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Motor Insurance

The motor insurance policy provides policyholders with a vehicle protection against financial losses if it gets damaged or stolen. Also, it covers liabilities for injuries, damages to others caused by your car. Some insurance companies have come up with innovative coverage, such as – coverage to valuables kept inside the locked vehicle, missing of keys, roadside assistance and zero depreciation etc.
The India Motor Vehicles Act 1988 has mandated to have ‘Third-Party Liability' or ‘Liability Only' insurance for all vehicles that ply on roads. However, the ‘Comprehensive Insurance/Package Policy' is optional.

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Terminologies used in the Motor Insurance Parlance
Under the comprehensive motor policy, the Own Damage portion indemnify you against any loss or damage caused to your vehicle due to natural and man-made calamities as mentioned in the range of coverage further to the third party damages is known as “Own Damage (OD)”.
A kind of an insurance policy which covers both the “Act” liability and also Own Damage losses is termed as “Package policy”.
The document issued by non life insurance companies in non-life insurance providing provisional cover till the issue of a formal policy is termed as “Cover Note”.
A casualty or an unfortunate event which is not predictable or calculated, is termed as an “Accident”.
The decrease in the worth or price of an asset due to its regular use and by normal wear and tear is termed as “Depriciation”.
Some accidental occurrences like Fire, flood, breakdown, lightning, earthquake,etc. which can cause damage to an asset is termed as “Perils”.
The principle which suggests that if any object of insurance is insured under two or more insurance contracts, the loss, if any, will be shared at pro-rata between the insurance companies which is usually paid in proportion of the sum insured is termed as “Principle of Contribution”.
A discount given on renewal of insurance policy non-life insurance categories to the policyholders for not making a claim in the previous year is termed as “No claim Bonus”.
Any legal responsibility for one's acts or errors, enforceable at law is termed as “Liability”
The damages occurred in a vehicle to such a great extent, that the repairable charges are more than the depreciated value of the vehicle then it is termed as “Total Loss”.
The repairable losses occurred due to an insurable cause are termed as “Partial Loss”.
A geographical location associated with the cities like Ahmedabad, Hyderabad, Pune, Bangalore, Delhi, Mumbai, Chennai and Kolkatta under one area as Zone A and the rest of India kept as zone B is termed as “Zones or Geographical area”
Types of Motor Insurance
Motor insurance typically is of three basic types.

1. Car Insurance

A Car insurance covers financial liability towards third party and loss/damage to your vehicle that may arise due to an accident involving your own car. It’s thus advisable to choose car insurance wisely.

2. Commercial Vehicle Insurance

Commercial Vehicle Insurance provides financial cover against third party legal liabilities, loss/damage to your commercial vehicle arising out of accident, fire & allied perils, burglary & theft, damage in transit, riots & strikes.

3. Two Wheeler Insurance

Two wheeler insurance covers any loss/damage caused to your vehicle due to natural and man made calamities such as burglary, theft etc. It also protects you against any legal liability arising out of permanent injury/death accidental and/or damage caused to the third party property.
Need for Motor Insurance
Motor Insurance(Third Party) is a compulsory legal requirement for purchase of new vehicles taken for either commercial or private usage as per Motor Vehicle Act in India. It is illegal to get your vehicle on the road without a third party insurance cover and one can be penalized for driving without a valid cover.

An accident can happen to anyone even if the driver of the car is not at fault. Motor Insurance turns to be very helpful and advantageous under the circumstances of any accident or losses/damage to the vehicle even if you are not at fault.

If the person driving the vehicle is held accountable for an accident which result in the outcomes like bodily injuries to a third party, in that scenario the expenses have to be swallowed by the owner of the car. In such scenario a third party motor insurance saves you from a distressing monetary blow.

Vehicles including cars, auto, two wheeler, etc. are a costly investment for a person. An accident can seize this investment into an enormous loss if the vehicle is not insured. Therefore, it is important to have a motor insurance policy.

It also helps to shelter for damages triggered other than an accident due to insured perils like fire, theft, etc.
Benefits of Motor Insurance
Listed below are the vital factors which facilitate the need to buy motor insurance:

Costs less when bought online

Purchasing motor insurance online offers lower premiums and thus it's a cheaper policy. When transacting online, the insurance company has lower operating costs, and they feel pleased to provide some proportion of money saved to the customer. By purchasing a policy online, you can avail several benefits such as paying premiums and renewing the policy in minutes.

Reduces your liability

Buying Third Party Liability (TPL) motor insurance coverage is legally mandatory in India. The TPL coverage provides cover against the legal consequences of an accident caused by your vehicle. If an accident caused by you brings damages to another person's property or injuries to him/her, the insurance company will pay for it and save policyholder from the legal aftermaths.

Pays for hospitalization

Not every driver or owner who faces an accident is fortunate enough to get away with a few bruises only. Some accidents result in serious injuries that require hospitalization. Instead of paying hefty hospital and treatment costs from your own, your insurance company will pay for these expenses.

Pays for damages

Not only your vehicle is expensive; paying for its repair is costly as well. There are times when your car may be damaged due to someone else's negligence. If you have motor insurance, you need not pay for its repairs.

Choose the Right Cover for your Vehicle
There are basically two kinds of insurance cover granted under the Motor Insurance framework which are:

1. Third Party Insurance Policy (Statutory requirement)

It is also termed as Liability Only Policy. It is mandatory to have your vehicles insured under the Motor vehicle act. It covers damages to the third party resulting from an accident involving your vehicle. Motor insurance brings assured peace of mind. If you take only a Liability Only Policy, damage to your vehicle will not be covered. It also includes personal accident cover for the driver.

What it covers?

It covers legal liability for injury, death, and property damage caused to a third party by your vehicle.
Death or bodily injury to a third party.
Damage to third party property.
It also provides Personal Accident Cover for owner/driver.
Accidental Death.
Permanent Total Disability.

2. Comprehensive Insurance Policy:

It is also known as Package Policy or OD Cover (Liability Only Policy + Damage to owner's Vehicle). This policy is a complete policy which provides added cover including third party insurance plan and safeguards the vehicle owner from financial turmoil caused by destruction, damage or theft of the insured vehicle.
When you're buying a motor insurance, it's wise to ascertain whether comprehensive coverage suits your needs or not. You need to determine if you want a package policy. It may seem appealing to save money by opting not to buy a comprehensive package policy. But, in case your car is damaged, it would be difficult to pay for financial losses. When you're looking to buy comprehensive coverage, it's a good idea to determine the coverage you want against how much money it could cost you to repair your vehicle. Comprehensive coverage provides you the assured peace of mind.
Policy Coverage

Damages to the vehicle due to the following perils are covered under motor insurance:

Fire, Explosion, Self- Ignition, Lightning
Flood, Storm, Cyclone, Hurricane, tempest, inundation, hailstorm, frost
Terrorism Acts
Landslide / Rockslide
Burglary/Housebreaking / Theft
In-transit by Rail/ Road, Inland waterways, Lift, Elevator or Air
Riot & Strike
Malicious Act
Note: Liability Only Policy does not cover damage to your vehicle. It would be wise to buy a Comprehensive Policy which gives a wider cover and provides cover for your vehicle as well.
Factors that Determine Motor Insurance Sum Assured

For Own Damage (OD cover)

The sum insured under the policy identifies the value of the motor vehicle, which is determined on the basis of Insured's Declared Value (IDV). IDV is the maximum sum assured, which is provided by the insurance company in the event of a claim.
IDV is computed on the manufacturer's listed selling price minus depreciation. The registration and insurance cost are not included while calculating IDV.

For Third Party

Coverage is mandatory as per legal requirements of the Motor Vehicles Act. This policy also provides personal accident cover to the owner/driver. Policy cover can also be extended to other risks like Personal Accident to occupants of the vehicle, Workmen's Compensation to Driver, etc.
Factors that Determine Motor Insurance Premium

Insured’s Declared Value (IDV)

The premium for your motor insurance depends largely on its IDV (Insured Declared Value), It is the amount that you will get in case your vehicle is stolen or suffers a total loss. Less IDV would attract less premium. It means, more the IDV, the higher the premium will be. Also, if parts of your vehicle are rare and expensive, you might need to pay higher premiums.

Geographical Zones

Insurance companies have definite demarcated zones to evaluate a motor insurance premium. These insurance zones are built as per the vehicle's susceptibility to accidents and theft. Your vehicle's premium will diverge basis your registered location. Basically, the zonal demarcation comprises of metro cities and the rest of India.

Purpose of the Vehicle

It is one of the factors that determine your motor insurance premium. If your vehicle is utilized commercially, the insurance company will charge higher premiums given that it's a source of your income. While the premium for the personal care will cost less.

Fuel type

Fuel Type is also a determinant for calculating your motor insurance premium. Basis your Fuel Variant (CNG, Diesel or Petrol) the Insurer will decide the premium amount.

Cubic Capacity (CC) of the Vehicle

The premium amount also depends on the engine strength of your vehicle. More the cubic capacity more will be the premium charged.

Claim History

Claim history also determines the premium calculation amount. If you have a claim history in your vehicle, then the premium can go up for the following year.

Add on Covers /Riders

1. Zero Depreciation Cover

Zero depreciation cover ensures comprehensive coverage without taking into account the depreciation factor. In case your vehicle is damaged due to a collision and you file a claim, the insurance company will cover the entire cost. This cover ensures full settlement coverage and depreciation will not make an impact. This add-on benefit comes with a minor increase in premium.

2. No Claim Bonus Protection

In the case of no claims in your policy, you tend to get discounts on renewal premium in the form of No-claim Bonus. So if you have collected a robust proportion of No-claims bonus %, this add-on cover will act as a shield against the loss of this bonus even if in the eventuality of a claim.

3. Invoice price cover

In the event of a "total loss" of your vehicle, the insurance companies will usually pay you the depreciated value of your vehicle and not the compensation to purchase a new vehicle. This add-on cover, you will successfully get a price to purchase a brand new car. It is also known as the "Return to Invoice" cover. This benefit also can be taken by paying extra premiums.

4. Emergency Assistance

Emergency assistance also comes as an add-on cover. The emergency assistance includes emergency transport, assistance in case you run of out fuel, assistance in case of a flat battery, towing facilities, taxi benefits, etc. Few assistances are given as complimentary by some insurers and others are charged as a part of the annual premium.

5. Keys and Locks Replacement Cover

This add-on cover is helpful in a way that in case the keys to your vehicle are lost, it will cover the costs of replacement. The cost of obtaining new locks will also be covered. Usually, this is obtainable once during a policy period.
The add on covers may vary from insurer to insurer.
Ways to Lower Your Motor Insurance Premium

Voluntary Deductibles

A voluntary deductible is a minimum amount that you declare to accept at the point of claim. When you opt for a higher deductible, you are entitled to a higher discount in premium. There is an opposite relationship between the deductible and the premium. So as the voluntary deductible enhances, the amount of premium decreases. If you choose this option, the insurance company will pay a claim only for the damages in excess of this limit of the voluntary deductible.

Installation of Safety Features

Installing safety features such as an anti - theft device in your vehicle can attract 2-5 per cent discount (varies with the insurance company) on premiums for your vehicle. So while shopping for an insurance policy for your vehicle, don't forget to disclose details of your vehicles along with safety features you have installed.

Protect NCB (No Claim Bonus)

NCB is a discount in premium given by the insurance companies if a vehicle owner has not registered a single claim during the term of the insurance policy.
If you have not made any claim in the previous year(s), you earn NCB for every claim free year. The total NCB percentage accrued over the years, which can go up to 50 percent, which can be redeemed on renewal or can be transferred to another vehicle. It stays with the customer. So don't waste claims for small damages. If a claim is made during the tenure of the policy year, no NCB will be given in the subsequent year.

Member of any automobile association

If you are a member of any of the designated automobile association, you are entitled to avail discount on premiums for own damage cover. The logic behind this is that it is assumed that members of such organizations are usually judged to be safe drivers, thus such members get a discount on the premium.

Take Requisite “Add-on” Covers

The package policy features some add-on Covers which include Zero Depreciation, Loss of Keys, Loss of Personal Belongings, and Roadside Assistance (RSA). So add on benefits comes at a cost. The premium amount would unnecessarily elevate in case you opt to add on additional benefits to your policy. Try to take the desired and requisite add on covers as per your requirement to keep your premium low.

Shop Online

Online insurance is normally cheaper than offline. Since the insurance company saves a considerable amount of distribution and processing on online policies, it passes some of its savings to the policyholders in the form of lower premiums. So prefer the online channel of insurance buying.
Policy Exclusions
The below mentioned are exclusions that are not covered under Motor Insurance
Any accident occurred outside the geographical area as mentioned in the policy.
Driving without a valid license and/or under the influence of liquor or drugs.
Mechanical or electrical breakdown
Willful Damage
The vehicle is not being used as per limitations mentioned under the policy.
Damage due to a war or nuclear risk.
Claims that does not come under contractual liability.
Benefits of buying Online Motor Insurance
As Internet dispersion grows manifold in India and people becoming increasingly comfortable with transacting online, we are witnessing a huge online buying and selling of products and services in the country. Online Buying of insurance has propelled the customer to make informed buying decisions. Listed are the various benefits associated with buying online Insurance.

1. Cost Effective

Online buying allows insurance companies to save their operational cost by 20-25% by cutting on intermediary commission, cost of an agency, physical cost of branches and the cost of paper proposal forms. That is why insurance companies offer cheaper premium rates, because this saved cost is passed on to the customer buying online. Insurance policies purchased online are generally less expensive as compared with the basic traditional sales model .So the customer gets higher coverage at a lower premium cost.

2. Time Saving

In today’s time the only shortage we have is about time. We don’t have ample time to do things. When it comes to buying online insurance, it saves a lot of time of an individual. At a click of a button you are eligible to buy insurance online. The online buying process is a time saving process as compared to buying offline.

3. Convenience

Convenience of access is a major differentiator; all you need is an Internet connection to purchase a policy online. We all are ready to pay for things, but the prime factor is of convenience in today’s hectic life scenarios. The advantages of online buying insurance include instant issuances of policies and customization, toll-free numbers for assistance or live chat facility to the customer for resolving doubts and making the buying decision easy.

4. Option to Compare

One of the huge advantages of buying online insurance is that it allows you to make an informed buying decision in a simple and appropriate manner. You can choose, compare and buy the right insurance product for the right purpose. Comparing allows you to differentiate between the cost and features of various plans offered by top insurance companies. Online buying also facilitates the correct understanding of the product features and thus allows you to make a decision as per your objective and need.

5. Option to check the track record of the Insurance Company

With an advancement of social media, various customer platforms and websites, you can extract enormous information and feedback about the insurance company and their plans by the views of industry experts, regulator, existing customers and extract a fair idea about the track record of a company financially by knowing their solvency ratio, claim settlement ratio, customer service performance and various other parameters .All these information helps the customer to make an informed buying decision.

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