Car Insurance: Everything You Need to Know

What is Car Insurance?

It protects you financially in case of any damage, destruction, or loss of your car due to unforeseen events like fire & flood, theft, or burglary. Again, any third-party damage or death and your own personal accident are covered under this policy. 

Looking at this, there are 3 types of Car Insurance i.e. Third Party car insurance, standalone Own-Damage (OD) insurance, and Comprehensive Car Insurance.

Types of Car Insurance

  1. Third-Party Car Insurance: Also called Third Party Liability Insurance. It covers bodily injury/death/property damage to any third party. The Indian government has made it compulsory for all car owners to buy this policy. 

This policy does not cover damage to your car.

  1. Standalone Own-Damage (OD) Insurance: It covers any damage to your own car due to any natural causes like flood, earthquake, cyclone, landslide, etc., or any man made causes like a road accident, theft, burglary, riots, etc. 
  2. Comprehensive Car Insurance: This insurance covers the benefit of both third-party car insurance and OD insurance. In this plan, you can get a cashless repair facility in network garages.

Why should you buy car insurance?

When your car gets damaged or lost due to an accident/natural calamity, or in case of any third-party damage/injury; the loss you have to bear may be very huge. In such situations, if you have third-party insurance or comprehensive insurance, then it can rescue you from such financial loss.

Look at 2 main reasons for taking car insurance.

  1. Legal need: According to the Motor Vehicle Act 1988, when you have any motor vehicle, it is mandatory to take third-party insurance.    Otherwise, you will have to pay a fine or will be imprisoned. So, taking third-party insurance will save you from such legal actions.
  2. Protection from third-Party liability: In case of any damage to any third-party’s property or bodily injury/death; third-party insurance or comprehensive car insurance will save you from huge financial loss towards the victim.

Look at some other benefits of taking car insurance below.

Benefits of car insurance

  1. Low premium: Because of online selling of the policy, the premium charged is low, as no middleman is involved.
  2. Cashless claim: You can repair your car without paying any fees in network garages
  3. Third-Party coverage: This policy covers damage to any third-party bodily injury/death or property damage.
  4. Own damage cover: Covers loss or damage to your car due to fire, natural disasters like earthquakes, landslides, floods, etc., and man-made reasons like theft, burglary, riots, etc.
  5. Personal accident cover: Up to Rs.15 Lakhs 
  6. Premium: Starts from Rs.2094
  7. Add-on covers: Covers like zero depreciation, roadside assistance, consumables, and No Claim Bonus (NCB) protection can be covered by paying an extra reasonable premium
  8. No claim bonus: Up to 50%

7 Benefits of purchasing car insurance online

  1. Low premium: Purchasing car insurance online cuts the cost of middlemen and paperwork. This lowers the premium by a considerable amount. 
  2. More options to compare: When you buy car insurance online, you will get more options to compare, as you do not have to visit them physically.
  3. Less time-consuming: When you buy a policy online, it will take very less time. Because here you do not need any physical visit and also no paperwork is involved. 
  4. More convenient: Here, you can compare, analyze and buy the policy while seating at your home. So, it is more convenient.
  5. Easy to check the reliability: You can easily check the reliability of the insurer while purchasing online by taking reviews from existing customers about the claim settlement speed, efficiency, and other services provided by it.
  6. Instant policy issuance: When you buy the policy online, you will get a soft copy of your policy instantly after filling out your details. You do not have to wait for days after submitting all your details and documents for approval of your request.
  7. Easy endorsement process: You can easily make changes to your policy online as you do not have to go to the office physically and submit the required documents. You simply have to mention the changes you want, upload related documents and submit your declaration.

What is covered and not covered in Car insurance

What is covered?

  • Third-party bodily injury/death or property damage
  • Damage to your own car (due to both natural and man-made reasons)

Natural reasons: Earthquakes, landslides, floods, cyclones, etc.

Man-made reasons: Strike, riots, etc

  • Loss/damage to your car due to theft, fire
  • Your Personal accident cover: Up to 15 lakhs (Death, Permanent Total/Partial Disability, Temporary Total Disability, children’s education fund, etc.)

What is not covered?

  • Driving under the influence of drugs or alcohol
  • Damage/loss due to involvement in any illegal/criminal activities
  • When the driver does not carry a valid driving license
  • When a private car is used for commercial (business) purpose
  • Claim after the policy period
  • Natural wear and tear
  • Mechanical or electrical failure
  • Engine, tires, and tubes damaged except in case of an accident
  • Consequential loss
  • Loss or damage outside India

Add-on cover

  • Zero depreciation cover: Normally claim is settled by deducting the natural wear and tear till that time. When you opt for zero depreciation cover, the total loss will be covered without deducting the depreciation value.
  • Roadside assistance cover: Under this coverage, if your car met with an accident/any breakdown within its geographical limits, the insurer will send mechanics to repair it. If necessary, they will also tow it to the garage, refuel it, or will arrange an alternative vehicle for you.
  • Consumables cover: It will cover the expenses on consumable items like nuts, bolts, engine oil, filter water, AC gas, grease, lubricants, etc. in case of an undesirable accident. 
  • Key replacement: This add-on will cover the expense to repair the damaged key/lock system and to replace the lost or theft key.
  • Engine and gearbox cover: It will cover the cost to repair or replace the damaged engine and gearbox.
  • NCB (No Claim Bonus) protection: With the help of this add-on, you can get NCB at the time of renewal even after making a claim.
  • Return to Invoice Cover: When you take invoice cover, you will get the purchasing price of your car including road tax and registration fees as your sum insured.  
  • Tire cover: As the name says, this add-on will cover damage to the tires and tubes. 
  • Loss of personal belongings: It will cover the loss/damage to your belongings due to any accident or theft when your car is properly locked in an authorized parking area.
  • Daily allowance: When your car is parked in a garage for repair after an accident for more than 3 days, this add-on will provide you daily travel allowance.
  • Electrical Accessories cover
  • Nonelectrical Accessories cover

Factors affecting premium of Car Insurance

  1. Geographical Location: Cities are divided into 3 zones by considering the traffic. Big Metro cities like Mumbai and Delhi come under the high-risk zone. So, there, the premium is also high. But in low-traffic cities premiums will be low. Premium will also be higher in the case of hilly areas.
  2. Purpose of use: The premium will also depend upon the factor for which you are using your car. Commercial use will increase the travel frequency. So, here, the payable premium will also be more than the private car. Again, if you are using your vehicle in transporting hazardous goods, the payable premium will increase. 
  3. Age of the car: With an increase in the age of the vehicle, depreciation increases because of natural wear & tear; and Its IDV value decreases because of a decrease in its market value. Hence, in the case of an old car, the premium will be less as compared to a new car.
  4. Type of Coverage: The coverage type that you have chosen will also affect the premium. Comprehensive insurance will cost more premiums than third-party and own-damage insurance.
  5. Add-ons taken: The number of add-ons taken by you will considerably decide the premium you have to pay. Choose only those add-ons that are essential for you. Because with an increase in the number of add-ons, your payable premium will also increase.

Ways to reduce car insurance premium

You can reduce your payable premium by taking some simple steps. Look at the steps that can reduce your premium without compromising in your coverage.

  1. Avoid small claims: When you do not raise any claim in 1 entire policy year, you will get no claim bonus (NCB) during the renewal. So, avoid claiming your policy for small events that you can afford easily, so that you will get a discount on your premium during renewal as NCB.
  2. Do not make unnecessary modifications: Generally, people do modifications to increase the performance of their cars. But, this increases the value of their car and hence increases the premium. So, do not make modifications unless it is necessary so that you will not have to pay an extra premium.
  3. Do not take unnecessary add-ons: Add-ons increase the scope of coverage. But it also increases the premium. So, take only those add-ons that are necessary for you.
  4. Install security devices: When you install security devices like gear lock and steering lock, the safety of your car increases and hence reduces the premium. So, install these devices to reduce your premium. 
  5. Do not let your policy lapse: When you do not renew your policy until it expires, it will lapse. In such a case, your no-claim bonus (NCB) will not be applicable. Again, you may have to pay a penalty. So, renew your policy before it expires.
  6. Become a member of AAI/WIAA: Members of AAI (Automobile Association of India) and WIAA (Western India Automobile Association) get discounts on their vehicle insurance. So, become a member of either of these associations to get a premium discount.
  7. Take pay-as-you-drive cover: It is an add-on cover introduced to the Indian market in 2020. Here, you have to pay premium only for a specified number of kilometers. This is very good coverage for owners who do not use their vehicles frequently. So, if you do not use your car much of the time, you should take this coverage.
  8. Compare and buy policies online: Purchasing insurance policies online eliminate the role of middlemen and hence reduces the premium. So, compare and purchase policy online.
  9. Increase voluntary deductible: A deductible is a specific amount of money you have to pay at the time of claim settlement. Choosing this option will decrease the liability of the insurer and hence will decrease the premium. So, increase the deductible to an affordable value.  

Things to consider before purchasing car insurance

There are multiple factors you should consider while purchasing car insurance so that you will get the best plan at a reasonable price. Look at the factors below.

  1. Policy Coverage: You should look carefully at the inclusions and exclusions of the policy. Take a policy that covers all the benefits you require like your own damage cover, personal accident cover, etc.
  2. Type of policy: First of all, you should find out what type of policy you want to buy. It is compulsory for every car owner to take third-party insurance. But you should take comprehensive car insurance to get wider coverage like personal accident coverage, own car damage, and third-party liability.
  3. Add-on covers: Add-on covers enables you to get extensive coverage with a minimal extra premium. So, you should look into the add-ons provided by the policy. Take the policy providing required add-ons like engine & gearbox covers and consumables, so that you will not have to face loss at the time of claim.
  4. Claim Settlement Ratio (CSR): You should consider the CSR of the insurance company. This tells about the percentage of claims, the insurer settles out of the total number of claims filed in a year. The more the claim settlement ratio, the more the chance that your claim will be settled. 

So, take a policy with a high claim settlement ratio.

  1. Claim settlement Process: Take a policy with an easy claim settlement process so that your claim will be settled fast without any complications.
  2. Range of network garages: A large number of network garages will increase the scope of getting a cashless repair facility. So, buy a policy from a company with more network garages.
  3. IDV (Insured Declared Value): This says the current market value of your car. It gradually decreases when your car becomes older. A new car has a high IDV value and hence has a high sum insured and requires a high premium. So, look at the IDV value and decide which policy you want to buy.
  4. Claim history: Poor claim history increases liability on the insurance company. So, they keep a high premium in this case. While in case of no claim in previous policy periods will make you eligible for a No Claim Bonus (NCB) and you may have to pay less premium. 

Eligibility criteria to buy a car insurance

  • You must be above 18 years of age.
  • You must be an Indian citizen.
  • You must own a car with an RC in your name.

How to buy car insurance online?

Step 1

Visit the Shade Tree Official website. Go to Motor Insurance in the insurance products tab. 

Step 2

Select car insurance. 

Step 3 

Fill in the details of your car. Now, available plans will be displayed

Step 4 

Select the plan according to your requirements. 

Step 5

Select the add-ons you want to take (applicable only in case of comprehensive car insurance). 

Step 6 

Make the payment.

Step 7

Your policy is created. Your policy documents will be sent to your registered mail ID.

Documents required to buy car insurance

KYC (Aadhaar Card, PAN Card)

How to renew your car insurance?

Step 1

Visit the Shade Tree Insurance website and go to the Renew tab.

Step 2

Log in to your account by providing the required details like your policy number and mobile number.

Step 3

Select the plan you want to take. Chose the add-ons you want to take.

Step 4

The payable premium will be displayed. Make the payment.

Step 5

Your policy will be renewed and the documents will be sent to the registered mail ID.

Documents required to renew your motor insurance

  • RC copy
  • Previous policy copy
  • KYC (Aadhaar Card, PAN Card)

If you renew your policy in the same company, then you will not need these documents.

How to raise a claim for your car insurance?

Take all the required steps correctly and carefully to avoid claim rejection. Car insurance can be settled in 2 ways, cashless and reimbursement. If you repair your car in a network garage, you can get a cashless claim settlement and in the case of other garages reimbursement claim settlement will work. 

Look at the steps you have to follow to claim your insurance.

Step 1

Intimate your insurer immediately after the accident and get a registration number. Keep photographs as evidence.

Step 2

After registration, the insurer will send a surveyor for inspection. Support and cooperate with him completely. Submit the required documents to the surveyor for verification. 

Step 3

Then you can take your car to a garage for repair. If necessary, the insurer will arrange to tow your car.

Step 4

In case of repair in a network garage, the insurer will directly pay the bills to the garage and in case of a non-network garage, you will have to pay the bills first. Then the company will reimburse the amount. 

Documents required to claim car insurance

  • Duly filled claim form with your signature
  • Policy copy
  • RC (Registration Certificate) copy
  • Driving license of the driver
  • Original repair bills and payment receipt
  • KYC
  • FIR copy in case of theft, injury/damage to the third party; and damage/loss due to strike, riots, etc.
  • ID proof of the insured person

Best Car Insurance Plans

Company nameCashless garagesClaim settlement RatioWhy should you buy?
HDFC ERGO General Insurance8,200+91.23%24*7 roadside assistancePay-as-you-drive add-onPaperless claim settlementNCB Benefit – 20% to 50% discount on premiumPersonal Accident (PA) cover – Up to Rs.15 Lakhs
IFFCO Tokio General Insurance4,300+91.92%24*7 road side assistanceMultilingual Website and App supportZero depreciation coverCNG and LPG fuel kit coveredYou can customize the IDV valueNCB benefit – Up to 50% discount on premiumPA Cover – Up to Rs.15 Lakhs
TATA AIG General Insurnace7,500+96%12 Add-on coversOnline purchase discount – up to 75%NCB benefit – 50% discount on premiumPA Cover – Up to Rs.15 Lakhs
SBI General Insurance16,000+89%Depreciation repayment coverage -100%Online purchase discount – up to 75%PA Cover – Up to Rs.15 Lakhs for Individual Owner, Up to Rs.2 Lakhs for occupants
Digit5,800+80.47%Pick and drop facility for repairSelf inspection facility by Mobile phoneYou can customize the IDV value“Pay-as-you-drive” add-on covered
ICICI Lombard General Insurance12,000+93.4%Easy claim settlement through AppNCB Benefit – 50% discount on PremiumPA coverage – Rs.15 Lakhs
Royal Sundaram General Insurance5,200+94.23%No increase in premium due to inflation in third party liabilityEasy NCB transferSelf Inspection through M Inspect AppClaim settlement within 5 days
New India Assurance Co. Ltd.3000+85.35%Towing charges compensation – Up to Rs.1500NCB Benefits – 20% to 50% discount on premiumOption for customization of IDV valueAdd-ons covered – i) Ligal liability to Employeesii) Personal Accident Cover for Co-passengers and paid drivers
Acko    —–83%42*7 Road side assistancePA cover – Up to Rs.15 LakhsPA cover for Co-passenger – Up to Rs.1 LakhsFree doar step delivery serviceSelf inspection facilityPaperless purchase 
Reliance General Insurance8,700+98%NCB benefits – Up to 50%Add-ons available – 7Self Inspection facilityLocate nearest network garage through – Selfi App
MAGMA HDI General Insurance4,000+92.5%NCB benefit – Up to 50%Anti-thft Device discount – 2.5% up to Rs.500AAI (Automobile Association of India ) discount
Kotak Mahindra2,300+94%NCB Benefit – availableOther premium discount – When opt for voluntary deductible
Universal Sompo General Insurance3,500+90.78%24*7 assistanceAdd-ons covered- 16Self ignition coverAccidental cover in – Road, rail, and water way

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