Car Insurance is an important contract where a customer pays a premium to an insurance company for the protection of the financial costs against potential losses like theft, accidents, damages to their vehicle & also the liabilities to a third party.
There are three main types of car insurance policies on the basis of the financial coverage they provide. It is important to understand these policies as having basic coverage is a mandatory law in India.
Let's know about the three types of Car Insurance in detail:
1. Third-Party Liability Only Cover (Mandatory)
This is the most important and legally required type of motor insurance in India. It is also referred to as the 'Act Only' policy, as it covers the liability covered by the Motor Vehicle Act.
- Coverage: This policy covers only the financial liability that you may incur if your vehicle causes damage, injury, or death to a third party. A third party can be another person, their vehicle, or their property.
- Key Feature: The policy provides financial assistance to the person or property you damage, thus protecting you from heavy legal and compensation costs.
- What it Excludes: It strictly does not provide any compensation for damage to your own car (Own Damage) or any medical expenses/injuries sustained by you, the driver.
- Cost: The premium cost for this policy is the lowest among the other two types, as decided by the Insurance Regulator.
2. Standalone Own Damage (OD) Cover
This policy solely focuses on covering damages to the customer's own car. This policy was brought on to help the owners of older cars purchase flexible coverage.
Coverage: This policy covers the repair & replacement costs for your own car resulting from a variety of risks, including accidents, fire, theft, natural disasters (like floods, earthquakes), and man-made disasters (like riots or vandalism).
Feature: Its key feature is to provide the Insured Declared Value (IDV) of your vehicle. An Insured Declared Value is the current value of the car, representing the maximum amount of the car the insurer will be liable to pay in case of theft or total loss.
Note- You cannot buy a Standalone Own Damage policy on your own. You must have a third party who is available to assist you.
3. Comprehensive Car Insurance (Package Policy)
This is the most applied and widely recommended type of policy, as it offers the highest level of protection by combining two different types of coverage into one.
- Coverage: It is a package that combines the mandatory Third-Party Liability Cover and the Own Damage Cover. This means it protects you against liabilities caused to others and covers the repair or replacement costs for your own car.
- What Does It Include? This policy covers everything from theft, fire, accidents, and natural/man-made disasters to necessary third-party liabilities.
- Personal Accident Cover (PAC): It is a compulsory Personal Accident Cover (PAC) for the owner-driver that is included in this policy, offering a fixed sum in case of accidental injury, permanent disability, or death. In Add-Ons, a Comprehensive Policy offers the flexibility to purchase add-ons (riders) like Zero Depreciation, Roadside Assistance (RSA), and Engine Protection, to customize and enhance the policy's coverage even further.
Mandatory Component: Personal Accident (PA) Cover
While it is not a policy but it is mandatory to take the Personal Accident Cover for the owner/driver should be purchased with the third-party policy. The amount is fixed (currently INR 15 Lakhs). This is a fixed benefit in case of accidents, disability, or death of the owner or driver.