Like any asset, owning a car involves a list of must have documents, be it registration of the car, driving license, a PUC (pollution under control) or an insurance. Maintaining all these documents are a ‘must’ and adequate care should be taken to put them in order.
While registration of the car is a onetime activity, insurance for the car needs to be renewed every year. The car insurance has to be ‘in-effect’ at any time when you are driving the car. Therefore, it is critical to get your car insurance policy in place on time.
There are various types of car insurance policies available in the market. These policies are applicable to private vehicles driven in India. One needs to buy car insurance policy after evaluating all the options.
Largely the car insurance policies available can be divided into two types:
- Third Party Car Insurance Policy: Motor Vehicle Act of 1988 has made it mandatory for all car owners to have a Third party liability cover. Third Party Car Insurance policy provides for the same. It covers any injury or damage caused by the insured vehicle to any third party or property. Third party is a person other than the insurer or the insured. It is typically a pedestrian or a driver or passenger of other car, which has faced injury or damage by your car. The policy thus insures any liability towards the Third person or property caused by the car, due to your fault, and this also explains the mandatory nature of the policy.
- A Comprehensive Car Insurance Policy: While the Third Party Car Insurance Policy covers any damage caused ‘by your vehicle’, it does not cover any damage caused ‘to your vehicle’. To cover any damage caused to your vehicle, you need to buy car insurance policy which covers damage to your car, third party liability and also a personal accident cover. As the name suggests, comprehensive policy covers all damages caused either natural or man-made like car theft, natural calamity like flood or fire or even a windshield broken by the branch of the tree.
Now, weather you need to buy only a Third Party Car Insurance Policy or a Comprehensive Policy depends upon various factors like:
- The premium payable for the Comprehensive Car insurance Policy is justifiably higher than that of a Third Party Car Insurance policy. So while deciding the insurance policy you need to equate the possible repair cost to your vehicle in case of damage which could be much lower that the additional premium that you may need to pay to buy a comprehensive insurance policy.
- While a Third Party Car Insurance policy is mandatory a comprehensive policy is preferred by buyers of a brand new vehicle, as it covers any financial damage caused to the car and provides more benefits to the owner.
Thus, though a Third Party Car Insurance is mandatory and cheap, Comprehensive Car Insurance policy provides a better cover against a possible financial damage.
Other than the Comprehensive Plan, the insurers also provide add-on covers. Some of them are noted below:
- Lost Key and Key replacement cover: These provide for cost for replacement of key or cost of replacing locks when the vehicle is broken into. This Add-on cover would be advisable for a high value luxury car.
- Road Side Assistance and Towing services: These services can be included as a part of the policy especially by people who travel long distance on highways.
- Add-on Personal Accident Policy: Add-on personal accident policy provides for additional cover in case of death or permanent disability of drivers and/or other passengers in the car. People who employ drivers can opt for this policy, thus, covering their employee better.
- Return to Invoice or An Invoice price cover policy should be bought by people owning a luxury car. It insures the invoice value of the car in case of total loss to the vehicle.
So buy car insurance policy that meets your requirements. But remember to ‘Read the Exclusions’. Insurance is a subject matter of solicitation and therefore it’s important to read the ‘exclusions’ mentioned in any car insurance policy. All Car Insurance Policy have exclusions such as damage caused by the person not holding a valid car license or drunk and driving, these being cognizable offences.