Vehicle Insurance in India - Importance, Types, and How It Works

Table of Contents

• What is Vehicle Insurance?
• Importance of Vehicle Insurance
  • Set by Law
  • Pays for 3rd Party Damages & Injuries
  • Protects You and Your Vehicle
  • Covers Legal Costs
  • Provides Financial Support to Family
• Different Types of Vehicle Insurance
• What is Insured Declared Value (IDV)? How to Calculate it?
• How to Choose the Right Vehicle Insurance Policy?
  • Calculate Your Requirements
  • Research and Compare
  • Evaluate Add-Ons
  • Consider Online Purchase
  • Read the Policy Document
• How to Claim Vehicle Insurance?
  • Insurance claim for damages to your vehicle
  • Insurance claim process in Third party claim
  • Insurance claim process in case of a stolen vehicle
• Conclusion

What is Vehicle Insurance?

Vehicle insurance is a contract that gives financial protection to your vehicle and liability for any kind of damages or injuries caused by accidents, disasters or thefts, with third-party coverage being mandatory in most places in India. This insurance covers the costs of the damages in your vehicle, legal liabilities, and medical expenses. The options of plans start from basic third-party to comprehensive plans that cover your own vehicle against theft, fire, and natural disasters. These policies mainly last for one year, but long-term third-party coverage lasts for 3-5 years in common amongst the new vehicles.

Importance of Vehicle Insurance

A large number of vehicle owners don’t understand the importance of insurance policy. It is often regarded as an unnecessary expense. If you also follow the same thinking, then these are the few important points that will help you understand why vehicle insurance is a mandatory requirement:

Set By Law

The Motor Vehicle Act of 1988 states that it is compulsory for every vehicle plying on the Indian roads to have valid insurance at all times. You will have to pay the penalty if you are found driving without car insurance or if it has expired. There is also a high probability of your driving license getting temporarily or permanently cancelled if you are found without valid insurance multiple times.

Pays for 3rd Party Damages & Injuries

Getting the basic third-party insurance policy will protect you from the expenses of damages and injuries. Without valid insurance, you might have to pay for the treatment and repair costs by yourself. Hence, getting vehicle insurance will help you reduce the liability and keep your finances managed.

Protects You and Your Vehicle

Give a thought about getting complete car insurance, which includes third-party damages, your own damages and injuries. Besides road accidents, even if the car faces any kind of damage due to driving conditions, fire, explosion, riots, natural disasters, strikes, acts of terrorism or even gets stolen, the insurance holder will take care of the expenses.

Covers Legal Costs

Sometimes road accidents lead to legal consequences. Imagine getting dragged in a case, filled against you for road accidents; this could take months or years to get over. You might have to hire a lawyer and pay their legal fees in many different types. During this tenure, you might end up spending a lot of money. If you have a car insurance plan, these legal fees and expenses will be taken care of by the insurance provider.

Provides Financial Support to Family

Most vehicle insurance policies come with personal accident coverage. This feature is either built-in, or you have to get it as an add-on. If a road accident leads to the death of the policyholder, the family members of the policyholder will receive compensation. This financial help from the insurance provider can at least help the family with their expenses.

Different Types of Vehicle Insurance

Your car is a basic necessity of your life; getting it secured with the correct insurance coverage is important. With the increase of road dangers, thefts and unavoidable occurrences of natural calamities, the need for insurance (the right one) is a smart decision.

But which type of vehicle insurance is best for your needs in India? Let’s understand it below:

**There are a few Add-ons that enhance protection coverage, the popular ones are:

• Zero Depreciation: No deduction of depreciation during the claim.
• Engine Protection: Covers damage to the engine from flooding or leakage.
• NCB Protection: Retains your no-claim bonus easily even after a claim.
• Return to Invoice: In case of total loss, reimbursement happens for the full car invoice.
• Roadside Assistance: Facilitates emergency services during breakdowns.

What is Insured Declared Value (IDV)? How to Calculate It?

IDV stands for Insured Declared Value. This is nothing but the current market value of the vehicle. In case of total damage or theft of the vehicle, IDV is the sum given to you by the insurance provider. Mostly, this is fixed and evaluated by the insurance provider. One of the major factors in IDV in insurance is that it determines the amount of premium you will pay to cover your car.

IDV represents the maximum claim amount that can be collected if the car is stolen or completely damaged beyond repair. Always try to set the IDV as close to the actual market value as possible.

Here is how IDV is calculated in insurance:
IDV= (Manufacturer’s listed selling price- depreciation) + (Accessories not included in listed selling price – depreciation), excluding the registration and insurance costs.

How to Choose the Right Vehicle Insurance Policy?

The vehicle insurance policies are important for keeping yourself, your vehicle, and others on the road safe. Getting the right one can determine the safety of your vehicle and yourself.

Calculate Your Requirements
Evaluate the need, the third-party liability insurance or the complete coverage, considering the type of vehicle, its usage and personal requirements.

Research and Compare

Do thorough research about different insurance providers and policies beforehand. Compare their coverage options, deductibles, premiums, claim settlement process, customer reviews and brand reputation.

Evaluate Add-Ons

There are many insurance policies that offer add-ons that give extra coverage for particular situations, such as road assistance, personal accident cover, engine protection, and zero depreciation cover.

Consider Online Purchase

Consider getting your vehicle insurance online because there are convenient offers with reasonable pricing. Skip the hassle of visiting the branch and getting insurance.

Read the Policy Document

Before making the decision, read the policy document carefully to know the terms and conditions. Read the renewability feature of the plan, which allows the plan to renew the policy on a yearly basis in a more hassle-free way.

How to claim Vehicle Insurance?

Getting your hands on the right vehicle insurance gives a financially secure claim process, in any worst-case scenario. It is very important to know exactly how to file a claim for an insurance policy as a vehicle owner. Let’s go through these steps to ensure a smooth claiming process, with fewer delays in receiving compensation.

Insurance claim for damages to your vehicle

• You must submit your claim form with the necessary documents requested by your insurance company; this must be done before you send the vehicle for repair.
• The company will send a surveyor to check the damage to your vehicle, and based on that, the report will be made and provided to the insurer.
• In case of an emergency, the surveyor will be sent to the accident site at any time.
• According to the report prepared by the surveyor, you will have to make arrangements for the repair of the car.
• As the repair process is completed, you will have to collect all the duly signed bills and the documents from the garage and submit them to the surveyor; from there, it will be sent to your insurance company for further processing.
• Depending on the nature of claim, the insurer can pay directly to the network garage under the cashless claim process. This option is considered convenient, as you don’t have to pay upfront. Make sure the car is repaired at an authorized garage to qualify for this process.
• If everything falls in place, your insurance company will process reimbursement for the bills.

Insurance claim process in a third-party claim

• Whenever a third party sends a notice to you for a claim, the first and foremost thing you need to do is inform the insurance company before you have any communication with them. Don’t make any sort of financial commitment beforehand without speaking to the insurance company first.
• Send a copy of the notice to your insurer or the insurance company.
• Submit copies of your driving license, FIR, and RC of the vehicle.
• Now the insurance company will go through and check the documents, and if required, will appoint a lawyer for you.
• If all things get approved by the lawyer, then the company will pay the dues directly to the third party, who initially made the claim.

Insurance claim process in case of a stolen vehicle

• Firstly, lodge an FIR and file a complaint with the police. Moreover, submit a copy of the FIR to your insurance company.
• Submit your final police report to your insurance provider.
• The insurance company will assign an investigator to work closely with your case, and you should coordinate with them fully.
• Once the claim gets approved, you will be submitting your RC book of the stolen vehicle, and then the name of the owner will be changed to the insurer.
• Hand over the duplicate keys and the subrogation letter for the car.
• If all goes well, the insurer will clear the claim.

Conclusion

Purchasing the right insurance policy is not just a legal requirement but also a financial safety net. Which will protect you against any unexpected fatalities. With the increasing risk of accidents and thefts, being aware of the insurance policy coverage, benefits, and the right claiming process is very important. If you encounter any problem, don’t hesitate to ask for help from your insurance manager or legal expert.