Why is Car Insurance Necessary in India?

A new automobile, be it a car or a bike, is considered to be a prized possession. Anyone can indeed buy a car in today’s world with the availableEMI options. But it is about the costs that follow the purchaseof a new vehicle. In India, it is mandatory for every car owner to purchase a third-party liability policy, according to the Motor Vehicles Act, 1988. However, one must not buy a car insurance policy only because it’s compulsory;the ideal motive should be to protect yourself from financial liabilities arising out ofaccidents.

What is car insurance?

It is a contract that you sign with an insurance company, wherein they ‘insure’ your vehicle from any kind of damages or risks in exchange fora premium. You cannot predict circumstances such as theft of the vehicle, total damage to your car, etc., that can lead to unnecessary financial liabilities. A car insurance policy covers you in such situations.

There is a certain amount that you must pay to the insurance company every year; this is termed as the premium. This amount depends on numerous factors such as the make and model of the car, the city you reside in, the age of your car, the type of coverage you’ve opted for, add-ons you’ve selected, etc.

It is good to have your car insured because it keeps you stress-free and you can drive without worrying. However, there are other factors thatstress the importance of having a proper car insurance plan.

Mandatory by law

Buying a car insurance policy indeed benefits you in many ways, but it is also true that it is compulsory to have one. As per the Motor Vehicles Act, 1988, it is mandatory for every car plying on Indian roads to be insured by a basic third-party liability car insurance. This cover protects you from any liabilities arising from an accident that has caused damage to a third-party’s person or property. However, this cover won’t offer protection to your vehicle. If you wish for extensive coverage, then you need to opt for a comprehensive cover instead.

Third-party car insurance

The insurance company signs a contract with you and offers the insurance policy to make you the policyholder, i.e. the first-party, whereas the insurer becomes the second-party. Any other person involved in the accident with the insured vehicle is called the third-party. No matter what your policy type is, whether a third party car insurance or a comprehensive one, any legal liabilities caused in an accident due to your vehicle will be compensated. Liability for death as well as injuries to the third-partyare included in this cover.

Coverage of damages to the insured

In case of accidents or any kind of collision, your car might get damaged and need repair. The expenses for fixing such damages will be reimbursedby the insurance company if you have a comprehensive cover. If your car gets damaged due to natural or man-made calamities, you can raise a claim to be reimbursed for the repair cost.

Additional coverage

The insurance company offers you a variety of add-on covers that you can choose from. These extra covers enhance your existing insurance plan. If you love travelling long distances, you might want to opt for a 24×7 spot assistance cover to help you in case your car breaks down anywhere. There are other covers to choose from as well, such as key and lock replacement, engine protector, etc.

Vehicle theft

Your insurance company will compensate you if your car gets stolen. But before raising a claim, you will have to file an FIR for the same. If the police cannot trace your car by any means, you will receive the compensation for the loss of your vehicle. Just to make it clear, the reimbursed amount will be the insured declared value (IDV) of your car and not the price of a brand new vehicle.

Modern technology gives you the liberty to buy car insurance online. To know in detail about the coverage that your policy offers, you must go through the policy document thoroughly. Also, do not forget to calculate the premium of your insurance policy online with the help of car insurance calculator so that you compare multiple policies and then go for the best one.