Car Insurance

Car insurance offers financial protection against loss/damage to the vehicle that is caused by accident, theft, fire, explosion, natural calamities, etc. It also takes care of the financial liabilities that occur due to the damage caused by the insured to the third-party individual/property.

Importance of Car Insurance

In India, around 54 road accidents take place every hour. What will you do if the repair cost is high and you are not able to get it done on time? Who will be responsible for the damages? This is where an effective car insurance policy will do its job. The policyholder can ask their insurer for assistance and get the repairs done on time. In the case of third-party liability, the insurance provider will deal with its aftermath without giving you any trouble.

The Indian government also stresses its importance via The Motor Vehicles Act, 1988. This act makes it mandatory to have at least third-party car insurance to enjoy a legal drive on the Indian roads. Anyone who dares to go against it has to face serious consequences.’

Types of Car Insurance Plans in India

Third-Party Liability Plan

It only covers the damages caused to the third-party individual/property. No coverage is provided to the policyholder.

The third-party liability insurance quote is the mixture of a few components which comprises of: -

  • Third-Party premium.
  • Premium for Personal Accident Owner-Driver Cover.
  • Goods and Service tax.

Comprehensive Plans

It is also called the ‘Big Brother’ of third-party liability plans. Why? Apart from covering the third-party damages, comprehensive plans look after the policyholder’s damages as well.

The quote for the comprehensive cover is the sum of its components which include: -

  • Third-Party premium & Own Damage premium.
  • Premium for Personal Accident Owner-Driver Cover.
  • Additional coverage (add-ons) along with Goods & Services Tax.

What Are the Benefits of Car Insurance?

Apart from own & third-party damage cover, car insurance offers other benefits as well. They are listed below for your reference.

No Claim Bonus

It is a discount which is offered to the policyholder for applying zero claims over the previous years. The discount can range between 5-50% at the time of renewal.

Additional Covers

Apart from the basic cover, there are several additional covers that you can opt for wider coverage but they vary from insurer to insurer. A brief explanation of them is given in the latter part of the write-up.

Cashless Garages

You can get the repairs done in one of the network garages which is associated with your insurance provider. Its benefit? You don’t have to pay a single penny. The bill will be settled by your insurance provider.

How Is Car Insurance Premium Calculated?

The car insurance premium is the amount that you have to pay to keep your policy active. It usually varies from insurer to insurer & model to model. To calculate car insurance premium, you can use the below-stated formula.

Premium= Own Damage Premium – (No claim bonus + discounts) + Liability Premium as Fixed by the IRDA + Cost of Add-ons.

On the basis of the below-mentioned points, the company determines the car insurance premium.

The manufacture year of the Vehicle:

This determines the age of the car. Older vehicles have low insurance rates in contrast to automobiles which might be especially new.

Vicinity of Registration of the Vehicle:

Your residential place and the vicinity in which you got your vehicle registered also has an impact on car insurance premium.

Model of the Vehicle:

If the vehicle has steeply-priced or uncommon spare parts, the coverage for the top class of the car might be higher as well.

Use of the Vehicle:

Car Insurance providers offer personal and business coverage rules. If a vehicle is used for business functions, it will attract higher coverage rates.

Safety Devices:

Today, most of the vehicles are geared up with safety capabilities and anti-theft devices. You're eligible to get a discount on the premium of up to 2.5% (if your vehicle is secure). Also, the devices must be approved by the Automobile Research Association of India.

Claims Records:

If you raise a claim against your vehicle insurance, the premium is likely to head up. If you abstain from raising claims, you may be rewarded with a No-claim Bonus (NCB).

What Add-ons Are Available in Car Insurance?

Personal Accident Cover

The insurance provider will offer financial compensation to you if your bodily injuries (in an accident) leads to partial/total disability or death.

Roadside Assistance

If you opt for this, you will get the necessary assistance if your vehicle is a victim of tire puncher, battery problems, etc.

Key Replacement Cover

If you lose your car key, this feature will cover the expenses of the new lock.

Zero Depreciation Cover

Under Zero Depreciation Cover, the insurance company will offer the original cost of the vehicle's part instead of the depreciated value.

Invoice Cover

If your vehicle is damaged beyond repair (in an accident) or stolen, this add-on will compensate for the gap between the invoice value of your car and its insured declared value.

Loss of Belongings

If an expensive/precious item is stolen from your vehicle, this add-on will compensate you for it (partly/fully).


1. I have to sell my car. Can I transfer my existing car insurance policy to the buyer?

Yes, you need an endorsement form along with the necessary documents (old RC copy, NCB recovery amount, etc) to transfer the existing policy to the buyer of the vehicle.

2. If I have CNG or LPG kit fit in my car, is it important to inform the Insurance Company about the same?

Yes., It is highly important to inform the Road Transport Authority (RTA) where the vehicle is registered and your Insurance Company. The RTA will make changes in the Registration Certificate (RC) accordingly, and the Insurance Company will inform you about the additional premium that you have to pay for the same.

3. Can I move my commercial vehicle from the actual spot of the accident?

You have to wait for a spot survey done by the insurance company. Only after that can you move your vehicle.

4. I have an electric car. Will I get a discount on its premium?

According to IRDA, you will get a 15% discount on the insurance premium.

5. The repair damage to my vehicle cost around Rs.20,000 but my cover is of Rs.15,000. Do I have to pay Rs.5,000 from my pocket?

Yes. The additional expense needs to be paid by you.