What is Car Insurance and why is it necessary to have one?

What is car insurance?

In simple terms Car insurance is the protection provided by the insurance companies for the loss against third party liabilities, theft or damage to the car.

Policy coverage

The insurance covers the insured for the loss arising due to :

Natural Calamities : Fire, explosion, self-ignition, lightning, earthquake, flood, typhoon, hurricane, storm, tempest, inundation, cyclone, hailstorm, frost, landslide, rockslide

Man made : Burglary, Theft, Riot & strike, Malicious act, Accident by external means, Any damage in transit by road, rail, inland waterway, lift, elevator or air.

Parties in car insurance

Insured : Owner of the vehicle
Insurer : The insurance company

Types of car insurance

Third party car insurance

It gives protection against the claims arising due to damages caused by accidents, permanent injury/death, of a person and also any other damage caused to the property.

Comprehensive car insurance policy

Comprehensive policy includes both Third party liabilities and also loss/damage caused to the vehicle by way of accident, theft or any other dangers.

Thus the insured will be reimbursed for the loss/damage to his/her vehicle in the following cases :

Vehicle valuation

Now the question arises for what value should the car be insured – for the depreciated value or reinstated value. However car need not be insured for any of the above two, it is insured for second hand value in the local market for the similar car and similar model.

Factors determining premium

Reimbursement in event of an accident

In case of an accident the company will repay for the cost of damaged parts which are to be replaced and also the cost of labor. However as per the regulations the company pays certain percentage of the product price and not the whole amount. The reimbursement on parts is subject to the following amount of depreciation

For all other parts

However the company will not be liable to pay in respect of following cases

Personal accident covers for owner driver

Due to bodily injury/death sustained by the owner-driver of the vehicle by violent accidental external and visible means which independent of any other cause shall within six calendar months of such injury results in.

Deductibles

In case of accidents insurance companies do not pay 100% of the expenses, certain amount has to be borne by the insured; the amount borne by the insured is known as deductible. For instance there is a loss of Rs.2000 and the deductible payable by the insured is Rs.500 than the amount payable by the insurance company is Rs.1500. Choosing a deductible is an important part of insurance because this is the cost which the insured has to bear in case of any damage or loss taking place.

Ways to reduce premiums

There are some ways by which premium amount can be reduced by a certain extent :

Documents required for car insurance

Companies providing car insurance

Information needed before applying for insurance

Steps taken for applying for insurance

Choosing an auto insurance company

The first step in choosing the right auto insurance company is to decide on the type of auto insurance required. Then one also need to look out if the company gives any discount if a person owns more than one vehicle, since it would be beneficial for both the client as well as the company by transferring all the auto insurance under one company’s product. Another step which can be considered is whether the company rewards the driver for having a good driving record by giving any discounts. Also the person needs to go through the policy document in order to have a better understanding of the insurance product. Also the insurance rates vary from location to location; rates are high in urban areas as compared to those in rural areas or town.