Car insurance was made mandatory by the Government under the provisions of the Motor Vehicles Act, 1988. If you own a vehicle, private or commercial, four-wheeler or two-wheeler, by law, you must take a third-party liability policy. This will insure you against paying for any third party damages. So legally, you can use your vehicle on the roads if you have a simply liability-only policy. But most of the time, this insurance does not provide enough protection as it will not cover any damages incurred to your own vehicle or yourself. This is where the Full Coverage policies come in. For additional premium, one can avail of a policy that will cover damages incurred to the car and self. There are two important types of physical damage cover:
- Collision Cover
- Comprehensive Cover
What is Covered Under Physical Damage Cover?
Under collision cover, you will be insured for any damages incurred on your own vehicle in the event that you collide with another vehicle, or property. You could even collide with a tree or a wall, and the insurance company will pay for the damages. This policy will include a deductible which is an amount you will be required to pay for the damages incurred. The balance will be paid by the company.
Under the comprehensive plans, companies will insure you and your vehicle against a variety of risks. The risks that are included under these plans are listed below:
- Theft or burglary
- Fire, Self-Ignition and Explosion
- Riots and Strikes
- Floods, Hailstorms, Windstorms, Inundation, Cyclones
- Damage caused by an animal or bird
- Transit by Road, Rail, Air or Elevator
What is Not Covered Under Physical Damage Cover ?
All insurance plans will have their limitations. For collision cover and comprehensive plans, certain situations or damages are excluded from the policy.
- Driving under the influence of drugs or alcohol.
- Driving without a valid driving license.
- Gross negligence in case of theft.
- Using the vehicle for purposes other than specified under “Limitations of use”.
- Loss due to mechanical failure or electrical breakdown.
- Consequential loss.
- Damage incurred outside of the geographical zone.
- Loss or damage incurred due to war, nuclear risk, or mutiny.
- Organized racing, reliability tests, pacemaking, speed testing.
- Using the car for any purpose in connection with motor trade.
Why Opt for Physical Damage Car Insurance?
Though it is not mandatory to have physical damage cover, in case of an accident, big or small, you will be covered against expenses you would otherwise incur on repairs and injuries.
- If you choose to finance the purchase of your car with a car loan, the bank or financial institution will usually require that you take a comprehensive car insurance plan. Banks will not approve your loan if you do not take a comprehensive plan.
- In case your car is stolen, you will receive your insurance amount and will be able to replace your vehicle.
- In case of natural calamities, any damages incurred will be covered.
- Insurance policies also cover mad-made anti-social activities that include terrorism, riots strikes, vandalism and any other malicious acts.
GST Update: GST of 18% is applicable on car insurance effective from the 1st of July, 2017