How does car insurance work in India?

Any valuable possession needs insurance for added security. Therefore, four-wheeler owners should opt for a car insurance policy to protect their vehicles in case of an accident, damages or theft. 

The concept of any insurance is quite simple. One needs to pay a regular premium to get financial coverage from the insurer in case of any unfortunate incident involving the insured asset. 

Also Read – How to use a car insurance premium calculator?

Here’s a clear idea of how car insurance work in India.

Why should you buy car insurance in India? 

Car insurance is mandatory in India as per the Motor Vehicles Act, 1988. Therefore, one must opt for a suitable car insurance plan while buying a four-wheeler. Otherwise, it might lead to severe penalties. Moreover, insurance covers the owners’ financial expenses if their car faces accidents, theft, damages from natural calamities, etc. 

Types of car insurance in India: 

There are two types of car insurance in India:

  1. Third-party

It is a mandatory motor insurance policy that every car owner has to purchase while buying a car. It covers the expenses one incurs due to third-party damage to life or property.

  1. Comprehensive

A comprehensive car insurance policy provides all-around coverage. It comes with all the benefits of the third-party policy and personal damage coverage.

Also Read – Best Way to Renew Car Insurance During COVID Times

What is covered in a car insurance policy? 

Car insurance policies provide the following coverage:

  • Third-party  damages for property, injuries and death
  • Damages due to natural calamities
  • Fire damages
  • Car damage due to accident
  • Theft
  • Vandalism damages, etc. 

Note: Third-party policy only covers third-party aspects, while comprehensive covers both own damage and third-party damage expenses.

What is not covered in a car insurance policy? 

A car insurance policy does not cover any damages when a person is driving:

  • under the influence of intoxicant or alcohol
  • without a valid driving licence
  • without renewing insurance plans

Also Read – How to Compare Car Insurance Effectively to Save on Premium amount?

Note: Damages caused during a war or expenses for servicing are not covered.

How is a car insurance policy priced or calculated? 

There are two types of car insurance in India, and their pricing also varies. Here are two ways in which it is calculated:

  • Third-party insurance policy

IRDAI decide the rates and premium of a third-party car insurance policy in India. This rate remains the same across all the car insurance companies and is not subjected to yearly changes.

  • Comprehensive insurance policy

In the case of a comprehensive insurance policy, an insurance company can charge the premium according to its structure. However, at certain points related to the third-party coverage, they must abide by the rules of IRDAI.

Also Read – Top Car Insurance Add-Ons to Buy Before the Monsoon Season

Add-ons for car insurance

Add-ons or additional riders enhance the coverage provided by comprehensive car insurance. Here is the list of add-ons that an insurance provider offers on comprehensive policies:

  • Zero depreciation cover
  • Consumable cover
  • Passenger cover
  • Tyre protect cover
  • Return to invoice cover
  • Breakdown assistance
  • Engine and gear-box protection cover and more

How to make car insurance claims? 

Here are the following ways to claim car insurance:

  • Filing an FIR at the local police station
  • Contact the insurance company to file a claim at the earliest. It can be done via call, email or the mobile app of an insurer
  • Submitting the required documents as instructed by an insurance company

Note: In case of third-party claims, the concerned party has to file a claim with an FIR. The Motor Claims Tribunal will conduct the entire hearing and settlement procedure. 

Should you file claims for small damages? 

Small damages are not recommended for filing claims because of the following factors:

  • Deductibles

It is advisable to settle smaller issues by repairing them on your own because raising a claim would make the owner pay for a voluntary deductible. 

  • No claim bonus

Car owners get a no-claim bonus if they do not claim throughout the policy period. It helps in getting a discount while renewing the policy.

How to buy the best car insurance policy in India?

Car insurance policies are available in the following ways in India:

  1. Online mode

One can opt for an online mode for a seamless policy purchase and transaction by visiting the insurance provider’s website.

  1. Offline mode

This traditional method lets you purchase insurance by visiting the insurance office or an agent.

Also Read – Here’s How Car Insurance Helps in Adhering to Traffic Laws


This guide lets first-time car-owners have a clear idea about how car insurance policies work. There are multiple insurance providers in the market today. However, it is advisable to review the insurance policies before purchasing them carefully.


Don’t Worry About the Future of Your Family, Plan This Way

For most people, family is a ray of hope in their existence. And to ensure the safety of the family, they can take any measures. But for the family’s breadwinner, there are always concerns regarding the family’s safety even in their absence. The best way to protect the future of your family is through planning. And that too as early as possible. Read on to more about how to plan for your family’s future.

1. Create a Budget

The first and foremost thing to do while planning for a family’s future is to create a budget. A budget will give you a clear understanding of the sources of income and expense channels. This will, in turn, lead you to the next step, managing the expenses.

2. Manage the Expenses

You can drastically reduce the total family expenditure each year by managing your expenses. As we all know, saving money is earning money. So, you can use this saved money for other requirements. And if there are no special requirements, you can divert these funds into savings and investments.

3. Participate in Investments

The benefits of investments always outweigh those of savings. As investments grow over time rather than accumulate, like in the case of savings, they can beat inflation. Inflation decreases the value of money with the passage of time. So, to ensure that your fund’s value doesn’t decrease over time, you must always choose investment plans with interest rates higher than the projected inflation rates. Some of the preferred investments that provide high returns are:
• Term Insurance Plans
• Gold
• Equity
• Stocks
• Mutual Funds
• Assets
• Bonds
• Government Savings Schemes
• Post Office Schemes

4. Term Insurance Plan

Term insurance plans are considered to be an effective choice in India by many generations. The main attraction of buying a term insurance plan is higher sum assured. Term insurance policies can provide the maximum cover even with a lesser premium. Given below is a general flow of procedures involved in purchasing the best term plan.

5. Prerequisites

Like any other mode of investment or payment, there are several things that you must consider before purchasing term insurance. The foremost things to do before purchasing are comparison and reliability of insurance providers. These allow you to choose a credible insurer who will be of use when you need them the most. You can even get a rough knowledge of the insurer’s credibility by knowing their claim-settlement ratio.

6. Selection

The selection procedure after finalizing an insurer involves the customization of plans and choosing the most suitable plan. By doing so, you can reduce a lot of monetary burden from your family expenses towards a term insurance plan. Before finalizing and purchasing the best term plan, ensure that you have gone through the policy terms and conditions. Their knowledge will clarify the liabilities and hidden clauses in the policy.

7. Purchasing

Best insurance plan providers give online and offline payment options to the customer. Even though the online mode is convenient and has the benefits of insurer offers and schemes, offline purchasing will provide you with first-hand consultation from an authorized insurance agent. It will help you further know your chosen plan in a better way.

8. Claim Procedure

Understanding the claim procedures will always come in handy in times of dire need. It is always advisable that at least two family members learn the claim procedures other than the policyholder.
A Term Insurance Plan is the best method to protect the future of your family. You can find several insurers who provide maximum returns to the policyholder’s family in case of their untimely demise.