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Types of Auto Insurance Research Team | Posted On Monday, August 10,2009, 05:12 PM

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Types of Auto Insurance



Auto insurance is a kind of insurance, specially designed to protect the vehicle and vehicle owners against the financial loss caused by an accident. As per laws of auto insurance in India, it is a legal requirement to have auto insurance when owning a vehicle. It also states that every automobile that is used for a social, recreational or individual purpose has to be insured. In case these laws are not followed by a vehicle owner (2 wheeler, 4 wheeler, commercial) he would be subjected to financial punishment as stated by the law.

The main aim of auto insurance is to compensate you for physical damage to your car in an accident. It provides cover against the loss due to an accident or a theft or if your vehicle is involved in a collision. You also get cover for the passenger travelling with you and any third party damage is also covered under auto insurance.

While putting in the legal context auto insurance is a legal contract between a vehicle owner and the insurance company. There are different types of auto insurance depending on the type of insurance, you pay a premium and the insurer will cover the risks mentioned in the insurance contract. If you are involved in an accident or victim of car theft, auto insurance will help you by making your loss good. Insurance Companies are coming out with competitive policies for its customers.

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Types of Auto Insurance

There are different kinds of auto insurance in the market. According to the size and use of vehicle, the policy to be taken also will change. For instance a Car owner cannot go for Two Wheeler insurance and a commercial vehicle owner cannot go for car insurance. Below given are the major types of auto insurance:

  • Two Wheeler Insurance
  • Car Insurance
  • Commercial Vehicle Insurance

Two Wheeler Insurance

Two wheeler insurance provides a kind of personal accidental cover for two wheeler owners, while driving the vehicle. It covers accidental insurance for the drivers of the vehicle. The policy basically provides protection from any loss or damage to the vehicle arising out of natural calamity like fire, protection against third party injury, burglary etc. The amount insured will depend on the current showroom price multiplied by the depreciation rate fixed by the Tariff Advisory Committee at the time of commencement of policy period. Most of the existing insurance companies are trying to increase the speed and quality of claim process to ensure existing customer’s loyalty and widen the customer base.

Car Insurance

Car insurance is the fastest growing category in the auto insurance segment. Number of cars is increasing in our society as the income of people is increasing. When the number of cars increasing naturally the demand for car insurance also will increase, this makes car insurance segment a hot one. Car insurance includes loss or damage by accident, third party insurance, insurance against burglary etc. The amount of premium will depend on value of the car, state where the car is registered, year of manufacture etc. Insurance companies are trying hard to make the claim process simpler and quicker to widen the existing customer base.

Commercial Vehicle Insurance

Commercial Vehicle Insurance provides cover for all the vehicles which are not used for personal purposes, such as Trucks and Heavy Motor Vehicles (HMVs). Commercial Vehicle Insurance protects the vehicle against damage caused due to accident, third party injury, natural calamity, theft etc. The amount of premium depends on the showroom price of the vehicle at the commencement of the insurance period, make of the vehicle and the place of registration of the vehicle, etc.

On the basis of coverage Vehicle insurance is again divided into two categories such as;

  • Full coverage auto insurance
  • Third party auto insurance

See also: Motor Insurance Terms You Should Know

Full coverage auto insurance

Full coverage auto insurance is a kind of comprehensive insurance. It provides third party liability services in addition to coverage for damages sustained by car of insured. In the event of an accident, full coverage auto insurance will protect the car and any other cars or property damaged. Types of damages covered this policy consist of thefts and accidents to certain types of risks. These insurance policies also provide coverage against floods, riots, earthquake and strikes. If insured pays extra premium, various accessories within a car can be insured by Full coverage auto insurance.

Third party auto insurance

Third party or liability auto insurance will only protect another party in the event of an accident. So if a car with third party auto insurance hits another car, the other car's damages, and all other expenses would be paid by the third party insurance. However, any damage to your own car would have to be borne by the car owner. Naturally, these policies are less expensive than full coverage, as it carries very less risk.

It only covers damages caused to another party, their vehicle, or property due to collisions or accidents. Third party insurance is compulsory in India.

It does not cover damages to your own vehicle or bodily injuries that you may suffer in the accident.

Auto Insurance covers:

  • Accidents due to external factors
  • Damage to your vehicle due to riots, explosions, terrorist attack or if a tree falls on it.
  • Various natural calamities like lightning, earthquake, cyclone and so on.
  • Damage to vehicle in Transit by rail/road, air or waterway.
  • Legal Liability towards any third party.
  • Compensation for the driver in case of death in an accident.

How to Calculate Auto Insurance Premium?

Insurance companies are providing value- added service to its client by offering them instant auto quotes. This will help you to find out the exact premium you have to pay for the insurance. Auto premium is determined by a number of factors such as;

  • Make of the vehicle
  • Year of manufacture
  • Place of registration
  • Current showroom price of the vehicle
  • Model of the vehicle, etc.

Premium is also depends whether the client is individual or corporate. If the price of the vehicle is more the amount of premium also increases.  You can renew the policy once it is expired. Sometimes companies provide a discount in premium to existing clients.

It is recommended that you take comprehensive insurance as it provides additional cover to your vehicle, at the time of the accident. You are covered for own damage (Damage your vehicle suffers in an accident). You are covered for damages in a collision, vandalism, accidents due to animals, natural calamities and so on.

Procedure of Auto Insurance Claim

Auto insurance claims can be accidental, theft or third party claims. Following are the procedure of auto insurance claim.

  • File a claim with your insurance company as early as possible:
  • Insured should mention the number of the other vehicle in case of an accident or third party claim
  • Names of witness should also be written down
  • File an FIR with the nearest police station
  • Get a claim number
  • A surveyor is appointed who reports the estimated value of loss or damage
  • Based on surveyor’s report, insurance companies try to send the amount to the insured within one to three weeks
  • Initially an individual have to pay the repair charges himself and later get it reimbursed

Documents Required for Auto Insurance Claim

To receive the auto insurance claim, you have to submit certain documents. Again it depends on the case. Documents required for accident Claims and documents required for third party claims are different. Bellow given list will help you in understanding the documents required;

For Accident Claims

  • Claim form duly signed
  • RC copy of the vehicle
  • Driving license copy
  • FIR on a case-to-case basis
  • Original estimate
  • Original repair invoice, payment receipt from the service center

 For Third Party Claims

  • Claim form duly signed
  • Police FIR copy
  • Driving license copy
  • Original policy copy
  • RC copy of the vehicle
  • RTO transfer papers duly signed, mentioning that the vehicle cannot be located

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