FAQs

Is car insurance compulsory in India?
Under the provisions of Motor Vehicles Act all the vehicles which are plying in public places shall have at insurance policy at least to cover third party liability as specified under the Act.

What type of policies are available for motor vehicles?
There are two types of policies available for motor vehicles –
Third party insurance -policy A
Comprehensive insurance policy- policy B.

What is the difference between these two policies?
Third party insurance policy covers only the inter-alia liability of the vehicle owner for loss or damage to life or property of the third parties whereas comprehensive insurance policy covers in addition to third party liability, loss or damage to the vehicle itself byway of accident, theft, etc and specified perils.

Whether the insurance premiums are same or different amongst four Indian companies?
The premium rates for car insurance in India are governed by Tariffs which is same for all the companies operating in India.

For what value the car is to be insured - Depreciated value or reinstatement value?
The car is neither to be insured for reinstatement value nor for depreciated value. It is to be insured for second-hand value in the local market for a similar type of car for a similar model. In the event of loss, the liability of insurance company is the maximum compared to the market value or the amount of insurance whichever is less.

What factors influence the premium for a car insurance?
The cubic capacity, use of car, normal area of operation and the value of car proposed for insurance decide the premium payable and also various extensions opted for.

How much would the insurance company pay in the event of an accident?
In case of an accident, the insurance company pays for cost of damaged parts which are replace and the labour cost to repair the vehicle. As per the revised regulations, depreciation is not deducted from the cost of the parts except for the tyres and tubes for which 50 percent depreciation is deducted.

What is Bonus/ Malus system?
In case of any accident occurring in a year for which a claim is lodged on insurance company, in the very next year, the insurance company loads the premium by way of charging a malus- a percentage of extra premium. Whereas when there is no claim lodged during the year the insurance company grants a discount in the premium by way of bonus.

What are the minimum/ maximum percentages of the Bonus/Malus?
The minimum Bonus is 20 percent, maximum is 65 percent whereas minimum Malus is 105 percent and maximum is 50 percent.

On sale and transfer of vehicle, what happens to the Bonus/Malus?
The Bonus/Malus goes with the original owner since he can claim bonus on his next purchased vehicle. However the purchaser enjoys the bonus under seller's policy till the renewal date. On date of renewal, the bonus/malus has to start afresh.

What is voluntary excess?
Voluntary excess is client's option to opt for bearing a certain amount of loss from every claim. For this option, insurance company allows a discount in premium.

What are the different types of covers that are granted under Motor Insurance?
There are two types of insurance cover for each class of vehicles:
“A” Policy:
This covers the insured’s liability to third parties for death and bodily injury caused by an accident involving the motor vehicle. This refers to the minimum risks that are to be covered under the Motor Vehicles Act 1938 (Act Liability).

“B” Policy:
Is wider in scope and covers not only accidental damage to the insured’s own vehicle, but also liability to third parties for bodily injury and / or property damage caused as a result of an accident involving the insured vehicles (Own Damage Losses and Act Liability). The policy can also be extended to cover additional liabilities (as provided in the Tariff).

What extension of cover can be obtained with regard to private car?
The following are the prominent extra risks that can be covered in addition to the standard cover:
Personal accident of insured, spouse and unnamed passengers.
Legal liability of the employees of the insured.
Wider Legal Liability to Drivers.

How is the premium charged under motor insurance?
The premium in a Motor Insurance Policy is regulated by the India Motor Tariffs, operating in the Madras, Bombay, Delhi and Calcutta Regions. For private cars, the rating considerations are:
Cubic Capacity of the Insured Vehicle.
Insured’s estimate of the full value of the vehicle and zone in which the vehicle operates (The premium will also vary depending on whether an ‘A Policy’ or a ‘B Policy’ is purchased).

What are the circumstances under which discounts are offered in premium?
The following are the significant circumstances under which a discount is offered on the amount of premium to be paid:
Where the insured is prepared to bear a fixed amount in respect of every claim for damages to the vehicle.
A discount commonly referred to as bonus is allowed on the premium when no claims are made against the policy during the relevant previous year.

Note:
Loading called malus is otherwise charged on the premium if the insured has made a claim during the relevant previous year.
A 5 percent discount is allowed if the insured is a member of a recognised Automobile Association (the amount of discount will not exceed Rs.100/- for private cars).

What is expected of the insured in the event of an accident involving damage to the vehicle and/or injury to third party?
Damage to the Vehicle:
When an accident takes place, a report should be immediately filed with the insurance company and a set of claim forms submitted to them. An estimate for repairs and/or replacements has also to be prepared and submitted. The insurance company may then appoint an independent Surveyor who will also value the damage and hold discussions with the repairers and arrive at the amount at which the claim will be settled.

On completion of the survey, the repair work can be undertaken. When the relevant bills are produced, settlement will be made under the Policy. The claim amount may be paid either directly to the repairer or to the Insured if the latter has already made payment to the repairer and holds proof of the same.

In case of settlement of claim either for total loss of the vehicle or for replacement of certain items, such damaged vehicle or parts belong to the insurance company. They may arrange for disposal of the same in the best manner possible.

Death or Injury to Third Party:
The moment an accident takes place and a third party is involved, a report should be immediately filed with the police. Simultaneously, notice should be sent to the Insurance Company.

No settlement should be made with the third parties for any compensation to the latter and no commitment should be entered into with regard to the Insured's liability with the third parties.

All dealings with the third parties will be only with the knowledge and approval of the Insurance Company. Any claim from third parties will have to be suitably defended in consultation with the Insurance company and expenses for such defence will be payable by the insurance company if incurred with their consent.

Can Motor Insurance Policies be taken for a shorter term than the normal period of one year?
Motor Insurance Policies are normally taken for a period of one year. However, according to the requirements of the vehicle owner, a policy for a shorter term can be issued.

Situations do arise when a person plans to sell off his vehicle within a couple of months and he does not intend to renew his policy for another year. In such circumstances, he may go for a shorter period of cover. Short period insurance attracts Short Period Scale for calculating premium and obviously comes out costlier than the pro rata for the said period.

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