Vehicle Insurance
Suitability
One should possess a valid "Liability Policy" to use a motor vehicle in a public place, as it is made compulsory by the provisions of Motor Vehicles Act 1988. In case a vehicle is purchased under Hire Purchase agreement, the financiers insist upon a Comprehensive Policy to take care of their interest as collateral security
Salient Features
Insurance companies issue Liability policy for "Act Risks and Package policy for Comprehensive Risks under the Motor Vehicles Insurance
Liability policy
Liability policy covers risks required to be covered under the Motor Vehicles Act. It is mandatory that every car owner be covered against Act Risks under Section 146 of Motor Vehicles Act 1988
The scope of cover is to pay compensation for death of or bodily injuries to third parties and damage to the property of third parties. While the insured is treated as the first party and the Insurance Company second party, all others would be third parties
This policy provides personal accident cover of Rs.2,00,000 to owner driver.
While the compensation for the personal injuries to third parties is unlimited, property damage is limited to Rs.7,50,000.
Package Policy (Comprehensive)
This policy covers all the risks of Liability policy as well as the loss of or damage to insured's vehicle also
The perils covered are:
Damage to vehicle by accidental external means, fire, lightning, explosion, self-ignition, Burglary. Housebreaking
Riot & strike, malicious acts and terrorist acts
Earth quake
Flood, inundation, cyclone etc
Landslide/ rockslide while in transit by rail, road, air, inland waterways, lift or elevator
Package policy can be restricted to loss or damage due to fire or theft or both fire & theft in combination with policy A or without
In case of "Liability Policy" + fire, the premium is only 25% of own damage premium + Liability Premium
In case of "Liability only Policy" + theft, the premium is only 30% of own damage premium + Liability Premium
In case of Liability only Policy + Fire & theft, the premium is 50% of own damage premium + Liability Premium
These extended covers can be obtained without inclusion of Liability only risks, provided the vehicle is not put to use
The geographical limits for use of the vehicle is India but the limits can be extended to Bangladesh, Bhutan, Pakistan, Nepal, Sri Lanka and Maldives by charging an extra premium of Rs.500 for package policy and Rs.100/ for Liability policies
Policies can be issued for periods less than one year. In such cases, short period scales are charged, which are higher than pro-rata rates.
No claim Discount: For every claim free year, the insured is rewarded with discounts in premium up to an extent of 55% (Package policy only). In case of a claim in any year, bonus earned till that year is wiped out. In case of adverse claims, premiums are loaded with Mauls.
Benefits
Liability Policy
The policy pays compensation awarded by a court of law, for death of or bodily injuries to third parties
It also pays damage to the property of third parties up to a limit of Rs. 7,50,000.
The policy also provides for the death of or bodily injuries with respect to paid drivers (workman) engaged in driving or maintenance of vehicle. The compensation payable is limited to the provisions of Workmen's Compensation Act 1923
Policy B
This policy covers all the risks of Liability Policy as well as the loss of or damage to insured's vehicle also
Temporary spot repairs and/or towing charges to repair workshop & delivery for repairs up to Rs.1,000 are also paid
Premium
Premium rating for private cars is based mainly on:
Power of the Engine (by its c.c.): Up to 1000 c.c. engine, between 1000 c.c and 1500 c.c. or over 1500 c.c.
Value: Minimum value of up to 1000 cc car to be Rs.15,000 , for vehicles between 1000 c.c and 1500 c.c. it is Rs.20,000 and for vehicles above 1500 cc, Rs.30,000 will be the minimum value.
Geographical Areas where the car is used: For this purpose, the country is divided in two zones - Zone A comprising of Ahmedabad, Bangalore, Chennai, Hyderabad , Kolkata, Mumbai, New Delhi and Pune and Zone B - the rest of India.
Age of the vehicle: Tariff classifies vehicles into three categories viz., those below the age of 5 years, those between 5 and 10 years and those aged above 10 years. Premiums increase as the age of the vehicle increases
Extra Benefits on Payment of Additional Premium
The following benefits can be availed on the payment of an additional premium
Vehicles fitted with Bi-fuel system (CNG kit)
Vehicles (like jeeps) fitted with trailers or caravan trailers
In case of Foreign made vehicles, valuation by an automobile Engineer is compulsory. If the vehicles are owned by foreign embassies an extra premium of 30% is charged. In case of damage to wind screen glasses of these cars, the compensation is limited to 3% of value or Rs. 30,000, whichever is lower
Also, by payment of Rs. 25 per employee, legal liability to employees while traveling or driving (not as paid driver) is covered
On payment of Rs. 25, a wider cover than the standard liability available under Workmen's Compensation Act can be availed of
Personal Accident cover to occupants, up to Rs. 200,000, while traveling in an insured car, can be obtained on payment of additional premium
Other Conditions
If the insured is a member of recognized Automobile Association in India, he gets a 5% discount to a maximum of Rs. 200
If the insured opts to limit the third party property damage to the amount specified in M.V.Act 1988 i.e., Rs.6000, he gets a discount of Rs.100.
If the insured's vehicle is fitted with anti theft device approved by automobile research association of India , the he can avail a discount of 2.5% of OD premium subject to a maximum of Rs.500.
Insured can avail discounts by opting for deductibles. Deductible is the portion of each and every claim, which has to be borne by the insured.
Recommendations
Liability policy is compulsory and cannot be avoided. Package Policy, not only covers features of Liability Policy, but also provides cover against the loss of or damage to insured's vehicle. With the increasing number of accidents on roads and the surging costs of repairs, this policy is very much recommended.
