From the time car sales observed a growth in the country, it was apparent that there would be crashes. These crashes could cause damages that the person at fault may not be able to pay for. So the underlying necessity of buying car insurance at the time of purchase of a car seemed to make complete sense.
Why Should You Buy Car Insurance?
As the Indian economy grew, the disposable income in the hands of the common man saw an increase. This, coupled with the availability of car financing, has made it easy to own a car, sometimes even more than one in a family. After all, having your own mode of transportation is more convenient than relying on public transport.
When you buy a car, it is necessary that you buy car insurance as well. The Motor Vehicles Act, 1988, mandates this due to the following reasons:
It reduces your liability - Buying third-party motor insurance is lawfully necessitated for all vehicle owners in India. Third-party liability insurance protects the car owner from the following incidents:
- It covers him/her against legal liabilities to a third-party in an accident.
- Third-party injuries/death is covered under this insurance plan.
- Damage to third-party property is offered coverage as well.
This insurance plan, hence, pays for all the damages caused by the at-fault driver in an accident and saves him/her from legal repercussions of the incident.
- It could pay for your hospitalisation - Some car insurance companies in India offer personal accident cover for the owner-driver along with the third-party liability insurance plan. This is a very useful insurance cover as it pays for minor or serious injuries that the car owner suffers in an accident. If there is a hospitalisation involved, he/she does not have to pay for the expenses from his/her own pocket. The motor insurance company will make the necessary payments. In case the car owner succumbs to injuries, his/her family will be compensated with a substantial amount to help them financially cope with the tragedy.
- It helps you stay stress-free - In case you are not a confident driver, getting your car adequately insured will help in reducing the stress of driving. Even for experienced drivers, car insurance is a necessity as they may get involved in accidents for no fault of their own.
Comprehensive Car Insurance
Although it is not mandated to buy a comprehensive car insurance policy, it is advisable to do so. The coverage offered by a comprehensive plan includes the following:
- Third-party liability cover - This is similar to the coverage offered by a basic third-party liability standalone policy that has been explained above.
- Own-damage cover - One of the most significant features of a comprehensive car insurance plan is the own-damage cover that protects the insured vehicle from damages. The vehicle is protected from accidental damages, natural calamities, man-made disasters, in-transit damages, etc. Additionally, the owner-driver of the insured vehicle is offered personal accident cover that protects him/her from accidental injuries or death.
It should be noted that a comprehensive car insurance policy costs less when bought online. From the insurer’s perspective, the low operating cost for online policy sales is passed on to the customer in the form of discounts. Moreover, it is easier to renew an online insurance policy with limited involvement of paperwork.
Motor Vehicles Act, 1988
The Motor Vehicles Act deals with the legal provisions applicable to the following:
- The registration of a vehicle
- The driving license of a vehicle owner
- Mandatory insurance required for a vehicle
The Act only necessitates the third-party liability policy. In case you are caught driving a vehicle without a minimum of third-party liability insurance coverage:
- You will be required to pay a fine of Rs.1,000
- In certain circumstances, you may even face a jail term of 3 months
- Your driving license could be suspended
- The registration of your vehicle could also be suspended
So, it is important that you abide by the law and purchase a suitable insurance policy for your vehicle.
Central Motor Vehicle Rules, 1989
As per the Central Motor Vehicle Rules, 1989, an insurance provider is required to issue a Certificate of Insurance for all policies. This will be in addition to the terms and conditions document, i.e., the policy documentation. So, irrespective of the type of plan chosen, the customer will be issued the certificate.
It is mandatory to carry this certificate with you at all times, particularly when you are driving. This is required, irrespective of whether you own a private car or a commercial vehicle. You need not carry the elaborate policy documentation and it can be stored at home.
If you face a police inspection, you will be required to show the certificate of insurance, your valid driving license, and Pollution Under Control (PUC) Certificate of the vehicle. There may be complications if you fail to produce the same.
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GST Update: GST of 18% is applicable on car insurance effective from the 1st of July, 2017