What Does Car Insurance Cover in India? Breakdown of All Key Protections

What is Car Insurance and its Types in India?

Car insurance, also called motor insurance or auto insurance coverage for cars, is a type of insurance policy that protects you and your vehicle against financial losses resulting from unforeseen events. It can cover third-party liabilities as well as own damages sustained by the insured vehicle due to accidents, calamities, fire, theft, and other perils.

In India, there are three types of car insurance plans offered across providers, namely:

Comprehensive car insurance

The comprehensive car insurance policy offers robust protection against a variety of risks. Not only does it offer the mandatory third-party liability coverage, but it also offers own damage coverage for the insured four-wheeler. If the car suffers any damage or loss due to accident, theft, calamities, or fire, the policy will pay for the necessary repairs and replacements.

Although it costs more compared to the other plan types, it is the most recommended option due to its elaborate coverage benefits.

Third-party car insurance

The third-party car insurance coverage includes the minimum cover required as per the Motor Vehicles Act 1988. It covers liabilities arising from any third-party damage or loss caused by the insured four-wheeler in an accident. This includes third-party bodily injury, death and property damage.

It doesn’t provide any coverage for damage or loss to the insured car.

Own damage car insurance

The own damage or OD car insurance policy is an optional, standalone plan. It offers financial coverage against losses sustained by the insured four-wheeler due to an accident, theft, natural calamity, man-made hazard, and fire & explosion.

The OD cover doesn’t provide any coverage for third-party liabilities. Car owners with an existing basic third-party insurance can add this policy on top to ensure 360-degree coverage.

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What Does Car Insurance Cover?

Here are the inclusions commonly featured under a standard car insurance policy:

Accidents:

In case the insured vehicle suffers accidental damage, car insurance covers the cost of necessary repairs and replacements.

Theft:

In case the insured vehicle is stolen and not recovered, the policy compensates the owner for the total loss as per the car’s Insured Declared Value (IDV).

Calamities:

Car insurance covers damages caused by natural calamities (such as earthquakes, landslides, and floods) and man-made hazards (including strikes, riots and terrorism).

Third-party liability:

Car insurance covers financial and legal liabilities arising from accidental damages or losses caused to a third party.

Fire & explosion:

The policy also covers damages suffered by the car due to a fire or an explosion.

Personal accident cover:

Under the compulsory PA cover, the policy protects the owner-driver against injuries, death or permanent disability resulting from a car accident.

What Does Car Insurance Not Cover?

Now that you know the answer to “What does car insurance cover?”, it's time to learn about the common exclusions. Here is a general outline of what car insurance doesn’t cover:

Depreciation:

Car insurance doesn’t offer coverage for depreciation in value or the general wear and tear of the vehicle.

Driving under the influence:

It doesn’t cover damages caused by a person driving the car under the influence of alcohol and/or illegal drugs.

Driving without a licence:

The policy doesn’t cover damages caused by a person driving the car without a valid driving licence.

Breakdown:

Car insurance typically excludes damages or losses resulting from engine seizure or electrical failure of the vehicle.

Territorial limitation:

Damages sustained outside the country are not covered under car insurance in India.

Additional Coverage with Car Insurance

To enhance the coverage of the standard car insurance policy, you can opt for add-on covers. Here are some popular add-ons bought alongside standalone OD and comprehensive car insurance plans:

Zero depreciation

The decline in the vehicle value due to usage and age is called depreciation. Under the standard insurance, the insurer factors in depreciation and deducts it from the final claim amount. However, with this add-on, claims for part replacements are settled without any depreciation deduction, maximising payouts and minimising out-of-pocket expenses.

Breakdown assistance

The breakdown assistance add-on, also called roadside assistance, offers round-the-clock emergency support if you get stranded on the road due to a car breakdown. Its services cover emergency fuel delivery, towing, flat tyre replacement, battery jump-starts and other on-the-spot support.

Return to invoice

With this add-on, your car insurance coverage will make sure you get to recover the invoice value of the vehicle, including the road tax and registration charges, in the event the insured car gets stolen or damaged beyond repair. However, note that this is only applicable in the case of total loss or constructive total loss.

Engine protection cover

This add-on covers the cost of repairs and replacement of the car’s engine and gearbox in the event they are damaged due to water ingress or lubricant leakage. Since the own damage component under the standard car insurance typically excludes this coverage, getting the engine protection add-on is highly recommended. Make sure to check the car insurance coverage details for specifics on this add-on.

No claim bonus protection

With claim-free years, you can earn no claim bonus (NCB) and use it for discounts on the own damage premium during car insurance renewals. However, if you raise a claim, your NCB resets to zero. With this add-on, you can raise a specified number of claims during the policy term without losing your earned NCB and carry it to the next slab.

Consumables cover

This add-on covers the costs of replacing consumables, such as nuts, bolts, washers and oils, during a claim. The standard car insurance coverage doesn’t include these costs, and although they are minor expenses, they can add up to a considerable amount.

Conclusion

Navigating car insurance coverage in India is simple once you understand its key inclusions and exclusions. Do proper research on coverage types and add-ons before finalising a policy. Ensure your vehicle is protected with a proper car insurance plan that aligns with your driving habits and coverage expectations.

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