Automobile insurance is an important aspect of buying a vehicle. It is a must for every vehicle, though many people are not aware of the intricacies of vehicle insurance.
We discuss a few significant elements in relation to auto insurance.
What is Auto Insurance?
Auto insurance or Car Insurance or Motorbike Insurance offers financial protection for vehicles against damage and/or bodily injury from an accident, some natural calamities, theft and more. The insurance terms depend on the legal regulations of the country of use of the vehicle.
What Does Auto Insurance Cover?
Usually a auto insurance covers the following:
- Damage or loss due to a road accident
- Damage or loss due to fire, natural calamities, external explosion, self-ignition, burglary, malicious acts
- Liability for damage of third-party property and/or third-party injury/death
- Some policies also include loss/damage to electrical/electronic accessories
The auto insurance does not include:
- Loss due to drunken driving
- Loss due to war or nuclear threats
- Loss occurred when the vehicle is outside the geographical area
- Consequential losses
- Mechanical and electrical breakdown, failure or breakage
Types of Auto Insurance
Car insurance is of 2 types:
- Third Party Liability Policy: This insurance policy gives coverage against legal liabilities resulting from a vehicle accident and covers death, injury, or property damage to third-party. It does not cover damages to the coupe of the insured. This type of insurance is mandatory in India.
- Comprehensive Package Policy: Apart from the third-party liability, this policy covers damages to the vehicle resulting from an accident, or due to natural and manmade calamities. It also provides a personal accident cover to the owner of the vehicle.
How Do Companies Calculate Auto Insurance Premiums?
Auto insurance premium calculation depends on:
- Insured Declared Value: Used only for Comprehensive Insurance Policies and not Third Party Insurance, the Insured Declared Value or IDV is the maximum amount that the policyholder can claim in case of a mishap. Calculation of this amount depends on the value of the vehicle at the time of claim. The IDV influences the premium amount.
- Cubic Capacity of the Vehicle: Used forThird Party Insurance Covers, the cubic capacity of the vehicle is the size of the engine of the car and it helps in determining the insurance premium.
Most vehicle owners are complacent when it comes to insurance of the car or motorbike and they do not gain necessary knowhow as to which policy is best for them. Buying the right car insurance policy or motorbike insurance policy is as important as buying the right vehicle.
When you invest in a car, don’t forget to invest in the best automobile insurance policy too!