What is motor Insurance?
Motor/vehicle insurance protects all types of motor vehicles financially in case of loss or damage due to any natural calamities/man-made causes or theft. It also covers third-party liability due to any accident with your vehicle.
Here vehicle means all types of motor vehicles i.e. cars, buses, trucks, bikes, scooters, etc. They may be used for private/commercial purposes.
Types of Motor Insurance
It is broadly classified into 3 types.
1. Third-party Insurance: This is the basic policy out of all three. As the name suggests, it covers the damage/loss that occurred to a third party due to an accident with your vehicle. The loss can be to third-party property or it can be bodily injury/death. This policy also covers the legal costs in case of any case filed in court.
According to the Motor Vehicle act 1988, all motor vehicle owners are bound to buy third-party insurance.
2. Stand-alone Own-damage (OD) insurance: This policy covers any damage or loss to your vehicle due to theft, or natural/man-made cause. It will also provide you with Personal Accident cover.
You can take this policy if you already have third-party vehicle insurance.
3. Comprehensive motor insurance: It provides coverage of both third-party insurance and OD insurance. So, it is advisable to take a comprehensive policy in place of taking two separate third-party insurance and OD cover.
Classification on the basis of vehicle covered
On the basis of what type of vehicle you are insuring, motor insurance can be classified into 3 categories.
1. Car insurance: This policy covers loss or damage to your four-wheeler due to natural disasters/man-made causes, or theft; third-party liability, and personal accident coverage to you in case of an accident of your 4-wheeler.
2. Two-wheeler insurance: It covers third-party liability, loss/damage to your 2-wheeler, and personal accident in case of an accident of your two-wheeler.
3. Commercial Vehicle Insurance: It covers the vehicles used for business purposes, not private vehicles.
Why should you buy Motor insurance?
- Legal requirement: According to the Motor Vehicle act 1988, it is mandatory for every vehicle owner to buy third-party vehicle insurance.
- Protection against theft: If your vehicle is stolen, then also the financial loss will be covered by the company.
You can check the other benefits below to decide whether you should buy vehicle insurance or not.
Benefits of Motor insurance
- No burden of third-party liability: If you have motor insurance, you do not have to worry about any injury or property damage to a third party in case of an accident with your vehicle.
- Emergency roadside assistance: In case of any emergencies like a breakdown during travel, the insurance company will send mechanics for repair. If required, they will also tow your vehicle to the garage, refuel it, or arrange an alternative transport system.
- No-claim Bonus: You can get a discount on the premium during renewal if you do not make any claim in the previous policy period.
- Cashless repair: You can repair your damaged vehicle in any network garage without paying any bills. The insurer will pay all the covered bills directly to the garage.
- Depreciation cover: Normally, after regular use of the vehicle, the parts gradually depreciate. So, the IDV value of your vehicle also decreases. When you take a zero-depreciation cover, you can get the claim amount without deducting that depreciation value.
- Membership discount: You can get a discount on your insurance premium by becoming a member of either AAI (Automobile Association of India) or WIAA (Western India Automobile Association).
What is covered under vehicle insurance?
- Third-party liability
- Loss/damage to your own vehicle due to natural causes (Ex. Earthquake, flood, landslide, cyclone)
- Loss/damage due to man-made cause (theft, burglary, riots, strike)
- Fire
- Personal accident – up to Rs.15 Lakhs
What is not covered?
- Natural wear and tear
- Consequential loss
- Driving under the influence of alcohol/drugs
- Driving without a valid license
- Electrical and mechanical breakdown
- Damage/loss due to involvement in any illegal/criminal activity
- Damage/loss outside India
- War (nuclear, chemical, or biological) or warlike situation
- If private vehicle is used for commercial (business) purpose
Add-ons of Motor Insurance
- Zero depreciation cover: By taking this add-on, you will get the total claim amount without deducting any depreciation value.
- Roadside assistance cover: In case of any breakdown while traveling, this add-on provides required assistance, like mechanics for repair, refueling, towing to the garage, and arranging alternative transport systems when required.
- Consumables cover: Consumables are the things that require regular replacement due to use and wear and tear.
- Engine cover: This add-on covers the expense of replacing and repairing the damaged engine.
- NCB (No Claim Bonus) protection: By taking this add-on, you will get NCB while the renewal even after a claim.
- Return to Invoice Cover: This add-on helps you get the ex-office price of your vehicle including road tax and registration fees.
- Key replacement cover: This add-on will cover damaged key/lock system, loss, and theft of your motor vehicle key.
- Daily allowance: This add-on cover will provide you the daily transport expense till your vehicle is in the garage for repair after damage.
- Tire cover: This add-on covers the damaged tire of your vehicle.
- Electrical Accessories cover
- Nonelectrical Accessories cover
Factors affecting premium of Motor Insurance
- Engine capacity: An engine with more CC (Cubic Centimeter) value will increase the total value of your vehicle and hence increase your premium.
- Engine type: Premium will also depend on the type of engine you are using; petrol engine or diesel engine. Because it will affect the IDV value of your vehicle.
- Vehicle type: The type of vehicle you want to cover (car, bike, truck, etc.) will impact the premium you have to pay.
Ex – Premium for a two-wheeler will be less than that of a car.
- Manufacturing company: The manufacturing company of the vehicle also impacts the payable premium.
- Age of the vehicle: With regular use of a vehicle, its IDV value decreases due to depreciation. So, the payable premium also decreases. Because the premium is decided on the IDV value of a vehicle.
- Geographical Location: The location of use of the vehicle affects the chances of a vehicle accident. In cities of high-traffic zone like Delhi and Mumbai; the risk of vehicle accidents is more. So, the premium of vehicle insurance is also high in these cities.
- No-claim bonus: The insurance company provides your no-claim bonus when you do not make any claim in an entire policy period and you will get a discount on the premium during the renewal.
- Add-ons covered: Add-ons covered under your policy will also increase your premium. The more the number of add-ons, the more will be the premium.
- Purpose of use: Commercial use of vehicles increases the premium. Again, if you are using your vehicle in transporting hazardous goods, then you will have to pay a higher premium. Because here the risk on the vehicle increases.
How to reduce the premium?
- Do not make small claims: Whatever may be the number of claims (1 or more) you have made in your policy period, you will not get a No-Claim Bonus during renewal. So, do not make claims for those losses which you can afford so that you will get a discount on your premium during renewal.
- Install anti-theft devices: Anti-theft devices like gear locks, break locks, and steering locks increase the safety of your vehicle and hence reduce the payable premium.
- Do not take unnecessary add-ons: Add-ons increase your premium. So, take those add-ons which you require. Do not waste your money by taking unnecessary add-ons.
- 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 and reduce the payable premium.
- Purchase policy online: When you purchase a policy online, the cost of agent commission and other paperwork gets omitted. So, insurance companies provide discounts on buying policies. So, purchase a policy online and reduce the premium.
- Take pay-as-you-drive cover: It is a new add-on introduced to the market in 2020. This add-on will save you from paying when you are not riding your vehicle.
- Increase voluntary deductibles: Deductibles decrease the liability of the insurance providers. So, they reduce the premium. Hence increase your deductible to an affordable amount.
- Do not make unnecessary modifications: Modifications increase the value of the vehicle and hence increase the premium. So, modify your vehicle only to the extent of the requirement. It will save you from paying unnecessary extra premiums.
Benefits of buying/renewing motor Insurance online
- Convenient: You can buy a motor policy at your own convenience without visiting any insurance office or agents when you buy it online. You can scroll your mobile, laptop, desktop, or tab at any moment anywhere according to your convenience.
- Time efficient: Purchasing insurance online saves your time as you do not have to visit a number of offices to find out which policy you should take.
- Low premium: On online purchase of insurance, you do not have to depend upon any agent to understand the policies. Complete information is available on the company website. So, the commission of the agent and the cost of other paperwork are omitted prom policy price leading to a decrease in payable premium both in case of purchase or renewal.
- Transparency: You will get all the information directly from the company website. As no agent is involved in the process, there is no chance that he/she will hide or modify any information to make a sale.
- More options to compare: You can get insurance details of all the insurance policies online. You do not have to visit them separately. So, you can compare a much higher number of policies before taking the one most suitable for you.
- Informed decision: You can take an informed decision by comparing a sufficient number of policies and taking reviews of existing customers.
- Easy policy renewal: You can easily renew your policy online by simply filling out some required details like your name, contact number, previous policy number, and vehicle number on the company website. Again, if you renew your policy from the same company, then you do not have to provide this much information also. You can renew your policy by simply giving your policy number.
- Instant policy issuance: You will get your policy copy instantly on your registered mail ID after filling in all the required details and making the payment. You do not have to wait long for the policy copy.
Things to consider before purchasing a motor insurance
- Covered benefits: You must look into the benefits provided by the policy. Make sure, your all required benefits are covered or not.
- Premium: Also check the premium for all your required benefits. Chose the plan that provides all your required benefits with the least premium among all.
- Claim Settlement Ratio: Buy a policy from a company with a high claim settlement ratio so that there will be a high chance of your claim being settled.
- Add-ons available: Add-ons increase your policy coverage to a very wider range. So, you should check, whether the policy provides your required add-ons or not.
- No-Claim Bonus: Check what amount of NCB is provided in the policy. Take a policy that provides a good No-claim Bonus.
- Range of network Garages: Network garage helps you to get a cashless repair facility. So, check the number of network garages the company has.
- Type of policy: You must check the type of policy you have to buy. Many people buy only third-party vehicle insurance as it is compulsory. But, it is preferable to buy comprehensive insurance as it provides much wider coverage than basic third-party insurance.
- Personal Accident cover: Make sure that your policy covers personal accident. Because it can cost you a significant amount.
How to buy motor Insurance online?
Step 1
Visit the website of Shade Tree Insurance.
Step 2
Go to Motor Insurance on the products tab and select the type of vehicle insurance (Car, two-wheeler, or commercial vehicle) you want to buy.
Step 3
Provide your vehicle details.
Step 4
Vehicle insurance of different insurers will be displayed. Select the policy that suits your requirements the most.
Step 5
Pay the premium.
Your policy is created. Your policy copy will be sent soon to your registered mail ID.
Documents required to buy a motor insurance
KYC (Adhaar Card)
How to renew your motor 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 required add-ons.
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 (Adhaar Card)
How to claim your motor insurance?
Step 1
Intimate your insurer immediately through a toll-free number, mail, or fax as instructed by the company. Get the registration number.
Step 2
Make an estimated loss and submit it to your insurer.
Step 3
The insurer will send a surveyor for inspection. He will analyze the damage in detail and submit a report to the insurer. Cooperate and provide him with the required documents.
Step 4
Take your vehicle to the garage for repair. Here also the inspector will calculate the exact expense of damage.
Step 5
Pay the bills and submit the bills & payment receipts to the insurer for reimbursement. (No bill payment is required in case of repair in a network garage)
Documents required for claim settlement
- Duly filled claim form
- Policy copy
- RC copy
- Driving license of the driver
- FIR Copy
- Original repair bills and payment receipt
- KYC
- ID proof of the insured person
- Medical certificate in case of third-party injury and Personal Accident
- Death certificate and post-mortem report in case of death
Apart from these, you may need some other documents depending open the type of insurance and situation.
Best Motor Insurance Providers in India
| Company name | Cashless garages | Claim settlement Ratio (CSR) |
| HDFC ERGO General Insurance | 8,200+ | 91.23% |
| IFFCO Tokio General Insurance | 4,300+ | 91.92% |
| Digit | 5,800+ | 80.47% |
| TATA AIG General Insurnace | 7,500+ | 96% |
| SBI General Insurance | 16,000+ | 89% |
| ICICI Lombard General Insurance | 12,000+ | 93.4% |
| Royal Sundaram General Insurance | 5,200+ | 94.23% |
| New India Assurance Co. Ltd. | 3000+ | 85.35% |
| Acko | —– | 83% |
| Reliance General Insurance | 8,700+ | 98% |
| MAGMA HDI General Insurance | 4,000+ | 92.5% |
| Kotak Mahindra | 2,300+ | 94% |
| Universal Sompo General Insurance | 3,500+ | 90.78% |
| Oriental Insurance | 3,100+ | 91.5% |
Terminologies
- Road tax: At the time of purchasing a vehicle, you have to pay an extra amount other than the actual price which includes registration charges, road Tax, and Insurance.
Road Tax is the tax amount you give the government to drive your vehicle on road.
- Solatium Fund Skim: It is a central government scheme for hit-and-run case victims. Under this scheme, the victim will get Rs.50,000 in case of serious injury and the nominee will get Rs.2,00,000 in case of death.
- Consumables: These are the items that need replacement or refill at regular intervals of time due to use or natural wear and tear.
Examples: Nuts, bolts, washers, break oil, grease, lubricants, engine oil, refrigerant for AC, etc.
- Bodily injury: The harm to the body of a person as a result of an accident is called bodily injury.
- No-Claim Bonus (NCB): This is the discount on the premium given by the insurer during the renewal when you do not make any claim in the previous policy period.
- Claim Settlement Ratio (CSR): It is the percentage of claims an insurer settles out of the total number of claims filed in a year.
- Claim Incurred Ratio (CIR): It is the ratio of the total amount of claims settled with the total premium collected by the insurance company in a year. When this ratio becomes 100% or more, the company suffers a loss.
- IDV (Insured Declared Value): It is the sum insured of motor insurance. It is the current market value of the vehicle which is calculated by deducting the depreciation value from the manufacturer’s listed selling price.
- Premium: It is the amount you have to pay the insurer to protect your vehicle financially in case of any loss/damage due to natural/man-made cause, theft, or fire; also provides third-party liability coverage in case of an accident.
- Voluntary deductible: It is the amount you opted to pay during claim settlement out of the total claim amount. It is not mandatory for you to take this deductible and hence got the name.
- Compulsory Deductibles: These are deductibles that you have to pay during claim settlement mandatorily.
- Anti-theft device: Also called security device, used for protecting the parts of your vehicle from theft.
Examples: brake lock, gear lock, electronic immobilizer, etc.
- Cashless/network garage: Network garages have a tie-up with the insurance company. In these garages, you do not have to pay the repair bills. The insurance company directly pays the covered bills to the garage.
- Endorsement: It is the change done in the policy when required.
For example, when you want to cover some extra add-ons or want to convert your third-party insurance to comprehensive insurance, then the insurer will make changes to your existing policy. This change is called an endorsement.
- Personal Accident cover: It covers disability and death to the owner-driver in case of an accident.
The disabilities it covers are:
- Permanent Total Disability (PTD)
- Permanent Partial Disability (PPD)
- Temporary Total Disability (TTD)
It provides a lump sum amount in case of death, PTD, & PPD; and weekly compensation in case of TTD.
- Add-ons: These are the additional covers provided by the insurer on payment of a nominal extra premium.
Break in insurance: It is the time gap between the expiry of an insurance and its next renewal.