Motor Insurance: Compulsory, Premium Calculation, Claim settlement, Policy Transfer - All questions Answered

Find yourself struggling with the basics of Motor Insurance? Perhaps this quick guide will help.

Here are things you should consider before opting for Motor Insurance

Whether you are buying motor insurance for the first time or are unsure regarding specific information, this detailed article has all the answers to your queries.

We also go over things you probably didn’t know that could be helpful in the future. From dos and don’ts to essential documents to the eligibility criteria, here’s what to know:

What is motor insurance?

Motor insurance, also known as vehicle/auto insurance, is financial protection offered to all kinds of vehicles (cars, motorcycles, trucks, etc.) against damage and its occupants against physical harm in the event of an accident, theft, natural disaster, and other such events as specified in the policy.

Is motor insurance compulsory?

As per the Motor Vehicles Act 1988, driving a vehicle in India without motor insurance is illegal. Car owners need to mandatorily have at least a  'third-party liability' cover that financially protects other vehicles, passengers, pedestrians and property in the event of an accident. Meanwhile, a comprehensive cover protects you and your car against all kinds of unforeseen circumstances in addition to the aforementioned third-party protection.

Why is motor insurance important?

The purpose of motor insurance is to provide protection against liability arising from a scenario where you inadvertently injure another human or damage another vehicle. The insurance policy covers the amount you would have to pay for the damage or bodily harm caused to a third party. Additionally, with comprehensive insurance coverage, you receive financial recourse in case you are the aggrieved party. It ensures you don't have to pay for any damages to your vehicle out of pocket, saving you from unwarranted financial duress.

Are there any specific exclusions?

Some things not covered under motor insurance are acts of war, using the car for unlawful reasons, driving without a valid licence, driving while under the influence of drugs or alcohol, accidents that happen outside the geographical jurisdiction of the policy, and mechanical or electrical breakdowns.

Willful damages or fraudulent claims are not entertained either and can result in your policy being cancelled and your name being blacklisted for any insurance policies in the future.

Related: What Is Not Covered By Your Motor Insurance Policy

How does motor insurance work?

The basic insurance coverage is based on the value of the automobile. Additional coverage or benefits add on to the cost of the basic cover. In case of an accident or damage, you can file a ‘claim’ with your insurer, who will cover the damage or losses up to the extent specified in the terms and conditions of the insurance policy. 

How is motor insurance premium calculated?

The premium is calculated based on the make and model of your vehicle, listed selling price from the manufacturer, its age, place of registration, and insured declared value (IDV). If no claims have been made on your insurance plan, you can also benefit from a No-Claim Bonus (NCB) that can reduce your annual premiums by 5% to 20% each year.

How to check motor insurance online?

Visit the website of the existing/preferred insurer and choose from among the three main categories - insurance for a new vehicle, transfer from another insurer, or renewal. Then fill an online form that asks for your personal details and that of the vehicle. It will make a calculation and present an estimate on the premium. You can also visit aggregator-based websites that will provide a service and price comparison between different insurers for you to make an informed choice.

How to claim motor insurance after an accident?

In the event of an accident, you can make a claim by either calling the 24x7 toll-free number provided by the insurer, sending an SMS or email to register your claim. You may also be required to file a First Information Report (FIR) with the local police station to initiate the claim process. The vehicle must then be driven or towed to an authorised garage for repairs, after which the survey and claims process starts. In case of a reimbursement claim, you will need to submit an estimate of repair costs, medical reports (in case of physical injury) and records of any other expenses incurred.

What is a no-claim bonus?

As an incentive for safe driving, a no-claim bonus (NCB) is offered as a percentage discount on the auto insurance premium for not having claimed insurance for a specified time period. NCB usually starts at 20% of the premium cost going up to 50% of the premium cost after five consecutive years of no claim. Your NCB can also be carried forward to other insurers in case you decide to port.

Can I buy a motor insurance policy online?

Yes, you can. There are multiple service providers and aggregators to choose from.

Can I renew my motor policy online?

Yes, you can renew your motor policy online in minutes.

How do I renew my motor insurance online?

Your insurance provider will send you a reminder via email and text a week or two ahead of your renewal date. You need to visit the insurers’ website and key in the policy details and other details as prompted by the online form. The renewal premium will be calculated and presented to you, and you can pay this online via card or bank transfer.

What are the benefits of buying motor insurance online?

Buying motor insurance online is easier and faster, and with less paperwork and manpower requirements it is also cheaper. All your documents will be safe and can be accessed from anywhere. Further, any changes, endorsements, or renewals can be done easily.

What are the different types of motor insurance?

Motor insurance is primarily classified based on usage - private or commercial vehicle. In addition, the insurance plan may have third-party liability insurance, comprehensive coverage, and other add-on coverage such as roadside assistance, zero depreciation, consumable cover, return to invoice, personal accident cover, etc.

Related: Types Of Motor Insurance Policies You Should Know About

What documents are required to submit a motor insurance claim?

A claim intimation form, vehicle's registration certificate (RC), driver’s license, FIR or vehicle non-traceable report are required to file an insurance claim. In the case of a cashless claim, a repair invoice is directly sent to the insurer. For reimbursement claims, you will have to submit an estimate of repair costs.

How much will motor trade insurance cost?

The cost of motor trade insurance depends on factors such as your age, gender, type of business, make and model of car, security of the said vehicle, number of employees listed on the insurance, etc. 

What motor insurance cover should I buy?

You should consider the following factors: the value of the car, how good a driver you are, the amount of life and health insurance you have (excluding the motor insurance), the coverage you need for third party insurance, whether your locality is prone to natural disasters such as floods, etc. 

What coverage limit will meet my needs?

Your coverage limit needs to factor in physical harm, permanent disability or death caused to you or a third party, medical bills, loss of income, pain and suffering, legal fees – apart from the comprehensive restoration of your vehicle.

What is the period of the motor insurance policy?

A standard motor insurance plan is valid for one year from the date of issuance and has to be renewed on an annual basis. However, since 2018, policyholders can also purchase a multi-year policy that provides uninterrupted coverage for three years.

Is service tax applicable on motor insurance premiums?

There is 18% GST applicable on motor insurance premiums.

If I lose my motor insurance policy document, can I get a copy?

Yes, you can easily get a duplicate copy after paying a small fee and executing certain directives from the insurance company.

Can I transfer my insurance to the purchaser of my vehicle?

Yes, you can transfer the insurance to the new owner. 

Can I continue to have the insurance in the name of the previous owner even after the vehicle is transferred in my name as per RTO records?

Legally it is not permissible to continue with the insurance without having it transferred to your name after the ownership of the vehicle has changed hands.

What is the procedure for transferring the policy?

There will be a small transfer fee, and a no-objection certificate (NOC) will be required from the previous owner. The new owner will have to provide the old insurance certificate, new RC, and fill the application form as well. If there are accumulated no-claim bonuses, you will need to get a certificate for that as well.

What is a deductible?

A motor insurance deductible is an amount you have to pay out of your pocket for repairs in the event of an accident. The deductible is set depending on your car's engine capacity and as per IRDAI directives.

Will my no-claim bonus be migrated if I want to change my insurance company?
Yes, you can transfer your no-claim bonus to the new insurance company by submitting an NCB retention letter.

Related: 5 Reasons Your Car Claim Gets Rejected Under The Terms And Conditions Of Motor Insurance

How can I increase/decrease my vehicle’s IDV?

At the time of renewal of the policy, you can ask the insurer to change the IDV of the vehicle. This can have a direct and significant impact on your premium and coverage. For such a request, the insurer may send a surveyor to inspect your vehicle, for which there may be additional costs involved. 

Can I get my money/unused premium refunded?

The refund policy depends on the insurer’s terms. You may be able to get the unused premium on a pro-rata basis after a small cancellation fee is deducted.

Conclusion:

The next time you find yourself stuck with a question on motor insurance, this article will undoubtedly be on the top of your list. Maybe it’s time you consider that motor insurance after all.

 

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