Insurance

An Introductory Guide to Motor Insurance

The concept of insurance isn’t unusual or new. It dates back to the 1800s when the first insurance company was started in India. As time flew by, this concept gained prominence, and soon after the establishment of The Insurance Regulatory and Development Authority of India (IRDAI), it became a formal channel to secure your risks. Whereas it started as a tool to secure life, the concept spread in other areas reaching to motor vehicles too.

Third party coverage at present is mandatory for every vehicle. The increase in the standard of living has seen a rise in the prices of motor insurance too. But with a little effort, you can optimise the benefits and costs for your motor insurance. Let us look at the ABC’s of motor insurance.

To begin with, understanding the different types of insurance policies is necessary –

➢     Third-Party Insurance

Third-party insurance is a type of motor insurance that covers the liabilities of the third person. It does not insure the damage to the owner of the policy or to the vehicle itself but only restricted to limited coverage for the third person. It includes any bodily harm or the cost of repairs if undertaken by the insured for such third person. The Motor Vehicles Act has made it mandatory for every vehicle to have at least a third-party insurance policy.

➢     Comprehensive Insurance

Comprehensive motor insurance, on the other hand, overcomes the shortcomings of third-party insurance. Apart from the liabilities of a third party, it ensures the owner/policyholder is covered along with any damages to the vehicle. A comprehensive plan is more expensive than a third-party cover as it includes all elements in case of a mishap.

Now that we know the different types of policies let us understand the significant factors on which premiums are determined – 

  • Make, Model and Variant of the Car – It impacts the amount as it decides to IDV or Insured Declared Value, that is the market value, of the vehicle. That makes it necessary to assess the specifications of your car concerning the manufacturer, the engine capacity, the variant and more.
  • Age of your vehicle – Whether you opt for a bike or car insurance, age is an essential factor that determines the premium. The vehicle age determines the Insured Declared Value, also referred to as IDV, and depreciation to your vehicle. The IDV is inversely related to the age, i.e. more the age, lower is its IDV. Moreover, the depreciation element increases as time passes by.
  • Location – The registration location of your vehicle determines the amount of premium. It is determined based on the damages that are prone to your vehicle in case of an accident. These incidences are more prevalent in an urban setting as compared to other cities in the country.
  • Add-on Covers – Add-on covers customise your motorcar or two wheeler insurance to provide additional protection over your base insurance policy. Additional coverage increases the premiums that levied.

While apart from those listed above, a no claim bonus facility & deductibles to your motor insurance influence the amount of premium. Lastly, make sure you read the policy documents for any fine print.

Finally, it all boils down to which is the most appropriate insurance for you. Check from the myriad options when selecting the right motor insurance plan – doing adequate research, whether for two wheeler insurance or car insurance, is essential to grab a steal of a deal.

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