Motor Vehicle Insurance: Types of Policies in India

In 1914, India witnessed the first Motor Vehicle Act in the colonial era, which underwent amendments in 1924, 1939, and 1988. That said, the Motor Vehicles Act (1988) which was implemented on July 1, 1989, has been in force to date and has received several additional laws since then. 

The Motor Vehicles Act (1988) mandates the licensing of drivers/conductors, control of motor vehicles through permits, registration of motor vehicles, traffic regulations, state-level special provisions related to transport undertakings, liability, offences and penalties, insurance, etc.

Speaking of insurance, the Act states that if the vehicle owner is without vehicle insurance, they are liable to pay a fine of Rs 2,000 and/or imprisonment for up to three months. In addition, the authorities will impose a fine of Rs 4,000, if the law is broken a second time. 

Importance of Motor Insurance

A proper insurance policy not only protects you from legal problems, but also reduces your monetary burden like paying unexpected damages, accidents caused by natural disasters, theft losses, third-party liabilities, and other unwanted monetary losses.

The cost of vehicle insurance varies from model to model and the type of policy. Here, we will mention the types of motor insurance and the MUST-HAVE feature(s) in policies.

Comprehensive Insurance

A comprehensive insurance policy covers the benefits of both third-party insurance and own damage insurance. It covers the liabilities of damages to others caused by your vehicle and damage, and it covers incidents like accidents, loss by fire, loss by theft, man-made disaster, or natural disaster for your vehicle.

It is the safest type of insurance policy, and it is recommended for all vehicle owners. The comprehensive policy has a validity of up to a year, which can also be extended, but at extra cost. The validity, however, may vary from insurer to insurer.

Third-party Insurance

This is the most basic type of insurance, as well as, the cheapest because of its limited coverage. The Insurance Regulatory and Development Authority (IRDAI) sets the price of a third-party insurance policy, and this policy only covers the damages and injuries caused to third parties by your vehicle.

This policy doesn’t cover the damage to your vehicle. Unlike the comprehensive policy, third-party insurance is usually valid for up to three years, as standard. The validity may vary from insurer to insurer.

Own Damage Insurance

This type of policy is exclusive to two-wheelers. It covers the damage to your vehicle, whether it happens because of an accident, natural disaster, or theft. The causes list can also vary from insurer to insurer. 

You can avail of this policy only if you have third-party vehicle insurance. 

Sometimes we don’t buy comprehensive plans, but later we realise that we need a policy for our vehicle. In this situation, you can choose the Own Damage insurance for your vehicle.

Add-ons

Insurance policies do not cover all parts of your vehicle, such as the engine or clutch plate. So, insurance providers offer you many add-on features like full engine coverage, clutch plate coverage, electronics coverage, etc.

There is also tyre protection (punctures, cuts, bursting of tyres, etc.), a consumable cover (brake oil, grease, air conditioner gas, fuel filter, washers, etc.), and roadside assistance (RSA). 

As the full form of RSA implies, the insurer will assist the vehicle's owner if there is a vehicle breakdown on the way. The insurance company will arrange all the services, as and when required by the insured vehicle's owner.

It is worth noting that the insurer's number should always be kept handy. 

The most important Zero-Depreciation (also called bumper-to-bumper Insurance) also falls under the ‘add-on’ category. The zero-depreciation add-on feature allows you to repair your insured vehicle without any additional cost, except filing/processing charges.

Conclusion

As per the MVA (Motor Vehicles Act) of 1988, a third-party insurance cover is compulsory for all motor vehicles (passenger- and commercial vehicles). However, we recommend having a comprehensive plan with a 'Zero-Depreciation' add-on to recover damages without shelling out a hefty amount. For further details, contact your preferred insurance provider(s).