Car insurance policies cover against any loss or damage caused to the vehicle or its accessories due to the following:
a) Natural Calamities: Fire, explosion, self-ignition or lightning, earthquake, flood, typhoon, hurricane, storm, tempest, inundation, cyclone, hailstorm, frost, landslide, rockslide.
b) Man made Calamities: Burglary, theft, riot, strike, malicious act, accident by external means, terrorist activity, any damage in transit by road, rail, inland waterway, lift, elevator or air.
A compulsory part - Third party legal liability, protects against legal liability arising due to accidental damages. It includes any permanent injury / death of a person and damage caused to the property.
1) Protection from a financial loss arising out of loss or damage to your vehicle.
2) Protection from liability towards third parties for personal injury.
3) Protection against death and property damage on account of any accident involving your vehicle.
The Car insurance policy consists of two separate parts. This is known as a Comprehensive or Package Policy. The two parts are
a) Own Damage - which addresses the losses arising out of damage to your car
b) Third Party Liability - which indemnifies you against claims arising out of any losses to a third person(s) from your usage of vehicles
The third party liability policy is compulsory by law, whereas the own damage liability is your choice. Third party liability policy is compulsory for every motorized vehicle in India (surprisingly, statistics suggest that 2/3rd of the vehicles plying in India do not have this. If you own a car and you do not have a third-party liability insurance, you are actually doing an illegal act. If you are insured, you definitely do have the third party liability cover, because no insurer will offer an insurance policy without one.
The illustration below depicts what a cover note of a car insurance policy contains. The Liability Premiums are set by the regulator and Insurance companies have no say on it. It varies only with the size of the car itself. The own damage sections are set by the insurance companies and differ from company to company.
The basic factor for computation of premium is the IDV value of the car being insured, which is the market value of the car in that particular city/ state. There are specific conditions based on which loading factors are applied on the basic premium and there are specific conditions under which discouts are given and discount factors are applied on the basic premium.
Finally, if the car does not have any claims during the previous year, the insured is eligible for a no claim bonus (NCB). The final premium is calculated after adding loading factors, deducting discounting factors and then applying NCB on the basic premium.
Each of the heads defined described above are explained in detail.
Apart from premium calculations, the policy cover note also mentions the following (a specific example is taken as an illustration):
LIMITS OF LIABILITY:
(a) Under Section II - 1 (i) of the policy -> Death of or bodily injury : Such amount as is necessary to meet their requirements of the motor vehicles Act.1988.
(b) Under Section II - 1 (i) of the policy -> Damage to Third Party Property Rs 7,50,000 ; PA Cover for Owner-Driver under section III-CSI Rs 2,00,000 ;Voluntary Deductible Rs.0
LIMITATIONS AS TO USE: The policy covers use of the vehicle for any purpose other than : Hire or reward,Carriage of goods(other than samples or personal luggage), Organized racing, Pace making, Speed testing,Reliability trials,Any purpose in connection with Motor Trade.
DRIVER'S CLAUSES : Any person including the insured : Provided that a person driving holds an effective Driving License at the time of the accident and is not disqualified from holding or obtaining such a license. Provided also that the person holding an effective Learner's License may also drive the vehicle and that such a person satisfies the requirements of Rule 3 of the Central Motor Vehicles Rules, 1989.
IMPORTANT NOTICE : The Insured is not indemnified if the vehicle is used or driven otherwise than in accordance with this schedule. Any payment made by the company by reason of wider terms appearing in the certificate in order to comply with the Motor Vehicle Act,1988 is recoverable from the insured. See the clause headed 'AVOIDANCE OF CERTAIN TERMS AND RIGHT OF RECOVERY'.For legal interpretation, English version will hold good.
Subject to IMT Endorsement Nos. & Memorandum printed herein / attached hereto : 22,16,28
Premium Collection Details :-[Collection No/Amount/ReceiptDate]
DISCLAIMER: Please visit insurers website for the policy wordings for complete details on terms and conditions governing the
coverage and NCB. This document is to be read with the policy wordings.
Policy is valid subject to realization of cheque. We accept premium only via legally recognized modes except for cash. If our
representative request you to pay in cash, kindly report it to us.
For information on ombudsman you may visit our website
I. Own Damage
This product protects you against loss or damage to your motor vehicle and/or accessories due to *Fire *Self Ignition *Explosion
*Lightning *Theft * Burglary *Housebreaking *Riot *Strike *Earthquake *Flood and allied perils *Accidental external means *Malicious acts *Terrorist activity *Transit *Landslide / rockslide
II. Third Party Liability
In addition to the coverage noted above, this product covers you against legal liability towards third party, in respect of the following: *Death of or bodily injury to any person *damage to property as per the provisions of Motor Vehicle Act. We are pleased to inform you that
in addition, the product also includes the following:
Personal accident benefits for owner driver upto a value of Rs.200,000.
Legal liability towards the paid driver.
Cover for Rs. 7.5 Lacs third party property damage.
PA cover for Un-named passengers.
We would like you to know that the policy does not cover consequential loss, depreciation, normal wear and tear, mechanical or electrical breakdown failures or breakages. The vehicle is not held covered if used for commercial purposes or if driven by an unauthorized driver.
Note: The foregoing is only an indication of the cover offered. For details please refer to the policy. It is our endeavor to provide consistent quality service to all our customers. We would like to let you know that insurance is a contract of Utmost Good Faith requiring the customer to disclose all material facts. If in your opinion any fact is material and is not covered by the information sought in the application form, we request you to disclose it.
It is important to note that our liability will commence only after we have accepted your proposal and the premium has been received in full.
I/We hereby declare that the statements made by me/us in this Proposal Form are true to the best of my/our knowledge and belief and no material information, which may be relevant, has been withheld or not disclosed I/We hereby agree that this declaration shall form the basis of the contract between me/us and the "Insurance Company"
I/We also declare that any additions or alterations are carried out after the submission of this proposal form then the same would be conveyed to the insurers immediately.
I/We agree that the Policy shall become void able at the option of the Insurer, in the event of any untrue or incorrect statement,
misrepresentation, non-description or non-disclosure in any material particular in the proposal form / personal statement, declaration and connected documents, or any material information has been withheld by me or anyone acting on my behalf to obtain any benefit under this policy. I/We hereby declare and warrant that the above statements are true, accurate and complete. I/We desire to effect an insurance as described herein with the Company and I/We agree that this proposal and declarations shall be the basis of contract between me/us and the Company and I/We agree to accept a policy subject to the conditions prescribed by the Company.
INSURANCE ACT 1938, SECTION 41 - PROHIBITION OF REBATES
1. No person shall allow or offer to allow, either directly or indirectly as an inducement to any person to take out or renew or continue an insurance in respect of any kind or risk relating to lives or property in India, any rebate of the whole or part of the commission payable or any rebate of the premium shown on the policy, nor shall any person taking out or renewing or continuing a policy accept any rebate except such rebate as may be allowed in accordance with the prospectus or tables of the Insurer.
2. Any person making default in complying with the provisions of this section shall be punishable with fine, which may extend to five hundred rupees.
SCHEDULE OF DEPRECIATION FOR ARRIVING AT IDV
AGE OF THE VEHICLE % OF DEPRECIATION FOR FIXING IDV
Not exceeding 6 months 5%
Exceeding 6 months but not exceeding 1 year 15%
Exceeding 1 year but not exceeding 2 years 20%
Exceeding 2 years but not exceeding 3 years 30%
Exceeding 3 years but not exceeding 4 years 40%
Exceeding 4 years but not exceeding 5 years 50%
Note. IDV of obsolete models of vehicles (ie. Models which the manufacturers have discontinued to manufacture) and vehicles beyond 5 years of age will be determined on the basis of and understanding understanding between the insurer and the insured.