VEHICLE INSURANCE

Vehicle or Motor Insurance is one of the largest non-life insurance businesses in the world because this insurance is statutorily mandatory in most countries.

The primary usage of motor insurance is to provide protection against losses incurred as a result of an accident. Motor insurance is required not only to cover risk towards the owner and the vehicle but also to cover the financial liability that may arise from an accident injuring a third party.

In India, the Motor Vehicle Act was established in 1939. It was amended in 1988. This amendment stipulates that no owner of a motor vehicle can use cause or allow to use the vehicle in a public place without a valid insurance. It means that any vehicle which is used in public has to be compulsorily insured against liability risk, etc.

-      Liability arising from death, injury or property damage to third parties.

-      Liability arising from death or injury to workmen such as driver / cleaner / conductor / laborers engaged for loading and unloading, etc.

-      Liability arising from death or injury to fare paying passengers travelling in the vehicle licensed to carry passengers.

Owners of the vehicle, financiers or leaser, who have insurable interest in motor vehicle, can insure the vehicle.

 

TYPES OF VEHICLES

For the purpose of insurance, vehicles are categorized in to three types.

-      Private car: Which is not used for commercial purposes but solely for social, domestic and private purpose. It is not to be used for hire, racing, carriage of good, other than business sample. 

-      Motor cycles and Scooters: Two wheeler with similar characteristics as motor cars

Commercial Vehicles: used for hire or reward. They are further classified into 

a.   Goods carrying vehicles: carry goods under private or public carrier’s permit.

b.   Passenger carrying vehicles: carry passengers on hire for e.g. Auto rickshaws, taxis, buses.

c.   Miscellaneous and special type of vehicles: covers vehicles like ambulances, garbage dumping trucks, publicity vans, mobile dispensaries, etc.

 

TYPES OF POLICIES

There are two types of motor insurance policies which are available for all types of motor vehicles

1.   The Act Liability Policy / Third Party Liability (statutory requirement)

This policy covers the liability as defined in the Motor Vehicles Act. Under this type of policy, the insurance indemnifies the insured against all sums which he may become legally liable to pay any person by reason of death or bodily injury caused to such third parties, or by damage to property of third parties caused by or arising out of use of the motor car.

2.   The Comprehensive Policy

This policy covers an entire range of risk as defined in the Tariff. This policy is also called the ‘Package Policy Cover’. The risks covered are: Fire, lightening, burglary, theft, earthquake, flood, cyclone, terrorist activity, landslide / rockslide, accidental external means, riots, etc.

Loss or damage of accessories is covered only if they are in the motor car. Extra fitting will not be covered unless they are separately described and valued in the policy schedule.

This policy excludes mechanical breakdown, failure and breakages, wear and tear, depreciation, consequential loss, overloading of a commercial vehicle and consequential loss.

 

BENEFITS OF MOTOR INSURANCE

It provides benefits to survivors when an accident results in death

It covers the bills of vehicle repair due to damage caused in an accident

It covers other loss like theft, fire, etc

It provides third party damage cover also

Extra fittings like music player, air conditioners, etc can be added to insurance property in motor insurance

It allows premium discounts

If no claim is made during the policy period, a ‘No claim bonus’ is offered on renewal with certain conditions.

It also provides financial safety for law suits brought against the policy holder as a result of an accident.