Fact Check: What Does Your Car Insurance Actually Cover?

Car insurance facts

In India, every automobile owned, for private or commercial purposes, is mandated to have an insurance. The Motor Vehicle Insurance Law, in India is governed by several but primarily by the Insurance Act and Motor Vehicles Act. Since car insurance in India is transferable, that is, the insurance transfers from the previous owner to a new owner when a legal sale of the car happens – Car Insurance in India also falls under Transfer of Property Act and Indian Contract Act and is not limited to the mentioned case.

The Vehicle Insurance in India serves the following two primary purposes:

  1. Protecting the owner of the insured vehicle against any financial loss that is a resultant from loss or theft of the insured vehicle.
  2. Protecting the owner of the insured car against the claims of a third party (the Third Party car insurance)

The latter serves as the one of the key reasons why Car Insurance in India is mandatory. Any automobile under use in public place is a liability and is a potential threat to human life. Hence, it is required by Indian law to be insured.

All motor vehicle Insurances must cover the following:

  1. Damages caused to a vehicle as a result of accidents, riots, strikers, malicious acts and natural disasters like earthquakes, storms and floods.
  2. Loss or Theft if the insured vehicle
  3. Liability to Third Party
  4. Personal accident cover for owner.

Covering the liability to the third party includes the following:

  • Repairing the cost of the vehicle
  • Any property damages
  • Any medical expense which is encountered as a result of an accident by the insured which included any kind of physical damage or bodily injuries.
  • Cost of care services
  • Loss of wages

In some cases, compensation for pain and suffering is also given. Third Party Car Insurances can thus be broadly classified as Bodily Injury Liability and Property Damage Liability.

However, all of the points mentioned above have solid exceptions, presence of any of which may lead to the individual not being able to claim his/her insurance.

A car insurance will cover damages due to the mentioned causes included in the point above, however, occurrence of an accident in particular, when the person was under the influence of any intoxicating substance like drugs or alcohol, can lead to the insurance claim being rejected.

An individual may not be able to claim his/her insurance it was a consequential loss of his/her vehicle. In case of theft, lack of a valid FIR copy can also lead to the rejection of insurance claim.

Insurance claims, in general, for loss, theft and damage can be rejected under the following criteria:

  1. Lack of a valid driving license (of the driver who caused the damage)
  2. Loss, theft or damage to the vehicle occurred outside the country.
  3. War or nuclear perils.

If the conditions mentioned in the following documents do not hold up to the requisites mentioned in the insurance policy, the vehicle’s owner is responsible to pay the compensation amount to the third party as well:

  • A duly signed claim form
  • RC copy of the vehicle
  • Copy of the driving license
  • FIR copy
  • Original estimate
  • Policy copy

Many insurers in India have now started to give add on services in insurance. The most common ones are:

  1. Zero Depreciation Cover – This add on cover protects the owner of the insured car against the financial loss that he/she might occur due to depreciation.
  2. NCB Protection Cover – This add on cover helps the owner of the insured car to protect his/her accumulated NCB (No Claim Bonus) in case he/she makes a claim. This allows the individual to retain discount in following year’s car insurance premium.
  3. Roadside Assistance – This add on provides fuel assistance, mechanic for repairs, towing service and accommodation help in case the car owner is stranded in a remote area.
  4. Return to Invoice Cover – This gives the individual an opportunity to get a full reimbursement of the entire value of the car, without depreciation in case of a total damage.

About Jennifer Cribsly

I'm a former real estate broker who specialized in helping first time buyers be able to purchase a home. Now full time mom, part time real estate owner/investor.
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