Buying a car is like a dream come true for many people. It offers a safe and comfortable travelling experience when the weather is unfavourable or public transport is unavailable. However, owning a car comes with several responsibilities.

You must follow some rules and regulations while driving a car and fulfil other mandatory requirements like driver’s licenses, RC, PUC, and car insurance. As per the Government rules, it is mandatory to insure every vehicle in India.

Keep reading to learn about the necessity of car insurance, its types, terms, and things to consider while purchasing one!

Why Should You Insure Your Car?

As per the Motor Vehicle Act 1988, every vehicle must be insured, at least with third-party car insurance. Vehicle insurance covers you financially against unforeseen mishaps like accidents, natural calamities, fires, etc.

However, you must pay a monthly premium for your car insurance policy to avail of this benefit. You can customise or extend your insurance benefits depending on the policy you purchase and your premium.

For instance, a comprehensive policy allows you to purchase add-ons or riders to extend the insurance benefits, but third-party insurance does not offer such coverage. You need a clear idea of third-party vs. comprehensive policy to understand this difference.

What are the Different Types of Car Insurance?

Here are the three main types of car insurance policies:

  • Third-party Insurance Policy

This insurance policy covers the expenses incurred in fixing the damages and losses caused to someone else’s vehicle or property by your car. Third-party insurance is the most common vehicle insurance policy mandated by law. However, such plans do not cover the losses and damages of the insured vehicle or its owner.

  • Comprehensive Insurance Policy

As the name suggests, a comprehensive insurance policy offers comprehensive coverage. If you purchase this policy, you can claim insurance benefits against the damages caused to your vehicle and a third-party vehicle. It also covers injuries to the vehicle owner.

You can also avail yourself of additional coverage by purchasing add-ons with a comprehensive car insurance policy. This will provide extended coverage for aspects not covered under the basic comprehensive car insurance policy.

  • Own Damage Insurance Policy

Own Damage car insurance covers losses and damages to your vehicle due to accidents, natural disasters, fires, and thefts. It provides financial protection for your car’s repair or replacement costs. It is opposite to third-party insurance.

So, if you have already purchased third-party car insurance and want coverage for your vehicle, you can get this policy. The best part is that you can buy damage insurance without waiting to renew the previous policy.

Third-Party Vs. Comprehensive Car Insurance Policy

Here are the key differences between a third party and a comprehensive car insurance policy:

Third-Party Car Insurance

Comprehensive Car Insurance

It is a mandatory requirement as per the law

It is not a mandatory requirement but it offers extensive coverage than a third-party insurance

Third-party insurance covers the damages caused to a third-party car or person by your vehicle

Comprehensive insurance covers the third party as well as the vehicle owner during an unforeseen mishap

It cannot be customised as per the policyholder’s need but offers a minimal personal accident cover

You can purchase add-ons under a comprehensive policy to extend the insurance benefits as per your requirements

Essential Car Insurance Terms That You Must Know

Here are some of the car insurance terms that every policyholder must know to understand the coverage and other aspects clearly:

  • Premium

The premium is the amount you pay for your insurance policy monthly or yearly. It serves as a subscription fee that provides financial security against unforeseen events. Paying premiums ensures coverage in case of accidents or other incidents.

  • Insured Declared Value (IDV)

The IDV is the maximum amount your insurer will pay if your car is stolen or completely damaged. After accounting for depreciation, it is determined based on your car’s current market value. A higher IDV results in a higher potential payout but may increase your premium slightly.

  • Add-ons

Add-ons are additional coverage options that you can include in your comprehensive car insurance policy to enhance its benefits. Examples include roadside assistance, engine protection, and key replacement. These extras provide more extensive protection and convenience, allowing you to tailor your policy to your needs.

  • No Claim Bonus (NCB)

The NCB is a discount on your insurance renewal premium that you earn each year when you do not file a claim. It rewards safe driving habits by reducing the cost of your policy over time. This incentive encourages policyholders to drive carefully and avoid making unnecessary claims.

  • Zero Depreciation Cover

Zero depreciation cover ensures that you receive the full claim amount without any deductions for depreciation. This add-on is particularly beneficial for new cars, as it helps maintain the vehicle’s value over time. By including this cover, you can avoid financial losses due to depreciation when filing a claim.

  • Own Damage Cover

Own damage cover provides financial protection for damages to your car from accidents, fires, theft, or natural disasters. This coverage helps you repair or replace your vehicle without significant personal expenses.

  • Deductible

A deductible is the portion of a claim you must pay out-of-pocket before your insurance coverage begins. Choosing a higher deductible can lower your premium costs but increase the amount you must pay during a claim. This option allows you to balance your upfront costs with potential future expenses.

Things to Consider While Buying Car Insurance for the First Time

If you are purchasing car insurance for the first time, considering the following points can help you make an informed decision:

  • Reputation of the Insurer

Before buying a car insurance policy, you must research the insurance company. Plenty of insurance companies these days offer lucrative benefits to attract car owners. However, considering only the benefits can be troublesome in the long run if the company is not right.

So, you should check the company’s claim settlement ratio (CSR). A higher CSR indicates that the company has records of settling maximum claims. Moreover, you should check if the insurer is registered under IRDAI (Insurance Regulatory and Development Authority of India) or not to ensure its legitimacy.

  • Know Your Requirements

The most crucial thing to consider while purchasing a car insurance policy is understanding your requirements. You may buy multiple add-ons without considering your budget and needs and burn a hole in your pocket. So, understand your requirements first and then opt for a policy.

  • Check for Network Garages

You can get cashless repair facilities from the insurance company’s network garages. So, you must check for the nearest network garage while buying a policy. It ensures you do not have to make any out-of-pocket expenses during emergency vehicle repair needs incurred due to an accident.

  • Compare Car Insurance Policies Online

You can compare the quotes of different insurers online before purchasing a car insurance policy. This will help you make informed decisions and get the required coverage within your budget.

Thus, buying a car insurance policy is essential to safeguard your vehicle from all odds and offer peace of mind. All you need to do is carefully consider the above points and purchase the right policy for your car. Lastly, don’t forget to check the customer reviews for the insurance company you select to ensure your vehicle’s safety.

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