When buying a car we mostly focus on specifications, features and gadgets, often ignoring the importance of motor insurance.
It is rather surprising that most vehicle buyers or even owners often choose not to opt for motor insurance and perceive it as a waste of money, while many are also willing to risk the penalties of driving without insurance, probably just to save a few thousand rupees in a year.
As per a mandate under the Motor Vehicles Act, 1988, every vehicle owner is entitled to a motor insurance policy that will cover accidental death, bodily injury or damage to property. Also, Insurance Regulatory and Development Authority of India (IRDAI) has recently mandated that all new vehicles should have a long-term third party cover to address high lapsation and take care of other mandatory aspects of insurance.
Commenting on the importance of motor insurance, Rakesh Jain, Executive Director and CEO, Reliance General Insurance, said, “One should look at the wider protection aspect against any unfortunate event. Basic insurance policy does provide for your vehicle’ protection, however, there are certain exclusions, terms and conditions, which restrict the benefits to customers like deduction of depreciation on parts replaced and consequential losses.”
A third party policy, on the other hand, only covers the damages done to the third party or his or her property. It does not compensate the damages done to your car. However, you can always add riders to the policy for a complete protection.
Pointing out the importance of buying comprehensive policy to widen the coverage, Jain added, “While considering add-on covers, one should keep in mind the need of it. For instance, in a flood prone region, one should always consider buying engine protects or hydrostatic lock covers as an add-on. However, the same is not required if precipitation of rain is normal in your region.”
Similarly, if the vehicle is two to three-year-old, one should consider buying depreciation reimbursement or nil depreciation cover for complete protection. Add-on covers like nil depreciation, engine protect, key protect, consumables, tyres and rim cover, EMI protect, and helmet covers are commonly available in the market to choose from at affordable premium rates.
It is also important that the car owner understands motor insurance policy based on the coverage. Industry experts suggest motor owners should buy Comprehensive insurance with Zero-Depreciation that is third party insurance plus some additional benefits. This will ensure that insurance is paid if your vehicle is stolen or set on fire, and also pay for any sort of damages to your vehicle. It also covers damage caused to vehicle due to lightning, riot and strike, malicious act, terrorist act, earthquake and other events.
COCO by DHFL General Insurance unveiled its flagship consumer research initiative COCO Barometer that aims at understanding consumer behaviour when it comes to purchasing car insurance among Indians. One of its study concluded revealed that Comprehensive insurance with Zero-Depreciation is the most opted policy while ‘Third-Party’ insurance policy is the least preferred policy for car insurance.
In case of any unfortunate event, insurer should be given an opportunity to inspect the vehicle and assess the damage before starting any repair work. Claimants should ensure they inform the insurer promptly and consult them prior to undertaking any repair work on the vehicle. In case of theft, major accident, or an accident involving a third-party, the incident must be immediately reported to police as well.
To own a priceless vintage vehicle requires high maintenance. And hence their insurance policies are different from the standard ones. The premium for these cars is usually higher since they are based on their valuation. Also, the ratings of such vehicles are done individually to estimate the applicable premium, unlike other standard vehicle on road.
For such cars getting an insurance is definitely a little tough. The criteria for determining the eligibility of vintage car insurance might vary from insurer to insurer. They might come up with insurance policies based on the value and the frequency of required maintenance as well as the costs associated with it. The spare parts or repair of vintage or classic cars can cost a fortune and hence insurer charge the premium based on the stated value or agreed value.
Jain elucidated, “Antique cars are defined as ‘Classic and Vintage Car’ as per the erstwhile India motor tariff. The vehicle should be certified by Vintage and Classic car club of India to be called so. The special rates are charged for vintage cars in line with the provisions of India motor tariff. The premium rates are charged as usual, but the key difference lies in the determination of the sum insured, based upon agreed value, on which no depreciation is deducted in case of total loss.”
While claiming insurance money, the car owner must know and understand all the inclusions and exclusions. Motor insurance policy does not cover the loss if the driver of the vehicle is found to be drunk. Insurers shall not be liable to make any payment in respect of any accidental loss or damage suffered whilst the insured or any person driving the vehicle under the influence of intoxicating liquor or drugs.
Sanjay Seth, Executive Vice President, IFFCO Tokio General Insurance, said, “No compensation shall be payable with respect to death or bodily injury directly or indirectly wholly or in part arising or resulting from or traceable to (a) intentional self-injury suicide or attempted suicide physical defect or infirmity or (b) an accident happening whilst such person is under the influence of intoxicating liquor or drugs.” According to the COCO Barometer, approximately 74 per cent of the respondents have an active car insurance policy. The remaining 26 per cent with a lapsed policy, claim that their insurance company failed to remind them about the policy renewal or they just forgot to renew it on time. Seth said, “The most common reason behind motor insurance policy lapse is the inability to keep track of the policy expiry date. As a standard practice, insurers send renewal notices 60 or 90 days before the renewal date. Still there is somehow an apathy to renew insurance especially if the vehicle is old.”
Motor insurance is the largest product category accounting for 43 per cent of the overall gross direct premium written (GDPW) during financial year 2018. While the GDPW for motor insurance displayed a robust growth of 18 per cent during financial year 2018, its share in the overall premium profile reduced owing to the significant growth of the crop insurance product as explained above. Jain said, “Considering various initiative by the regulator such as enhancement of sum insured for compulsory personal accident cover to owner driver, advent of long term products, motor insurance penetration is likely to increase.”
Most vehicle owners are unaware of the fact that fines cost much more than an insurance policy. Wearing seat belt and helmet saves lives and minimises the chances of getting injured, however, the risk of financial burden can be avoided only with a motor insurance policy.