Auto Insurance 101: A Quick Guide for Motorists
Car Insurance

Auto Insurance 101: A Quick Guide for Motorists

Auto insurance, also commonly known as car insurance, is an agreement between the insurer and the insured wherein the insurance company agrees to provide financial coverage to the policyholder for the damages caused to their car in an accident. As per the Motor Vehicles Act of 1988, it is mandatory for you to at least have a valid basic auto insurance policy in order to drive your vehicle legally on roads in India. To help you understand better, here is a brief overview of auto insurance:

What is auto insurance?

An auto insurance policy can offer you financial support for repairing the damages caused to you, your car, and the third party in an accident. The auto insurance is only valid for a set tenure, after which you will need to renew your car insurance policy. The insurance company charges you a premium at regular intervals in exchange for keeping the insurance policy valid. The maximum financial coverage that the insurer can offer for your vehicle is called IDV or Insured Declared Value. The IDV is only paid out in cases of complete and irreparable damage or if the insured vehicle is stolen.

Like any other indemnity insurance policy, the auto insurance policy also requires you to pay a predetermined sum of voluntary and compulsory deductible whenever you file a claim. While the insurer decides the compulsory deductible amount, you can adjust the voluntary deductible according to your budget.

What factors affect the premium of your auto insurance policy?

The cost of your car insurance policy depends on several factors, such as:

  • Your area of residence

  • The make and model of your car

  • Your driving history

  • The type of auto insurance policy you wish to buy

  • The type of fuel your vehicle uses

What are the different types of auto insurance policies?

There are two types of auto insurance policies that you can choose from – comprehensive and third–party insurance policies. While the law makes it mandatory for you to at least have a third–party insurance for your car, it is advisable to buy a comprehensive insurance policy as it can offer you a wider coverage. Here is an overview of these two types of auto insurance policies:

  • Third–party auto insurance policy

    A third–party auto insurance policy offers financial protection against the third–party liabilities that arise due to an accident. The coverage does not compensate you for the damages that are caused to you and your car due to the accident. Consequently, due to its limited coverage, third–party insurance is the most basic and cheapest form of car insurance in the market.

  • Comprehensive auto insurance policy

    A comprehensive auto insurance policy offers you financial support against the damages caused to you, your car and the third party in an accident. Basically, a comprehensive insurance policy covers you against accidents, natural disasters, and manmade calamities. You can also include several different types of add–ons to your comprehensive car insurance policy. These riders can help you extend the insurance coverage you wish to enjoy. Here, it is important to remember that the premium of your comprehensive car insurance policy will be higher than the premium of a third–party insurance policy due to the extensive nature of protection offered.

Disclaimer: The above information is indicative in nature. For more details on the risk factor, terms and conditions, please refer to the Sales Brochure and Policy Wordings carefully before concluding a sale.

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