Car Insurance Basics You Need To Know
Car owners certainly have their cars insured. But, do they really understand the insurance policy? You must have had certain intentions in mind while taking the policy, but are you sure that your car will be protected against those risks? So, here are the basics you ought to know about car insurance that will help you make a smart decision.
Is Car Insurance a Must?
The Indian law says that any vehicle on the Indian road needs to have a valid insurance policy that at least covers the cost of damage that the vehicle may cause to other people or vehicles.
In case of any damage covered under the terms of the insurance contract (and as long as there is no fraud involved), the insurer will bear the amount rather than you having to pay from your pocket. In most cases, an insurance policy covers costs caused by accident damage, theft, fire and natural calamities like floods, earthquakes or cyclones.
Forget the compulsion; even without it, it is advisable to have your new car insured. Its not always the neighbour who gets hurt; your car too could meet with an accident. It is truly worth spending some amount on car insurance. Auto insurance policies need to be renewed on an annual basis.
Types of Car Insurance
Basically, two types of auto insurance policies exist: third party and comprehensive. Lets look at them in detail.
Third Party Insurance
This type of insurance covers the damage caused by your car to a third party. It is the minimum that you need to have as per the Indian law, so that, if another individual or vehicle is damaged as a result of your driving, the third party needs to be compensated for it. For example, if you meet with an accident while driving, the insurer will pay for the damage caused to the other vehicle and individuals in that car. However, you or your car will not be covered under this policy.
The premium here is calculated based on your cars engine capacity. As this policy covers only third party damage, the premium is relatively less when compared to a complete coverage policy.
Comprehensive Insurance
The name explains it; it is comprehensive. This auto insurance policy covers the damage caused to you as well as to the third party. In met with an accident, medical expenditure of you, passengers in your car as well as the other partys medical expenditure gets covered. The insurer also takes care of expenses caused to both your car and the other vehicle.
As per this policy, the insurer also pays for any damage suffered by your vehicle in case of any natural calamity, theft, burglary, terrorist activity or any repair in transit. There are insurers who even cover car accessories like the music system and A/C in your car.
The premium here is calculated based on the insurable value of your vehicle. The premium comprehensive auto insurance is usually higher as the coverage is wide compared to a third party policy.
What Coverage Do I Need?
There are two things you need to keep in mind while going for choosing car insurance:
1) Whats My Capacity to Pay the Premium?
Third party insurance is the legal minimum cover you need to have in India. In case you want to opt for something higher, think of what kind of risk you can afford to protect. You may already have a car loan, any other loan to repay or any other financial obligations to meet. Calculate and find out if you would be able to pay off the premium due for your car insurance.
2) Additional Scope of Coverage
There is additional scope of coverage as long as youre willing to more for the kind of situation you would want to cover. For complete protection, you may want an all-inclusive policy for your car. The premium amount differs based on the coverage you opt for. The types of coverage usually include the following:
a) Personal injury protection: You and passengers in your car get covered in case of an accident. Theres yet another feature in case you want coverage for your car driver.
b) Uninsured/Underinsured coverage: If hit by another vehicle that hasnt been insured, the insurer pays for damage caused to you and your car.
c) Collision: In case of a collision with another car or object, the policy covers repairs to your car. All repair expenses of your vehicle excluding the voluntary amount that you want to pay on your own is covered.
d) Car accessories: This additional cover covers damage caused to your car accessories like the music system and A/C.
As your car grows older, its value too goes down and so does the premium for your car insurance if you have opted for a comprehensive policy. However, in case of a third party auto insurance, the premium amount remains constant as the amount decided is based on the engine size which is always the same.
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