What are the different types of vehicle insurance?
A car insurance policy acts as a financial safeguard against damage or loss caused by any accident involving your vehicle. To ensure safety and security, maintaining a valid car plan has become mandatory by The Motor Vehicles Department. Based on different categories, there are several types of vehicle insurance available. Each of these policies caters to different requirements of the user, based on the nature of the vehicle and the nature of the usage of the car. Here we will briefly discuss the types of car insurance in India.
Types of motor insurance policy
1. Based on the type of vehicle covered
When classified into the types of vehicles it covers, there are three broad types of motor insurance:
a. Private car policy: The plan that provides coverage exclusively to privately owned and used cars.
b. Two-wheeler insurance policy: As the name suggests, this plan covers two-wheeler vehicles that are owned and used for private purposes.
c. Commercial vehicle policy: This plan is meant for vehicles that are used for commercial purposes. It can be classified further into two subdivisions:
- Passenger carrying vehicle: The plan offers coverage to passenger-carrying vehicles like buses, taxis, auto-rickshaw, bikes, etc.
- Goods carrying vehicles: This policy covers those vehicles that are used for transporting goods like trailers, lorry, trucks, etc.
2. Based on the type of coverage offered
Motor insurance policies can also be classified on the basis of the coverage they offer. That way, it can be differentiated into three types:
- Third-Party Liability Plan:
This plan offers third-party liabilities only if your vehicle causes any loss or damage to any individual or property. It offers compensation to the third party under such circumstances, on your behalf. This is the basic plan, and every vehicle plying in India must possess this plan.
- Comprehensive insurance policy:
This plan offers coverage to your vehicle along with third-party liability coverage. You have to bear the loss under such circumstances. However, if it incurs any damage, the plan will cover it. It covers financial protection, if your vehicle gets damaged due to natural calamities, man-made causes, damaged in transit or if it gets stolen.
- Standalone damage cover: This is just the reverse of the third-party policy. In case of an accident, this plan will cover the cost of your loss or damage in case of an accident and not the third party.
|Points of difference||Third-party difference||Comprehensive cover|
|Legal mandate||Legally mandatory||Depends on your choice and requirement|
|Coverage scope||Covers only third-party liability||Covers both the third-party liabilities and own damage coverage. Add-on facilities are available to broaden the scope of coverage|
|Add-ons||Not available||Optional, but available with an extra premium charge|
|Premium||Determined by the regulatory authority IRDAI||Comparatively higher than the third-party plan and the premium depends on the riders chosen, according to the policy of the concerned insurance company|
|Claim liability||Claim amount gets determined by the concerned motor accident tribunal up to an unlimited amount for physical damage and death and up to INR 7.5 lakhs for property damage||Limited to the IDV set while purchasing the vehicle.|
|NCB||Not available||Available, if no claims arise within one year of the claim|
|Discounts on premium||Not available||Allowed|
3. On the basis of the coverage duration
Types of motor insurance policies can also be differentiated on the basis of the coverage duration. It can be classified as:
- Annual third-party liability policy: This plan offers coverage against third-party liability for one year.
- Annual comprehensive policy: This plan offers coverage to third-party liability, theft and damage of the concerned vehicle and is valid for up to one year.
- Long-term third-party policy: This is compulsory for vehicles bought on or after 01.09.2018. It offers coverage for five years for two-wheelers and for three years in the case of four-wheelers.
- Long-term comprehensive plan: They offer long-term continuous coverage and cover both third-party liabilities and damages and theft of the concerned vehicle. For two-wheelers bought before or after 01.09.2018, this plan runs for two to three continuous years and for those bought after the said date, it is available for five continuous years.
- Bundled policy: These plans are available for vehicles bought on or after 01.09.2018. They allow the third-party liability coverage for three years and own damage coverage for one year for four-wheelers and for two-wheelers, it offers third-party coverage for five years and own damage cover for one year.
Kinds of add-ons available under a comprehensive plan
- Zero Depreciation: The older your vehicle gets, the more depreciation it acquires leading to more price drops. But, zero depreciation coverage allows no depreciation. It keeps the value of your vehicle like that you have bought it.
- Engine Protection Coverage: This add-on offers coverage for damages caused by the engine. All sorts of problems that come within the purview of this scheme like leakage of the lubricating oil, water leakage entering the engine are covered here.
- Roadside Assistance: Road-assistance add-on offers support and assistance in case of the breaking down of the vehicle amidst the road. You have to call the authority who will reach the spot and do the needful at the earliest.
- Consumable Coverage: This allows consumable coverage starting from new engine oil and other service costs.
- Return to Invoice Coverage: In case of irreparable damages or theft, this add-on provides you with the benefit of receiving the entire amount of your vehicle, including the registration cost and road tax of the new vehicle.
- Tyre Protection Cover: This offers protection against damages caused to your tyre in case of any unfortunate accidents leading to bursts, cuts, bulges, etc.
This is a comprehensive guide about the vehicle insurance details depending on several circumstances.