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Car Insurance

Car Insurance. You probably have it, but do you fully understand it? It's important to understand car insurance definitions and coverage types so you buy enough to protect yourself but not more than you need.

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Introduction

Car Insurance works as a safety net for the owner/user of the car. Realising its importance for car owners across the country, the Government made it obligatory for vehicle owners to have a third-party insurance cover for their vehicle. This means you have to buy a policy for your car to avoid any penalty/losses/legal trouble in the future.

Purchasing a car insurance policy is often a formality among many car owners because the only reason they care about getting a cover for their four-wheeler is that it is mandatory by law. Low premium plans are generally preferred since they are easy on the pocket. This means that spending on an inadequate cover that can make the owner pay a hefty amount out of his pocket in the event of a mishap or damage.

It is very important to invest in a comprehensive car insurance plan that's right for you. Keep in mind that you need to understand the terms and conditions of the car insurance plan and draw a comparison with other policies to come at a suitable decision.

Is Car Insurance Mandatory in India For Motor Car Owners?

All the motor cars plying on the Indian roads must have a valid motor insurance policy as per the Indian Motor Vehicles Act, 1988. It is illegal to ride your car for private or commercial purpose on Indian roads without having a mandatory third-party liability cover insurance.

It is obligatory to have a valid car insurance policy as it provides financial protection against unfortunate accidents, which may damage to third-party property, and/or cause bodily injuries to the third-party driver or co-passengers and/or pedestrians. In such cases, having a liability cover provides financial coverage, the insurance company pays compensation on behalf of the car owner.

Basics About Motor Insurance Policy

Premium

It is the fixed amount that you need to pay to the insurance agency to keep the policy in effect.

Car Insurance Policy

The premium amount of the policy will depend upon the Insured Declared Value (IDV). This affects how high or low that amount will be. Many insurance firms have contacts with the manufacturers and provide you with the optimum value.

Natural Calamities

This section includes protection against the following phenomenon: landslide, self-ignition, lightning, explosion, earthquake, flood, typhoon/hurricane, inundation, and hailstorm.

Man-made Calamities

Under this, you will be covered against threats like burglary, theft, damage during transit, an accident caused due to external agents, terrorist activities, riots, and strikes.

Car Insurance Policy Assures:

You Stay Financially Protected

A valid car insurance policy provides you with financial coverage in case of car theft or any damage caused by or to your vehicle.

You Are Legally Protected

It is mandatory to have a valid motor policy for your hatchback, saloon, SUV car to drive them legally on Indian roads, so having a valid motor policy keeps you legally protected.

You Are Protected With Personal Accident Cover

In case the policyholder meets an accident, which causes a partial or total permanent disability or dies due to an accident, the insurance company covers the insured up to the sum of Rs.15 lakh.

You Stay Worry-free

You can enjoy your drive without having any worries about riding your car illegally, paying a hefty penalty, or paying from your pocket in case of third-party bodily injury or property damage.

Types of Car Insurance in India

There are two primary options available in the market and both of them cater to completely different needs.

Third Party Liability Car Insurance

Third party liability car insurance is the most vanilla form of car insurance policy that you can buy. In fact, as per the rules and regulations, it is the bare minimum policy that you must have to drive the car. The Motor Vehicles Act of 1988 mandates all vehicles to have at least the third party liability policy so that they can drive their vehicles legally on the road.

Thus, this policy type at least gives you the clearance of legal driving. As the name suggests, it covers for damages to third parties during an accident. If a policy holder meets with an accident, he/she is considered as the first party, the insurer as the second party and any other person or property involved is the third party.

Any damages or injuries or death of third party individual or property is taken care of by the policy. It must be noted that since the coverage provided by a third party cover is very limited in nature, its premium prices are also low. In fact, the IRDA recommends the price of the policy on a regular basis. Though the policy is just enough for you to drive, it doesn't offer a lot of benefits and convenience.

Personal Accident Coverage : A third-party car insurance policy covers an owner-driver cover

Owner-Driver Personal Accident Cover: In case of a permanent total disability or an accidental death, the policyholder is covered with a sum insured of up to Rs.15 lakh on an additional premium.

Personal Accident Cover Table:

Accidental Event

% of Sum Insured

Death

100%

Dismemberment of both the limbs or loss of vision in both eyes or one limb and one eye

100%

Dismemberment of one limb or loss of vision in one eye

50%

Permanent Total Disability

100%

What is not Covered in Liability Cover Only

  • Own Damage of your car is not covered. Any damage incurred to the insured car due to an accident is not covered. The policyholder will have to bear the repair cost himself or herself.
  • Accidental damage/ liability/loss happened outside the specified geographical area.
  • Damage, liability, loss happened due to invasion, war and other warlike operations.

Comprehensive Car Insurance

A comprehensive car insurance, on the other hand, is a policy that will surpass your needs and then provide some more features and benefits. To start things off, it includes the third party liability policy by default and builds on the top of it. A comprehensive plan offers the following coverage.

Own Damage Cover

If your car was to meet with an accident and you wished for your policy to look after the repair expenses, a comprehensive policy would do that for you. The premium that you pay for a comprehensive plan has a small component dedicated towards own damage.

Natural Calamity

In the unfortunate event that your car is at the receiving end of a natural calamity such as flood, cyclone, typhoon, landslide and so on, the policy kicks in. Your car insurance will cover all the expenses related to such repairs.

Man Made Calamity

There are several instances where cars are damaged due to riots, strikes, malicious activities, theft or burglary. Having a comprehensive policy offers your car protection against all such things and ensures that you can sleep well at night.

Extra Add-Ons

Some of us want additional features and benefits or security to the base policy to enhance the protection of your vehicle. In such cases, opting for an add-on is the most sensible option. But you can only avail riders with a comprehensive policy.

Different Types of Add-on Cover in Car Insurance Policy

Zero Depreciation

Zero Depreciation is a coveted add-on car insurance coverage feature that allows you to get full settlement regardless of any write-offs for depreciation as in normal car insurance plans. By opting for such coverage, you gain access to full claim policy against a premium; such plans are very beneficial for the top and mid-segment luxury and expensive cars as they provide superior benefits at minimal costs.

Return to invoice

In case your car gets written off due to an accident or gets stolen, you will be eligible to get the original invoice value including registration and road tax. Usually maximum cover in case of total loss is calculated as per the IDV (Insured declared value) mentioned in the policy. The cover is available for normally 4 wheelers that are upto 3 years old.

No Claim Bonus Protection

No Claim Bonus is like a reward discount given to insured at the time of renewal of car insurance for every no claim year. A minimum of 20% discount is eligible which can go as high as 50%. No claim bonus protection add-on helps you to preserve your NCB even if there is a claim, helping you to preserve discount in your following year's premium.

Engine Protect

We all are aware engine is the heart of the car and probably the most expensive part of the car. Engine repair is normally not covered under your normal comprehensive policy. In case if you're insurance company is not offering coverage for engine protection, it is a good idea to go for an engine protect ad-on. As engine is the heart of any vehicle, always ensure your car engine is well protected at all time. Engine cover add-on also offers protection to the engine and it's electronic circuit especially in case of flooding. Since flooding during the monsoon season is quite common, it is ideal to go for such an insurance add-on especially if your place of residence is prone to flood situations.

24/7 Roadside Assistance

Car can break down anytime anywhere. There is a good possibility a garage and a service centre is not always in the proximity of your reach. It can be headache to get help in such cases especially if you are not familiar with the area. In this add-on cover, insurance company provides certain round-the-clock services like emergency refuelling, towing, change of punctured tyre, arranging for a mechanic's services and so on in case your car breaks down. So say adieu to car breakdown troubles and add this cover for complete peace of mind during driving.

Car Key replacement cover

Improvements in vehicle security and the development of smart key technology with programmed chips controlling locks, alarms, immobilisers and ignitions seems to have only increased the problems and cost when things go wrong. Losing out a car key cannot get replaced easily by local locksmith for a new generation car. It needs to come from the car manufacturer and can leave a big hole in your pocket. Key replacement covers the costs (up to the sum insured) of key replacement. If your car has been broken into then it will also cover locksmith charges, new locks and replacement keys.

Accident coverage for Co-passengers

This add-on is like an accident coverage, it provides coverage for co-passengers of the vehicle. It provides lump sum compensation to fellow passengers in case of death, permanent or partial disabilities suffered during an accident. So show the care for your co passengers and make them feel safe and secure in your car with this add-on cover.

Car Accessories Cover

There are lot of accessories in the market which we put in the car to make our car look unique and to enhance our driving experience. The accessories can be expensive if need to be replaced if damaged or stolen. You can get your accessories insured with this add-on cover and need not worry continuously when you park in unfamiliar locations.
As we can see there are plenty of add-on covers available today. Choose the add-ons based on your individual requirement and circumstances. The add-ons can enhance your base 4 wheeler insurance plan and make good value out of your premium payment.

Insured Declared Value (IDV) In Car Insurance

When it comes to car insurance, there are many terms that you need to be aware of. Among them, one of the most important term is the IDV (Insured Declared Value). You must have heard people talk about the IDV a lot when a car insurance policy is being purchased or renewed. But what exactly is this IDV? IDV is nothing but the current market price of your car. With time the vehicle ages and its value drops. The insured declared value, or the IDV, is just that.

Why is IDV Important in Car Insurance?

It is very important for you to get the correct IDV of your car. IDV is absolutely crucial in car insurance. This is because the claim you get depends greatly on the IDV of the car. If your car gets stolen or is damaged beyond repair, your insurance provider will pay compensation equal to the IDV mentioned in your car insurance policy. You must note here that the value of the car is not the current ex-showroom price but the IDV of your car. So if you have a Maruti Suzuki Wagon R that is a few years old, you can't expect to get INR 5 lakhs (its current price for brand new car) for it. The IDV will be considered in this case.

Apart from the claim, the premium also is affected by the IDV. For older cars, the premium of the car insurance policy is lower. This is because as your IDV increases the value of your car drops, your insurance cover also starts becoming lesser. Quite understandably, you pay a lower insurance premium for a policy of a lower value. So this is another area where the IDV plays a huge role.

These are the main reasons why the insured declared value or IDV of your car is so important when you buy your renew your car insurance policy. Make sure your insurance provider makes a correct assessment and you pay your premium accordingly and get an adequate cover too.

IDV and Car Insurance Claim If due to an unfortunate incident your car gets stolen or is completely damaged, you will need to replace it. At such a time, your insurance provider is liable to pay a claim to you, provided you have a comprehensive car insurance policy. However, you will only get the claim amount that is viable with the IDV of the vehicle. If your car is just six months or less old, you can get up to 95% of the value of the car as compensation from the insurance company. On the other hand, if the car is about four years old, you will only get 50% of the value of the car. So even you had a Nisan Sunny and want to continue with the same make and model, you will only get INR 4 lakhs as compensation after four years. The current price of the car is INR 9.5 lakhs, so you have to pay the remaining amount.

This is how the IDV plays out at the time of a car insurance claim. You must therefore be very careful when calculating the IDV. Never buy a car insurance policy before you check the IDV and understand what you are liable to pay as premium and what you stand to receive at the time of a claim.

How to calculate the IDV of a car?

Like most other things, the internet has made it very easy for you to find information about all aspects related to car insurance. You can get a fair idea about the IDV by using a simple internet calculator. Just enter the details regarding your vehicle. These include the model and make of the car and the age of the car. You can use an insurance aggregator's website to calculate the IDV of your vehicle. Alternatively, you could directly visit your insurance provider's official website or mobile application and get the job done.

If you are on the lookout for buying an insurance, car insurance premium calculator 2018 is the smartest to go about the same. There are several insurers who offer such calculators on their website. The simple idea behind using car insurance premium calculator 2018 is to get quotes from insurers before actually buying the policy.

Differences Between Third-party and Comprehensive Motor Insurance

The Differences Between Car Third Party Liability Cover and Comprehensive

Coverage

Third Party Policy only

Comprehensive Policy

Third Party Liability

  Covered

Covered

Third Party Property Damage

  Covered

Covered

Personal Accident Cover

  Covered

Covered

Own Damage

Not Covered

Covered

Vehicle Theft

Not Covered

Covered

Add-on Covers

(Extra Protection Shield)

Cannot be added

Can be added


Let us see an example to understand the difference between a third party liability cover and comprehensive car insurance cover.

Example: Rahul and Kunal bought a new Honda Jazz hatchback car in Jan'19. The on-road price in Mumbai is Rs.9.61 lakhs

Rahul insured car with only a Third-party cover. Third-party premiums costed him Rs.4000.

While Kunal bought a Comprehensive policy (covers own damage + third party liability cover), which cost him Rs.8500/-.

In the month of June, both met an accident and it was their fault. And the total repair cost turns out to be Rs.20,000 (approx.).

As Rahul had purchased only third party coverage, the whole repair cost of his car will have to be borne by him. The insurance company will pay only third party property damage cost. Nothing for any damages incurred on the car.

Since, Kunal had bought a comprehensive car insurance policy, the insurance company will pay the repair cost (after deduction for the depreciable parts cost) on behalf of him.


Key Points

Rahul

Kunal

Premium Paid

Rs.4000/- (only third-party)

Rs.8,500 (Comprehensive)

Third-party

Paid by the insurance company

Paid by the insurance company

Own- Damage Repair Cost

Rs.8,000/-

Not paid by the insurance company

Paid by the insurance company

Total Money Invested

Rs.4500 + Rs.20000

Rs.8500

Net Savings (Rs.)

0/-

More than approx. Rs.11500

Total Money paid by Rahul is Rs.24,500, whereas, Kunal paid Rs.8500. On the face value, Rahul saved money on the premiums paid. However, he had to suffer a huge financial loss of money that came along with the car damage. The total loss borne by Amit is of Rs.20,000

Note: All the prices are indicative and are subject to change.

Understanding Car Insurance Premium


What is Car Insurance Premium?

Car insurance premium is the amount paid towards the total cost of your insurance policy. It is the sum paid to the insurance company to cover your vehicle against untoward incidents.


Are Premiums Static Or Will They Inflate Over Time?

You might often get confused upon noticing that your car insurance premium has increased over the years without any fault on your part.

It is interesting to note that the inflation in the amount of premium each year is affected by a variety of factors even though you pay your premiums on time.

Take a look at the factors that can cause a rise in your car insurance premium each year.


Previous Claims

If you have settled any auto claims previously with the insurer, it creates the impression that your vehicle is risk-prone. In such a case, the insurer might increase your premium amount to commensurate it with the quantum of risk involved.


Medical Condition

If over a period, you, as the insured, develop any diseases such as diabetes or heart ailments, the insurance company is bound to charge higher premiums from you for the simple reason that you pose a greater risk as a driver now. As a result, the insurance company needs to adjust your cover amount in proportion to any such contingency.


Wear and Tear of Vehicle

If you are a frequent driver, your vehicle is bound to experience some amount of wear and tear. Insurers consider this an important factor while deciding on the premium amount. For cars that have travelled a certain number of miles in a year or those whose make, and model is old, insurers charge a premium more than the normal amount to balance their liability in case of a claim.


Location

You will often find that premiums for insurance policies in areas where traffic is low are quite cheaper when compared to metropolitan cities or places that witness high traffic. This is because there are greater chances of accidents and mishaps in the case of the latter and therefore insurance companies have to be financially prepared to deal with liabilities arising from such cases.


Age of the Driver

Age is also an important factor while deciding on the premium amount. Younger drivers pay a reduced amount as premium. As your age increases, so does your premium amount as insurance companies are often sceptical about selling insurance policies to the elderly, given their deteriorating physical capacity and medical conditions.


Will The Premiums Spike At The Time Of Renewal?

Your insurance premium is bound to rise on account of the factors mentioned above. However, here are a few ways how you can prevent a steep rise in the amount payable as premium amount:


Avoid Claiming small Damages

Check the amount of repair that you would incur in case of damage. If the amount is petty, avoid filing a claim since it might form a negative impression on the insurer leading to higher premium costs in the future.


Safety Equipment

Installing safety equipment in your car can reduce your insurance premium to a considerable extent. For instance, installing a gear lock or a steering lock can work to your advantage, and it displays your sense of prudence and responsibility.


Online Insurance

Since online insurance involves minimal documentation, both at the time of purchase and renewal, you stand a better chance to save up on yearly increase in premiums. You can visit insurance aggregator websites, which allow you to buy the best insurance online by comparing a range of policies from reputed insurance companies.


Loyalty towards Insurer

It is advisable that you choose an insurance partner that you have previously associated with on other insurance policies. This is because insurance brands reward customer loyalty in many ways, with one of them being, ensuring and controlling the rise in the premium amount in subsequent years.



The Key Benefits Of Buying Motor Insurance


Enhanced Financial Protection

Your car insurance will save you from financial burdens occurring from third-party liabilities, natural calamities, man-made calamities, and other strokes of ill luck. If you purchase a liability cover, only then will your car insurance cover protect you from financial burdens arising due to any third-party person or property damage. However, if you buy a comprehensive package, it will offer third-party damage cover as well as personal damage cover.


Cashless Garage Service

Most of the insurance providers now provide cashless garage service, which means that you don't have to pay the repair amount yourself and then claim reimbursement. You can directly go to the network garage certified by your insurance provider and get cashless repair service. The provider will directly clear your bill and you can clear the remaining amount which is not covered under your car insurance.


Personal Accident Cover

Personal accident cover is an essential policy benefit that is generally included in most car insurance policies without any extra premium charges. The cover offers insurance in case of permanent or partial disability and death of the owner of the vehicle/policy. Personal accident cover amount is up to INR 1 lakh or more depending upon your car insurance cover.


Towing Facility

In case of an accident or any other related event, if your car is wrecked or damaged severely, the insurance cover offers towing facilities to carry the vehicle to nearby service centres. The incurred amount is included in your insurance cover, and you can receive towing benefits up to a certain cash limit, which is dependent on your policy cover.


Add-On Covers

Motor insurance policies have many add-on covers that offer extra protection against financial liabilities. You can avail these add-ons at a minimal increase in premium amount. The add-on covers may include zero depreciation cover, key replacement cover, loss of personal belongings cover, etc.