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Car insurance: What you must know

May 07, 2009 16:46 IST

For most of us owning a car has been a dream that we have nurtured since childhood and protecting the vehicle by insuring it becomes a priority once we own a vehicle.

Vehicle insurance (also known as auto insurance, car insurance, or motor insurance) is insurance purchased for cars, trucks, and other vehicles. Its primary use is to provide protection against losses incurred as a result of traffic accidents and against liability that could be incurred in an accident.

Types of vehicle insurance

There are two types of vehicle insurance:

  • Comprehensive
  • Third Party

Comprehensive Insurance

A Comprehensive Insurance cover insures the vehicle against any risk arising out of theft or damage to the vehicle, death of the driver and/or passengers in the vehicle during an accident, and damage caused by the vehicle to other people or property.

Coverage with Comprehensive Insurance

Comprehensive Insurance insures the vehicle against:

  • Natural calamities: E.g. Earthquakes, floods, typhoons, etc.
  • Man-made calamities: E.g. Burglary, thefts, riots, strikes, etc.
  • Personal accident cover: Provides personal accident cover for the individual owner-driver and passengers of the insured vehicle while travelling in, mounting, or dismounting from the vehicle.

Third Party Insurance

Third Party Insurance only covers the damage done by your vehicle to other vehicle or property. It does not cover accidents, theft or damage to the vehicle.

Coverage with Third Party Insurance

Third party legal liability cover protects you against legal liability arising due to accidental damages, such as:

  • Any permanent injury/death of a person.
  • Any damage caused to the property.
  • Caused while anyone is driving the insured vehicle.

Both kinds of insurance are valid for only a year. It needs to be renewed every year. The premium of the insurance is dependent on certain parameters like vehicle classification, value, etc.

Car Insurance Clauses

There are some clauses which are a part of your car insurance that you need to aware of. You would not be able to claim for any damages occurring with the insured vehicle because of:

  • Wear and tear or general aging of the vehicle.
  • Depreciation or any consequential loss.
  • Mechanical/electrical breakdown.
  • Wear and tear of consumables like tires and tubes.
  • Insured vehicle being used for purposes other than mentioned in the limitations of usage in the agreement.
  • Vehicle being used outside the geographical boundaries of India.
  • A person driving any vehicle without a valid licence.
  • A person driving the vehicle under the influence of drugs or liquor.
  • Loss/damage encountered due to war, mutiny or nuclear risk.

Claiming Insurance

In case you are involved in an accident or you accidentally banged your car somewhere which caused some damages to your vehicle, you can claim insurance.

To claim insurance, you need to:

  • Note the licence plate number of the other vehicle involved in the accident (if any).
  • Note names and contact numbers of witnesses (if any).
  • Call the insurance company and file a claim. Make a note of the claim reference number given and the list of documents required for claim processing.
  • Check whether the insurance company has a preferred garage and make a note of the details of the same.
  • File an FIR at the nearest police station in case of property damage, bodily injury, theft, or major damages.
  • Submit the documents to the insurance company's representative and verify it with originals.
  • Make any additional payments required to the garage if the insurance company does not cover the complete the expense of the repairs.

Cashless Claims and Reimbursement Claims

With the changing features of insurance, it is possible now to get your vehicle repaired and claim for the insurance.

The first is to go through the insurance company's preferred garage and get the repairs done. The insurance company pays for the repairs minus the items not covered under the policy which is paid by the owner of the vehicle. This is known as a cashless claim.

The second way is to get the vehicle serviced or repaired at a garage of your choice and ask for reimbursement of the expenses from the insurance company. This is called a reimbursement claim.

Advantages and Disadvantages

Cashless Claims

Reimbursement Claims

Advantages

  • Responsibility lies with the insurance company
  • The surveyor would take the car to the garage, get it repaired and return it back to the owner
  • The company' garage network is generally reliable
  • The service provided by them is much better than any other local garage

Disadvantages

  • A lot of formalities take place before any action takes place
  • Often, the reparations are delayed since the surveyor may do the complete inspection and then take any decision
  • The garage, which the insurance company chooses might be expensive and since, the owner has to pay some percent of the expenses, he may end up shelling out more money than usual

Advantages

  • You may get your car repaired at your preferred garage by your trustworthy mechanic
  • An immediate action can be taken place just after the inspection
  • The garage may fall into your budget as well since even you have to pay for certain expenses
  • You may also repair your other parts of the vehicle which were not damaged at the time of accident

Disadvantages

  • Responsibility is entirely yours
  • Repairs done by local garages may not be dependable

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