You often spend a lot of time deciding on a health or life insurance policy; but have you given that much thought to the coverage under your car insurance? What if your vehicle is damaged in an accident that may or may not be your fault? Will you have enough money to avoid having legal liabilities and a financial mess on your hands?
Whatever be the model of car you drive, it is imperative that you have adequate insurance coverage, so that your life and vehicle are protected. Hence, it is important to be aware of the different types of car insurance plans available to you in the market, how each plan works, and how much insurance is too much!
Types Of Auto Insurance Covers
There are two types of car insurance plans available in India. These have been explained below:
Third-party liability insurance plan - This is a plan that offers protection from legal liabilities arising out of events such as accidental third-party injuries, death, or property damage. In other words, this plan protects your vehicle from legal repercussions if you are responsible for an accident in which a third party has suffered some losses. This coverage is also the minimum level you need to have to be able to drive in India. If you are caught driving without this insurance cover, you are liable to face heavy penalties or even prison term.
- It is important to note that this insurance plan does not offer coverage to the insured vehicle itself. So, if your vehicle has also been damaged in the aforementioned accident, you cannot claim for the damage repair expenses.
- Some insurance companies in India offer a Personal Accident cover for the owner/driver of the vehicle along with the third-party liability insurance plan.
- The third-party liability insurance policy is also referred to as a liability-only plan or act-only policy, and is usually cheaper than other forms of car insurance.
Comprehensive car insurance plan - A comprehensive car insurance policy is inclusive of the following coverage:
Own-damage cover - This insurance cover protects the insured vehicle from the following damages:
- Natural calamities such as floods, landslides, lightning, etc.
- Man-made disasters such as theft, strikes, riots, etc.
- In-transit damages to the vehicle - This includes damages while the car was transported via rail, road, lift, inland waterways, etc.
- Third-party liability insurance - This insurance cover is similar to that explained above for the standalone policy.
- Personal Accident cover for the owner/driver - The comprehensive car insurance policy protects the owner/driver of the insured vehicle from accidental injuries and death. However, this coverage is not extended to the passengers.
- Own-damage cover - This insurance cover protects the insured vehicle from the following damages:
In addition to the above, the comprehensive policy can be enhanced through add-on covers that can be bought separately from the insurance company. So, you can buy add-on insurance coverage such as engine damage cover, No Claim Bonus (NCB) protect cover, zero depreciation cover, and many more this way. The comprehensive auto insurance policy is also referred to as a package plan, as it is a bundle of insurance coverage that protects the car and its owner from various incidents.
So Which Car Insurance Plan Do You Really Need?
The answer to this question depends on various factors such as your budget, your driving abilities, and your area of residence, to name a few. There is no one-size-fits-all solution as far as auto insurance is concerned. You will have to assess your specific insurance needs and come to a decision.
- Take into account the possibility of car theft or accidents in the area where you reside.
- You should also assess your confidence as a driver. New drivers should ideally opt for a comprehensive insurance plan so as to avail extended coverage.
- In case your vehicle is not used all that much, you may limit its insurance coverage to a liability-only plan.
- If you are on a shoestring budget, you can consider taking a third-party liability standalone plan. You can also consider using public transport till things are looking up on the financial front.
- You should also check whether you need add-on coverage and select only the ones that are really necessary. For instance, if you live in a flood-prone area, it makes sense to buy an engine protect add-on insurance cover for your vehicle. You should not opt for extended insurance unless you are prone to the risks covered under the add-on plan. Otherwise, this may cause an unnecessary hike in your car insurance premium.
- When deciding on voluntary deductibles, choose wisely. If you are an experienced driver, you can afford to opt for high voluntary deductibles.
You can compare car insurance plans between insurance providers and arrive at a cost-effective solution. This facility is available at neutral financial websites, free of extra charges. So, make use of this facility as much as possible. This not only eases your journey of picking the right insurance for your needs, it also helps you save a significant amount of money in the long run.
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