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Why You Need A Comprehensive Car Insurance Coverage? Research Team | Posted On Thursday, March 01,2018, 06:56 PM

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Why You Need A Comprehensive Car Insurance Coverage?



Why You Need A Comprehensive Car Insurance Coverage?

Motor vehicle is a prized possession because you spend Lakhs of rupees to buy it. Any damage caused to it in an accident costs you thousands in repairs. Worse, if it is fully destroyed, replacing it will be a costly affair. Also, buying a new motor vehicle in case of theft is not a joke. Thus, to cover your motor vehicle from all such risks, it is important to buy a motor insurance plan.

Whether a motor vehicle is for personal or commercial use, the Motor Vehicle Act mandates you to get it insured. In the absence of valid cover, you will be penalized.

There are two types of motor insurance plans, namely, third party liability cover and a comprehensive motor insurance plan. Let us learn about both in detail:

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What is a comprehensive car insurance plan?

A comprehensive motor insurance plan provides coverage for all damages caused to a third party as well as injury to you/damage to your vehicle in an accident. Comprehensive car insurance provides overall protection against damages caused to your car, the third party, their car, third-party legal liability, injury to you and so on. The damages caused may be due to human acts or a natural calamity.

By paying extra premiums, you can add covers like engine protector, accessories cover, zero depreciation cover, and so on to a comprehensive motor insurance plan.

What is a third party motor insurance plan?

A third party motor insurance plan:.

  • The first party is covered under the insurance plan. (The person who avails the car insurance plan).
  • The second party is the insurer.
  • The third party is the person who claims damages (on life/property) on being injured by the insured.

So what is a third party motor insurance plan? If you avail a third party motor insurance plan, the insurer enters into an agreement with you to compensate, on a legal liability (if you are sued in a court of law), on death of an unrelated party/bodily injuries/damage to a third party property, while driving your car.

What's covered under third party motor insurance?



1. Death of a third party/unrelated party in an accident: You are covered for any compensation/legal liability, on death of any third party, due to an accident with your car. There is no limit on compensation.

2. Accident causes disability to a third party: If the car which you are driving meets with an accident and causes disability/serious injury to a third party, the insurer compensates the party. The compensation amount is Rs 2 Lakhs for total disability and Rs 1 Lakh for partial disability.

3. Damage to the property of a third party: The insurer compensates a third party on damage to his property, caused by an accident due to your car. The compensation is Rs 7.5 Lakhs for cars/commercial vehicles.

4. There is owner-driver cover: The owner-driver cover is mandatory with any third party motor insurance policy. The owner-driver insurance covers the owner/person who drives the car in case of an accident, up to Rs 2 Lakhs for car/commercial vehicle.

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Why You Need A Comprehensive Car Insurance Plan?

1. The plan covers you for damage to your car: While third-party motor insurance covers damage to a third party (another's persons) car/property, if your car collides with another person's car/property, you are not covered for damage to your car.

A Comprehensive car insurance plan pays the repair costs for your damaged car.

2. You are covered for injuries suffered in the accident: The third-party motor insurance plan, does not compensate you for medical treatment for injuries sustained, as the driver/owner of the car in an accident.

A Comprehensive car insurance plan pays for hospitalization/medical treatment on injuries you sustain, if you drive the car and it meets with an accident.

3. Covered for unattended personal belongings stolen from your car: Third party motor insurance does not compensate you, on leaving personal belongings unattended inside the car. If they are stolen, the insurer will not compensate you for the loss, if you only avail third-party motor insurance.

If you avail a Comprehensive car insurance plan with ‘Loss of Personal Belongings’ add-on cover, you will be compensated for your loss.

Benefits of comprehensive car insurance plan:

Following are the key benefits of comprehensive car insurance plans:

1. Theft of car: It is never an easy task to buy a new car to replace a stolen car. Therefore, you should have a comprehensive motor insurance plan which covers loss of car due to theft.

A standard comprehensive motor insurance plan cover doesn’t pay you for a new car; it just reimburses you for the value of the stolen car.

2. Collision coverage: Comprehensive auto insurance provides coverage for the damages caused to your car because of an animal collision or any other collision. It covers damages like a smashed fender, dented hood and broken windshield.

3. Weather damage: Hailstones, dust storms, floods, and so on can easily damage your car. Comprehensive motor insurance pays for repairs arising due to the occurence of such natural events.

4. Fire damage: Comprehensive car insurance also covers you against fire.

5. Falling object cover: It pays for damage caused by falling objects like trees.

6. Third party coverage: Comprehensive car insurance covers all that a third party liability motor insurance plan covers.

7. Add-ons: You have add-ons like engine protector, accessories cover, zero depreciation cover, and so on to comprehensive motor insurance plans. Though it increases the premium amount, these additional covers enhance the basic comprehensive motor insurance plan.

SEE ALSO: Good Driver: Pay Less Motor Insurance Premium

What is IDV and why is it useful?

What is IDV?

IDV stands for Insured Declared Value. An insurer sets the highest sum assured to be provided if the insured vehicle is stolen. IDV is the current market price of the vehicle. In case the insured vehicle is totally damaged, the insurer reimburses you the IDV.

Importance of IDV:

  • The car insurance premium amount is determined by the IDV.
  • Lesser the IDV, lower would be the premiums.
  • Furnishing incorrect estimates to lower your IDV turns out to be profitless in the long run.
  • Insurers consider a car’s IDV value and then pay the claim in case of theft or a total loss.
  • Ideally, IDV should be close to the insured vehicle’s market price. Therefore, increase or decrease the IDV of your motor vehicle accordingly.


How is comprehensive car insurance premium calculated?

A comprehensive car insurance premium is calculated based on:

1. Insured declared value (IDV): IDV is the value of the car estimated by the insurance company when you apply for a motor insurance for the first time. This is the maximum amount up to which the insurance reimburses or pays in cases you make a claim. IDV is subject to depreciation. Hence it changes and decreases over time.

IDV only applies to comprehensive motor insurance plans and not third party motor insurance plans.

2. Cubic capacity (cc): Cubic capacity is a measurement used to determine the size of a car engine. Cubic capacity does not change with time. Therefore, it affects third party insurance premium amounts and not comprehensive policy cover. Higher the cubic capacity of a vehicle, higher is the premium amount.

3. Age of the car: Age of the car also determines the car insurance premium. Older the car, higher the wear and tear. Older cars are exposed to higher risks.  Hence, the premium amount increases with the age of the car.

How to decide on the comprehensive car insurance plan?

Most car owners buy motor insurance just because it is mandatory as per the Motor Vehicles Act. They buy it without doing proper research. Also, car owners look for low premiums. This could mean that the insurance product that they pick might not give them adequate cover. Spending a tad more on premiums is not bad at all, if the insurance product gives you adequate cover. Following are some points to keep in mind while selecting a comprehensive car insurance plan:

1. Compare policies online: With a number of insurers offering a number of plans, you are bound to be in a fix. A simple solution is to compare policies online. There are a number of online aggregators which give unbiased information on car insurance products without charging anything. By furnishing the amount of coverage you want, you will get the premium quotes for each plan in the insurance space. You can then identify plans that offer maximum coverage at competitive rates.

2. Customer service: Customer service is one of the most important factors to be considered. Check the following points in the insurance company:

  • How long the company has been in existence
  • Company’s reputation
  • Online customer reviews
  • Offline customer reviews
  • Claim settlement ratio

3. Flexible coverage: Not all insurance products will fit your needs. But, this doesn’t mean that you go for an insurance product, which doesn’t fulfill your specific insurance needs. Some insurance companies offer flexi-coverage. Such a company should be a priority over the others. These companies allow you to customize a product according to your needs.

4. Cost effectiveness: You should pick basic comprehensive plans which offer wide coverage at a reasonable premium cost. You can add appropriate add-on covers to the basic plan. The best way is to compare plans online.

5. Distribution network: Go for an insurance company that has a wide distribution network. An insurer must be accessible 24x7.

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