What is Motor Insurance?
Motor insurance (also known as auto insurance, or vehicle insurance), is an insurance policy purchased for private or commercial vehicles to provide financial shield against any loss or damage. Vehicles like cars, trucks, motorcycles, scooters, tractors and other road vehicles can be covered under the motor insurance policy.
How does motor insurance help the owner of the vehicle?
The primary objective of motor insurance policy is to provide:
• Financial aid to the owner of the vehicle in case of unfortunate events. Basically, it provides financial shield against any damage incurred to the insured vehicle due to natural or man-made perils.
• Liability cover, which could arise due to the damages incurred to the third party property, vehicle due to the collision or accident.
• Liability cover against the bodily injury or accidental death of pedestrians, passengers of the other vehicle, etc.
• Theft of the insured vehicle.
Classification of Motor Insurance
For purpose of insurance, motor vehicles are classified into 3 broad categories:
• Private Cars
• Private Two Wheelers: Motor Cycles, Motor Scooters, Bikes, etc.
• Commercial Vehicles: Goods and Passenger carrying vehicles – Rickshaws, Taxis, Cabs, Buses, etc.
Based on the categories, the motor insurance premium varies. However, we’ll focus on private motor vehicles – private cars and two wheelers.
Certificate of Motor Insurance
The certificate of insurance is accepted by the police authorities, R.T.O and other public authorities as valid only if it is issued by the insurance company, and must be provided as proof of Insurance, if and when required.
Why to Buy Motor Insurance Policy?
It is Mandatory for all plying vehicles on Indian roads as per the Motor Vehicles Act, 1988
The Motor Vehicles Act passed in 1939, which was amended in 1988, and again in April 2017 (passed by Lok Sabha awaiting passage in Rajya Sabha and by the President), ensures the road safety of the people.
Unfortunate incidents like road accidents cause bodily injury, and more than often it leads to the permanent disability of the victim. Not to forget, it may also cause accidental death of the pedestrians, passengers of the other vehicle.
Prior to the implementation of the Motor Vehicles Act, these victims were not compensated, because the vehicle owners did not have the resources to pay any compensation to the victim.
And for this very reason – to safeguard the interests of road accident victim, having a motor insurance was mandated. This is done as third party motor insurance have been mandated.
However, the insurance against the loss or the damage of the own vehicle not mandatory.
But the insurance for the third party liability arising out of the plying motor vehicles in public places is mandatory.
Without having third party motor insurance policy, you may have suffered a financial hit, and possibly, get into legal matters.
Hence, it is advisable to all the vehicle owners to have a motor insurance policy. And to protect from digging a hole in your pocket, one must also buy own damage coverage plan.
Types of Motor Insurance Policies
Be it a private car, a two wheeler, or a commercial vehicle, there are two types of Motor Insurance Policies.
1) Third party motor insurance: To provide liability cover. This motor policy applies uniformly to all vehicles, whether Private Cars, Commercial Vehicles, Motor Cycles or Motor Scooters, etc. with certain exclusions.
2) Comprehensive motor insurance policy: Package or Comprehensive policy offer cover for own damage of the insured vehicle and also third party liability cover.
Comprehensive motor policy applies to all Private Cars, Commercial Vehicles, Motor Cycles, Scooters, etc. with certain exclusions as per the vehicle and usage.
What is Covered Under Motor Insurance Policy?
Let’s dive-in to know what’s covered under a motor insurance plan
1) Third party Liability Motor Insurance Covers:
The liabilities, which requires a third party insurance, are as follows:
a) Any liability incurred by the insured vehicle in respect of bodily injury, disability, or death of any person – pedestrians, passengers of other vehicle, and including owner of the goods or his authorised representative
b) Liability incurred due to the loss or damage to any property of a third party
c) Liability incurred due to the bodily injury, disability, or death of any passenger of a public vehicle
d) Liability arising under Workmen’s Compensation Act, 1923 due to the respect of death or bodily injury of:
• Paid driver of the insured vehicle
• Conductor, or ticket examiner
• Workers, carried in a goods vehicle
(e) Liability arising due to the bodily injury or death of passengers of another vehicle.
2) Comprehensive Motor Insurance Policy Covers:
• Liability to Third Parties:
With the comprehensive policy for your vehicle, all the liability incurred to the third party is covered. Liability arising due to the bodily injury or death of any person, and any loss or damage incurred to the third party property due to the insured motor vehicle.
• Damages incurred to the insured vehicle due to the following perils:
o Fire, explosion, self-ignition or lightning.
o Burglary, house breaking or theft.
o Riot and strike.
o Earthquake (fire and shock damage).
o Flood, hurricane, storm, inundation, cyclone, hailstorm, frost.
o Accidental external means.
o Malicious act.
o Terrorist activity.
o Transit by road, rail, inland waterway, lift, elevator or air.
o Landslide /rockslide.
3)Personal Accidental Cover Under the Motor Insurance Policy
Personal Accidental Cover is mandatory for the vehicle owner
Personal Accident cover is a financial aid to the motor vehicle policyholder. In case of unfortunate accident, where the owner-driver suffers a permanent disability or dies, the compensation is paid by the insurance company. It is compulsory for all the vehicle owners to get a personal accidental cover. Moreover, there are other optional PA covers for passengers and pillion riders. Let’s see more details on PA cover under motor plan.
A) Personal Accident Cover for Private Cars:
• Compulsory PA cover for owner-driver: The motor insurance policy comes with the coverage of Rs.2 lakhs for the owner-driver of the insured car on paying the premium of Rs.100.
• Optional PA cover for co-passengers: You can get personal accident cover for named and unnamed passengers with a sum insured of Rs.2 lakh per occupant on the premium of Rs.100/person.
• Optional Legal Liability cover for Paid Driver: Under Workmen’s Compensation Act, 1923, compensation will be paid. The optional paid driver PA cover comes at Rs.50.
B) Personal Accident Cover for Private Two Wheelers:
• Compulsory PA cover for owner-driver: The motor insurance policy comes with the coverage of Rs.1 lakh for the owner-driver of the insured two wheeler on paying the premium of Rs.50.
• Optional Pillion Rider PA cover: You can get personal accident cover for named and unnamed passengers with a sum insured of Rs.2 lakh per occupant on the premium of Rs.100/person.
What is NOT Covered under the Motor Insurance Policy?
There are few exclusions under the Motor insurance policy:
There are certain exclusions to a standard own damage motor insurance policy, which are as follows:
• Any damages incurred when the policy is not active or lapsed
• When damage is caused deliberately
• Cost of consumables
• Consequential loss
• Any wear and tear due to ageing
• Any mechanical or electrical breakdown
• Damages arising due to driving without a legal and valid license
• Damages arising due to driving under the influence of alcohol or drugs
• Loss or damage incurred while driving outside India
• Loss or damage due to radioactive or nuclear-related activities
• If the vehicle is used for purposes other than the permitted use, for example, commercial use, your claim will be rejected.