles Act, 1988, it is mandatory to have a liability insurance policy to drive a vehicle on the road.
A liability insurance policy is one of the types of vehicle insurance that covers your legal liability towards third parties; If your vehicle is damaged by any person.
Third-party insurance also covers damages caused by your vehicle to third-party property.
If the aggrieved person claims compensation for any of the above scenarios (injury to a third party or damage to their property) you will have to pay for the loss or injury (the amount of payment is decided by the court).
Hence third-party insurance compensates the loss of a third party on your behalf.
Such an insurance policy covers only the liabilities of the third party and does not cover the insured vehicle.
What is package policy?
This type of vehicle insurance is designed to provide a complete cover including the vehicle.
You get cover against robbery, theft, riots, self-ignorance, fire, lightning, explosion, etc. with all the benefits present in third-party-only insurance.
It is beneficial to take a package policy for your vehicle over third-party insurance as third-party insurance does not provide cover for your vehicle.
The package policy premium depends on the type of vehicle you have and also on the extent of indemnity.
In a separate post, we have talked in detail about which vehicle third-party insurance is good for.
The above two main (third party insurance and package policy) are the types of vehicle insurance.
Apart from this, we also get to see vehicle-wise motor insurance products nowadays, some of which we are discussing further.
- Vehicle Wise Vehicle Insurance Types
Based on the benefits, we have two types of auto insurance policies which are mentioned above.
We have the following insurance policies depending on the type of vehicle:
- Two-wheeler insurance
- Private car insurance
- Commercial or commercial vehicle insurance
- two-wheeler insurance
The name itself indicates that two-wheelers are covered in this type of vehicle insurance.
Whenever you buy a two-wheeler, it is mandatory for you to take third-party insurance for at least 5 years. While buying a new vehicle, it is up to you whether you
want to take a package policy or a third-party policy.
You can take comprehensive cover for 1 year but the third-party cover has to be taken for at least 5 years.
- Private car insurance
This type of motor insurance is designed for four-wheelers. According to the Motor Vehicle Act of India, whenever a person wants to buy a new private four-wheeler, he has to take third-party insurance for at least 3 years.
The period of comprehensive cover in a four-wheeler can be availed of.
But the term of third-party insurance will be at least 3 years.
- Commercial or Commercial vehicle insurance
Commercial vehicle insurance is designed for business people who have more than one vehicle to run their business.
In this type of vehicle insurance, more than one vehicle is insured at a time.
In which the policyholder has to pay the fixed premium and in return the insurance company indemnifies.
The third-party damage caused by his vehicles in the accident as well as pays for the repair of the insured vehicles (if package policy is taken) Is.
Note: Due to an amendment in Indian Motor Vehicle Act now it is mandatory to take third-party insurance for at least 5 years for two-wheelers and 3 years for four-wheelers.
What is covered?
Generally, the following incidents/damages/moco are covered in a vehicle insurance policy.
Note: Benefits can be more or less depending on the type of vehicle insurance.
- In case of damage to a third-party vehicle, an amount is given for compensation.
- Compensation is made in case of damage to third-party property.
- It is paid for repairs in case of damage to the insured vehicle due to self-ignorance, fire, explosion, riots, terrorist acts, etc. (if there is a package policy)
- Payment is made in case of damage to the insured vehicle due to natural calamities such as earthquakes, storms, floods, cyclones, landslides, etc.
- Compensation is also given in case of an accident due to the fault of others.
- Compensation can also be taken in case of dacoity/theft.
In what situations is the cover not available?
Insurance companies may refuse to grant a claim under certain predetermined conditions and circumstances.
For events that are not covered in the insurance policy, where are the exclusions in the language of insurance? Here below are some of the events that are not covered by a two-wheeler or car insurance.
- There is no claim for wear and tear due to the age of the vehicle.
- If the driver does not have a valid driving license then the insurance company is not bound to give any claim.
- Periodic depreciation is applied to the insured vehicle.
- The electrical and mechanical part breakdown is not covered.
- No claim for damages can be made if the vehicle is used for illegal activities.
For more details read this post, “What does a motor insurance policy cover and what does not?” Read..
Which policy to take: Third-party insurance or package policy?
Which of the types of vehicle insurance would be a good policy depends on your vehicle and you.
We suggest here that if your vehicle is new then you should take the package policy only.
On the other hand, if your vehicle is old then we recommend taking third-party insurance as motor insurance has conditions like exclusion and depreciation due to which very little money is received or compensation is received on the claim of the old vehicle.
We have talked about this topic in detail in a separate post, you should read that post.
From this, you will get accurate information about which motor insurance policy will be good for your vehicle, click here for more information.