Indian Insurance

Basics of Insurance

Is motor car insurance compulsory in India?
Under the provisions of Motor Vehicles Act all the vehicles, which are runnng in public places shall have at insurance policy at least to cover third party liability as specified under the Act.

What is insured ?
Any light motor vehicle used for social, domestic and pleasure purposes and for the insurer’s business.

What types of policies are available for motor vehicles?
There are two types of policies available for motor vehicles
•  third party insurance -policy A and
•  comprehensive insurance policy- policy B.

What is the difference between these two policies?
Third party insurance policy covers only the inter-alia accountability of the vehicle owner for loss or damage to life or property of the third parties. Whereas comprehensive insurance policy covers in addition to third party accountability, loss or damage to the vehicle itself by way of accident, theft, etc. and specified dangers.

Are the insurance premiums same or different amongst four Indian companies?
The premium rates for motor vehicle insurance in India are governed by Tariffs, which is same for all the companies operating in India.

For what value the car is to be insured - Depreciated value or reinstatement value?
The car is neither to be insured for reinstatement value nor for depreciated value. It is to be insured for second-hand value in the local market for a similar type of car for a similar model. In the event of loss, the liability of insurance company is the maximum compared to the market value or the amount of insurance whichever is less.

What factors determine the premium for car insurance?
The cubic capacity, use of car, normal area of operation and the value of car proposed for insurance decide the premium payable and also various extensions opted for.

How much would the insurance company pay in the event of an accident?
In case of an accident, the insurance company pays for cost of damaged parts which are replace and the labor cost to repair the vehicle. As per the revised regulations, depreciation is not deducted from the cost of the parts except for the tyres and tubes for which 50 percent depreciation is deducted.

What is Bonus/ Malus system?
In case of any accident occurring in a year for which a claim is lodged on insurance company, in the very next year, the insurance company loads the premium by way of charging a malus- a percentage of extra premium. Whereas when there is no claim lodged during the year the insurance company grants a discount in the premium by way of bonus.

What are the minimum/ maximum percentages of the Bonus/Malus?
The minimum Bonus is 20 percent, maximum is 65 percent whereas minimum Malus is 105 percent and maximum is 50 percent.

On sale and transfer of vehicle, what happens to the Bonus/Malus?
The Bonus/Malus goes with the original owner since he can claim bonus on his next purchased vehicle. However, the purchaser enjoys the bonus under seller’s policy till the renewal date. On date of renewal, the bonus/malus has to start afresh.

What is voluntary excess?
Voluntary excess is client’s option to opt for bearing a certain amount of loss from every claim. For this option, insurance company allows a discount in premium.

How is voluntary excess different from compulsory excess?
In case of voluntary excess, it is the client’s option for which he gets discount in premium whereas compulsory excess is imposed by the insurance company in addition to Malus to take care of a bad claim experience for a particular car. For compulsory excess, no discount in the premium is allowed.

What are the different types of covers that are granted under Motor Insurance?
There are two types of insurance cover for each class of vehicles:

“A” Policy: This covers the insured’s liability to third parties for death and bodily injury caused by an accident involving the motor vehicle. This refers to the minimum risks that are to be covered under the Motor Vehicles Act 1938 (Act Liability).

“B” Policy: Is wider in scope and covers not only accidental damage to the insured’s own vehicle, but also liability to third parties for bodily injury and / or property damage caused as a result of an accident involving the insured vehicles (Own Damage Losses and Act Liability). The policy can also be extended to cover additional liabilities (as provided in the Tariff)

What briefly is the risk covered under the Own Damage Policy?
The insurance company will cover the insured persons against loss or damage caused to the insured vehicle by any of the following:

Fire, explosion, self ignition or lightning, burglary, housebreaking or theft, riot and strike, earthquake (fire and shock damage), flood, typhoon, hurricane, storm, tempest, cyclone, hailstorm, frost, accidental external means, malicious act, terrorist activity while in transit by road, rail, inland waterway, lift, elevator or air land or rockslide.

What is the significance of a certificate of Insurance?
The Certificate of Insurance issued by the insurers in relation to every vehicle is the only evidence acceptable to the police authorities to show that valid insurance exists. This document has to be produced when demanded by an authorized police officer.

The Certificate of Insurance cannot be backdated. Hence, if a Policy is not renewed on or before the expiry date, the Certificate of Insurance in respect of new Insurance will be effective only from the date of New Insurance. For every renewal, a fresh certificate must be obtained. If there is any alternation in the risk during the currency of the insurance, the old certificate should be surrendered and a fresh one to be obtained. Duplicate Certificate in lieu of defaced, mutilated or lost certificates can be obtained on payment of prescribed fee and after production of an affidavit to that effect.

When will policy not pay?
•  Consequential loss; depreciation; wear and tear; mechanical and electrical breakdown; failure or breakage.

•  When vehicle is used outside the geographical area; when used contrary to limitation as to use; driven by a person other than the driver stated in driver’s clause .

•  War perils, nuclear perils and drunken driving.

Filing Insurance Claims

There is danger at every corner when it comes to Indian roads. Automobile insurance plays an important role in protecting consumers from serious financial losses that result from accidents.
Filing an auto insurance claim

At the scene

•  Provide the Police with the information they require.
•  Stop and get help for the injured.
•  Record the details of the accident.
•  Call the police and notify the nearest medical unit.
•  Take steps to protect your car from further damage. Your Insurance Company will probably want to have someone inspect it and appraise the damage before you order the repair work done.

Filing the Claim

Lawfully, no motor vehicle is allowable to be driven on the road without valid insurance. For this reason, it is compulsory to get the vehicle insured. Motor insurance policies cover next to any loss or injure caused to the vehicle or its accessories due to the following natural and man made calamities.

Natural Calamities: Fire, explosion, self-ignition or lightning, earthquake, flood, typhoon, hurricane, storm, tempest, inundation, cyclone, hailstorm, frost, landslide, rockslide. Man made Calamities: Burglary, theft, riot, strike, spiteful act, and accident by external means, terrorist activity, and any damage in transit by road, rail, inland waterway, lift, elevator or air.

Motor insurance provides enforced personal accident cover for individual owners of the vehicle while driving. One can also opt for a personal accident cover for passengers and third party legal liability. Third party legal blame protects against legal liability arising due to accidental damages. It includes any permanent injury / death of a person and harm caused to the possessions.