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A dummy's guide to auto insurance

By Neelima Shankar
November 20, 2014 14:11 IST
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Here's all you want to know about insuring your priced possession!

A vehicle is an asset for the buyer, bearing monetary as well as emotional value. Any such asset needs protection. This need gave rise to auto insurance market in India.

The Indian government mandates that every vehicle plying on road should be insured. Auto insurance covers all kinds of losses or damage caused to the automobile and/or its parts due to both natural and man made calamities.

Covers offered however range from individual owner of the vehicle to passengers and third party liability.

Insurance can be taken for private cars, two wheelers and commercial vehicles -- new and used.

Insurance in India is regulated by Insurance Regulatory Authority of India (IRDA).

Car insurance is basically of two types: comprehensive and third party.

Third party insurance

This type of insurance provides cover for death or injury caused by the vehicle to third party. In terms of auto insurance, first party refers to the insured (owner and vehicle), second party refers to the insurer (insurance company) and any other property or people apart from these fall under third party.

In case of third party insurance, no cover is given to the owner and the vehicle.

Comprehensive insurance

This type of insurance provides cover to the insured and the vehicle from natural and man made calamities along with providing third party cover. It covers all risks under Motor Vehicles Act.

There are three main features of an auto insurance policy:

1. Premium

Premium of the policy depends on several features like cubic capacity (size of the engine), city of registration, model and manufacturer of the car and many more.

Premium increases with the price of the car.

Since the tariffs on premium are regulated by IRDA, therefore all insurance companies provide policies having more or less the same premium.

2. Claims

In case of auto insurance, claims can be accidental, theft claims and third party claims.

3. Documentation

Auto insurance in India needs some specific documents like duly signed claim form, RC copy of the vehicle, Driving license copy, FIR copy, Original estimate and policy copy.

Types of covers included

Among the natural and man made covers provided are cover against risk of fire explosion, self ignition or lightening, burglary housebreaking or theft, riot and strike, earthquake, flood, typhoon, hurricane, storm and, tempest, inundation, cyclone, hailstorm and frost.

Liability to third party is also offered as cover.

Additional payment entitles the insured to protect other accessories of the vehicle like bi-fuel kit, electronic/electrical accessories etc.

Exclusions in auto insurance

Certain losses are not covered under auto insurance. They include consequential loss, depreciation, mechanical and electrical breakdown, failure or breakage, when vehicle is used outside the geographical area, war or nuclear perils, driving without license and drunken driving.

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Neelima Shankar