Thursday, 18 February 2016

Motor Insurance India: Types, Importance, Benefits of Motor Insurance in India


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Insurance is a fastest growing marketplace around the world; it offers coverage against insured event for example; Life Insurance covers an insured person against death, Health insurance provides reimbursement for medical expenses incurred in a hospital. In the same way, Auto insurance or Motor Insurance covers vehicle and third parties against accidental damages etc. Motor insurance is a part of General Insurance. In our daily life, we use certain types of vehicle to travel here and there. Though, no one wants to be hospitalized; but in reality, everyone is exposed to danger while traveling on road. Motor Insurance or Auto Insurance helps us to bear the financial loss in case of an accident. As per Law, it is mandatory to have liability insurance if you own a vehicle for example; Car, Motor Cycle, Commercial vehicle etc. If your vehicle hits a person or an object then you’re liable to pay for the loss (As per Law).
Types of Motor Insurance

Importance of Motor Insurance: Automobile is a precious part of our life; we can travel anywhere with the help of it. You might be obeying all traffic rules and regulations; but accident may happen any time due to your fault or someone else fault. You might have seen some reckless people; driving recklessly on road; so imagine what will happen; if they hit you or your vehicle?  In other case, acknowledging the fact that you drive very carefully; but, mistake can happen anytime which may cause injury to a third parson or his property. In the event of mishaps due to an accident, you bear financial loss or physical loss or both; therefore, having a motor insurance can help you bear financial losses.

Types of Motor Insurance or Vehicle Insurance


Depending on the benefits, there are basically two types of motor insurance policies exist in India.  
  1. Third Party Liability only Insurance Policy
  2. Package Policy or Comprehensive Policy

Third Party Liability only Insurance Policy- 

As per Public Insurance Act, 1991, it is mandatory to have a liability insurance policy. Liability Insurance policies cover your legal liabilities towards third parties; in case third parties suffer from injuries or death due to your vehicle. Liability insurance polices also cover loss to third parties’ property due to your vehicle. In any of the above scenarios (Injury to third parties or damage to their property), if victims seek compensation then you have to pay for the loss or injury (compensation to be paid would decided by a civil court); therefore, having a liability insurance policy would save you against financial crisis. Third party liability insurance provides personal accidental cover and cover for third party liability; it does not cover damage to own vehicle due an accident.


Package Policy or Comprehensive Policy-

These policies are designed to provide a complete cover, including coverage for own vehicle. You get cover against theft, burglary, riots, self-ignorance, fire, lightning, explosion etc, along with all benefits offered by third party only insurance. It would be beneficial to take package policy for your vehicle instead of third party only insurance; because third party only insurance does not provide cover for your vehicle. Package policy premium depends on the type of vehicle you own and also depends on the limit of indemnity.  

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Benefits of Motor Insurance


Usually, Motor Insurance Policies provide coverage for;
  • Damage to third party vehicle
  • Damage to third party’s property
  • Damage to insured vehicle due to self-ignorance, fire, explosion, riots, terrorist acts etc
  • Damage to insured vehicle due to natural calamities like; earthquakes, storms, floods etc
  • Accident caused by external factors
  • Theft/Burglary/House Braking

Exclusions in Motor Insurance


Insurance companies may refuse claims under some predefined conditions and circumstances.
Here are some exclusions in motor insurance;
  • Wear and tear due to age of a vehicle
  • Insurance companies do not pay any type of claim if the driver does not have a valid driving license
  • Periodic depreciations are applicable on insured vehicle
  • Electrical/Mechanical Breakdowns
  • If the vehicle is used for unlawful activities etc.
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