Car Insurance - Inclusions and Exclusions

As the owner of a new car, you would have scoured all available options to identify insurance policies that are most suitable for you. When you are buying a policy and paying the premium, you need to be aware of what is covered in the insurance and what is not.

Inclusions in Car Insurance Policy

Car insurance policies vary between insurers. However, most policies cover the following,

  • Comprehensive cover for your car

    You will need to prioritise your requirements and compare insurance policies to identify the one that is appropriate for your needs.

  • Damage to your own car
    • If you are involved in an accident, and your car has borne some damages, you can notify the insurer at the earliest possible time to claim insurance. Most policies provide you a time frame of 48 hours for intimating the insurance company of the accident.
    • You can get your car towed to a Network Garage (if included in your insurance cover) or an ordinary garage for the repair of the vehicle.
    • Following an inspection of the vehicle and evaluation of the estimated charges, the insurer approves the claim and releases funds for repair work.
  • Natural calamities

    A comprehensive insurance cover for your car can protect it in the event of unpredictable natural calamities like floods, landslides and earthquakes.

  • Personal accident cover

    An effective car insurance policy will provide financial assistance to your/your family in case you are injured in an accident. This helps in reducing your financial burden at a time when you need it most.

  • Man-made disasters

    Your car insurance policy can protect your vehicle from various man-made hazards like strikes, terrorism, riots and fire.

  • Theft of your car

    In case you car has been stolen, you can claim for an amount that equates to the insured declared value specified in your car insurance policy.

  • Third-party liability insurance
  • If a third-party has incurred damages through your car in an accident, a comprehensive car insurance policy covers the cost of claims.

  • Injury to a person

    If you have accidently run over a person and injured him, your car insurance policy can compensate that person/his family for their losses.

  • Damage to property

    In case of an accident where you have caused damage to a person’s property, your insurer can pay that person for the damages incurred by him.

  • In addition to these inclusions, you can enhance your car insurance policy by selecting add-on covers at a higher premium.

Exclusions in Car Insurance Policy

A car insurance exclusion involves risks or situations that are not covered in your car insurance policy. These are always clearly mentioned in the policy documentation. It is important to know your policy exclusions so that you are prepared when an incident occurs.

Permanent Exclusions

Some of the situations that are permanently not covered by a standard car insurance are,

  • Damages incurred while using the car for illegal purposes.
  • Damages caused to the car due to its usage beyond limits.
  • Loss or damage as a result of war, terror attacks, hostilities or nuclear accidents.
  • Damages caused to the car while it was driven by a person under the influence of drugs or alcohol.
  • Accidents found to be fraudulent by the insurance company.
  • Damages caused to the car in an accident while the person driving could not produce a valid license.
  • Damages incurred by the car in an accident with an underage driver, or one who drove on the wrong side of the road.
  • Cost of car coolants, petrol, nuts, bolts, etc.
  • Willful damages caused to the vehicle by the owner.
  • Damages caused to the car during a time when the policy had expired and was not renewed. Car insurance policies are annual contracts that should ideally be renewed on time, without the occurrence of a gap between the expiry date and the renewal date.
  • Damages to the car and its engine due to oil leakage.
  • Consequential losses due to certain actions from the car owner or a third-party, and not due to an uncertain event. For instance, the engine damage of a car following hydrostatic loss during the monsoons is due to the negligence of the car-owner, as he had cranked it up in a flooded area. This will not be covered by the insurer.
  • Contractual liabilities that the policyholder has towards the car. For example, if the car-owner had pledged his car to another person for a certain duration, and the car is damaged while it was used by the person to whom it was pledged, the damages incurred by the car are not covered by the policy. However, if the pledged car was driven by the car-owner himself, the damages to the car will be covered by the insurance, as per the comprehensive coverage of the policy.

The scenarios listed above are applicable to cars used for personal purposes. For commercially used cars, separate insurance policies can be purchased from insurers. Any manipulation in this process will also result in the rejection of an insurance claim. Further, rejected claims that have not been taken up in court within 12 months of rejection will not be recoverable from the insurance provider later on.

Exclusions that can be covered via add-ons

Certain risks that are not included under the coverage of a standard insurance plan can be added to the policy on payment of extra premium. These type of exclusions are as follows.

  • Mechanical expenses due to wear and tear of the car and its parts is not usually covered in a standard plan. However, adding a zero depreciation cover ensures that the depreciation of the value of damaged parts will not happen before reimbursement. In effect, you will receive full reimbursement for the costs incurred for replacing parts.
  • For own damages, the maximum amount that your insurer pays you is the IDV of your car as per the policy, subject to deductibles. Adding an Invoice Cover to your policy enables you to claim for reimbursement of the full amount that was paid for the car. However, this cover is available only during the initial few years following the purchase of the car.
  • Usually, a car’s engine is not covered for malfunctions that are non-accidental. If you add an engine protector cover, you will be insured against non-accidental electrical and mechanical breakdowns.
  • A 24x7 Roadside Assistance cover protects you in emergency breakdown situations that require battery jump-start, emergency fuel, replacement to a punctured tyre, etc.
  • Passengers in a car or a hired driver are not included under a standard personal insurance. However, you can add-on an Extended Accident Cover for the passengers and the paid driver.
  • A is valid only within the geography of India, but it can be extended to include neighbouring countries like Bangladesh, Sri Lanka, Bhutan, Pakistan, Nepal and the Maldives for an additional premium of Rs. 500 for each vehicle. However, these geographical extensions exclude protection for damage to the vehicle or injury to its occupants/third-party.

In summary, it is advisable to read your policy documents carefully and understand the conditions included therein. This will help you immensely at the time of a claim, as it avoids confusion and gives you better clarity of the overall process.

GST Update: GST of 18% is applicable on car insurance effective from the 1st of July, 2017

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