Types of Car Insurance Plans

Types of Car Insurance Plans


Types of Car Insurance Plans


Motor insurance is mandatory as per the government for all cars driven on public roads. For a small annual premium, you get protection against financial losses that may arise in case your car is damaged in an accident. You can choose from two types of insurance plans offered :

1) Comprehensive Car Insurance

2) Third-Party Liability Insurance


Comprehensive Car Insurance

When you purchase a car insurance policy, you must ensure that it provides coverage of the expenses incurred in case your car gets damaged or lost, and also provides coverage for third-party damages. In other words, a comprehensive motor insurance policy that you purchase ensures not only the vehicle but also the person driving the car. Third party damage coverage is the most important benefit of a comprehensive car insurance policy. In India, it is compulsory to purchase a car insurance policy before you drive the car on an Indian road. Moreover, according to the Insurance Regulatory and Development Authority (IRDA) and Motor Vehicles Act 1988, it is mandatory for all vehicles that move on the roads to have an updated third-party vehicle insurance policy. Hence, to avoid legal hassles and to ensure complete coverage of the expenses incurred due to third party damage, you should purchase a comprehensive motor vehicle insurance policy.

Owning a car is something millions of people look forward to in life. In fact, simply having a car and a license is a milestone most cannot wait to hit. In order to drive legally, one must not only have a driver’s license but they must also have valid insurance. It is a requirement throughout the country, no matter what state you are in, to have insurance even if it is just the minimum coverage. There are different types of car insurance and today we will look at comprehensive car insurance.

Defining Comprehensive Car Insurance

Comprehensive car insurance is not required by law. It is, however, one of the most common types of insurance car owners adds to their policies. Comprehensive car insurance is different from collision coverage. Comprehensive coverage protects your vehicle from damage that is caused by anything other than a collision.

What Does Comprehensive Insurance Cover?

So, what does comprehensive insurance cover? This type of car insurance helps protect your vehicle against damage caused by fire, flood, vandalism, theft, animals (even hitting an animal with your car), falling objects (hail or tree limbs), natural disasters (hurricanes, earthquakes, windstorms, and tornadoes) and civil disturbance. Comprehensive coverage is likely required by a lender if you are leasing your vehicle. It could also be required if you are financing the vehicle. If you own the vehicle outright the coverage is optional.

What Does Comprehensive Insurance Not Cover?

As you can see from above, comprehensive car insurance covers quite a bit of thing that can cause damage to your car. There are things that comprehensive insurance does not cover. Those items include the following:

● Damage to someone else’s car due to a crash
● Damage to your car due to a crash
● Lost income or medical expenses for you or your passengers stemming from an accident
● Lost income or medical expenses for another person due to an accident

Varying Deductibles

Like all other insurance policies, a comprehensive insurance policy for your car has varying deductibles. You can choose the deductible for your policy. This means that you will have to pay that amount should damage occur to your car before the insurance policy kicks in and pays the rest to make the repairs.

The Age of the Car

Many car owners will question whether or not they actually need comprehensive insurance. Even though it is an optional form of coverage it’s still an important one. Repairs for broken windows, shattered windshields, and other damage is expensive no matter the age of the vehicle. That’s why so many drivers have this type of car insurance despite it not being required by a lender or other financing institution.

A comprehensive car insurance policy has these following benefits:

  • Covers damages due to accidents
  • Covers third-party liability
  • Offers personal accident cover
  • Cover for the incursion of the damage due to theft, natural disasters, robbery and more
  • A bit expensive than a traditional car insurance scheme with a limited coverage
  • But, since it covers multiple areas of damages to the car and many more aspects, it is best to opt for a comprehensive car insurance plan


Third-Party Liability Insurance

A Third-Party refers to a person or entity who is NOT the purchaser or the vendor to a contract or agreement.  Liability insurance then is coverage meant to pay third-parties for damages or injuries caused by the insured.

Put another way… Liability coverage intends to cover parties (a third party) other than the insured who are damaged or injured by the insured (purchaser of the insurance policy) following acts or events for which the insured is responsible.

Liability policies vary on what they cover. Some popular liability policy examples include:

  • Auto Liability
  • Personal Liability (available on Homeowners policies)
  • Business General Liability
  • Professional Liability
  • Employers Practices Liability
  • Others

What they cover is generally limited in total potential payout and certain exclusions apply.


What Does Third-Party Liability Insurance?

Many people often opt for third party only car insurance policy because they consider them to be cheaper.

  • A third party insurance car covers for the expenses incurred as a result of the following reasons:
    Damages to a third party vehicle
  • Damage caused to a third party property
  • Injuries caused to other people in an accident

Some insurance companies charge extra for third party property coverage. This coverage has become a priority these days since the cost of repairing damages is high.


What Does What Does Comprehensive Insurance Not Cover?

When opting for a third party only car insurance policy, you must be aware of what benefits you’re missing out on. Let’s take a look at what third party car insurance does not cover:

  • Cost of damages to a vehicle or the belongings in the vehicle in case of an accident
  • Cover for losses incurred if your car or belongings are stolen or destroyed
  • Coverage against damages to your own vehicle
  • Cover for injuries you suffer in an accident
  • Pay-out for a replacement if your car is written off

It would be wiser to opt for third party motor vehicle insurance if you own an old inexpensive car model, which is cheaper to repair.


Difference Between Comprehensive Car Insurance And Third-Party Liability Insurance, Which is the best?

 Third Party, also known as Act Only, car insurance offers cover against any legal liability to a third person caused when you are at fault. It covers any damage or injury caused by you to another person or property. However, it doesn’t extend to any damage to your dream car suffers in the event of an accident. It provides unlimited coverage i.e. whatever the court awards as your liability to the “Third Party” due to an accident caused by your vehicle. In the case of “Third Party” property damage, the Policy offers the compensation up to Rs. 7,50,000/-. Third Party cover meets your mandatory requirements only.

   Comprehensive is a full package that covers your car against damage caused by a number of insured events, such as natural and man made calamities. Natural Calamities like Fire, explosion, self-ignition or lightning, earthquake, flood, typhoon, hurricane, storm, tempest, inundation, cyclone, hailstorm, frost, landslide, rock-slide. Man-made Calamities say Burglary, theft, riot, strike, malicious act, accident by external means, terrorist activity, and any damage in transit by road, rail, inland waterway, lift, elevator or air. It also includes third party liability and personal accident cover to owner/driver.

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