How Does IRDA Define Motor Insurance?
The major function of motor insurance, for both two-wheelers and four-wheelers, is to provide protection to the owner of the vehicle against –
1. Loss and damage of one’s own vehicle, and
2. The legal liability of the vehicle owner for the damage or loss caused to a third party
Also, the Government of India has made third party liability coverage mandatory for all vehicles in India. It is a legal obligation for the owner of the vehicle to compensate for the loss incurred by a third party due to an accident caused by the vehicle. So, every vehicle owner at least needs third party insurance. Driving in India without any insurance cover is a legal offense according to the Motor Vehicles Act of 1988.
Types of Insurance
As per the IRDA, motor insurance can be categorized into two parts:
1. Liability Only Insurance Policy – This third party cover provides coverage to you against third party liabilities arising from an accident and this type of insurance cover is the minimum insurance requirement.
2. Comprehensive Insurance Policy – This type of insurance provides all-round coverage to your own vehicle as well as coverage for legal liabilities towards third parties.
The liability only insurance does not cover your own vehicle. So, for those who are looking for extensive coverage for their vehicles, comprehensive insurance policies are the right option. It is better to take an all-inclusive insurance cover for an all-round protection.
IRDA of India also specifies the coverage limits of insurance policies. The damage coverage of the vehicle normally comes under the OD (Own Damage) section of insurance policies. Motor Insurance can cover damage or loss incurred by the vehicle because of the following reasons:
9. External accidental means
18. Act of terrorism
20. Malicious acts
21. During transit via railways, inland waterways, road, airways, elevator, or lift
Premiums and Sum Insured
The IRDA also specifies the premium rates and the amount of sum that is assured under an insurance policy. The amount of sum to be insured is decided on the basis of the following terms:
1. For OD –The amount of sum that is insured under a motor insurance policy is determined by the present market value of the vehicle. The value of the vehicle is called IDV or the Insured Declared Value. The Insured Declared Value cannot be set by the owner of the vehicle or by the insurance provider; this value is pre-set by the present value by the manufacturer of the vehicle. Furthermore, the deflated value of the vehicle, which is called as depreciated value, is determined by the vehicle’s age.
2. For Liability Cover –This coverage is offered as per the rates fixed by IRDA, based on the capacity of the vehicle.
The Dos and Don’ts of Motor Insurance
The Insurance Regulatory and Development Authority provides entire guidelines about motor insurance for both two-wheelers and four-wheelers. In order to protect the interests of the insurance policyholders, IRDA presents some dos and don’ts about motor insurance policies.
Here are a few tips about what to do when you intend to buy motor insurance plan in India:
1. Have a clear concept regarding from where to buy your motor insurance plan. It is not compulsory to buy vehicle insurance from the dealer. You can buy it from any desired insurance company.
2. Even if you purchase vehicle insurance from the dealer, fill up the insurance proposal form by yourself and do not just sign an empty proposal form and let anybody else to fill the form on your behalf.
3. It important to go through the entire insurance proposal form. Get acquainted with the terms, clauses, and features of the insurance policy as you choose to proceed.
4. Keep a photocopy of the completely filled insurance proposal form as a record.
5. Ask for the insurance policy brochure and go through it thoroughly by yourself.
6. Go through the inclusions and exclusions mentioned in the insurance policy. Clear any doubts you have.
7. Choose add-on features with the insurance policy that suit your need.
8. Provide all the important documents related to your vehicle for verification.
Try to stay informed while purchasing an insurance policy. Here are the things you should not do when you buy insurance for your vehicle:
1. Don’t let someone else fill your insurance proposal form.
2. Don’t leave any field of the form empty. If you have difficulty in understanding the language, seek help from the insurance provider.
3. Do not let your insurance policy lapse. Always try to renew your vehicle insurance within its due date.
4. Do not hesitate to get detailed information about the insurance of a used vehicle from the insurance company. If you are buying a used vehicle, always make sure with the insurance company about the transfer of the policy owner and other procedures.
5. Do not provide your insurance provider with incorrect information. This may land you in a legal situation.
Apart from the above-mentioned tips, IRDA also specifies certain general guidelines for policy owners:
1. When you seek insurance coverage for your vehicle, first check whether the insurance company is registered with IRDAI. It is the foremost information that you should check about the insurance company.
2. Remember, it is not important that you seek an insurance agent for purchasing vehicle insurance. You can also buy it directly from the insurance company. Just visit your nearest branch office or the official website to buy directly from the company.
3. No matter from whom you buy the insurance for your vehicle, always go through the policy thoroughly to understand the terms, inclusions and exclusions, the renewal and claim settlements processes, the premium amount, etc. before signing any document. Always clear your doubts before purchasing the policy.
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**To understand exactly about the policy coverage, exclusions etc read the Policy Wordings carefully.**