Motor insurance policy: Check types, nature of coverage and benefits

The Madras High Court recently kept in abeyance, its order mandating "bumper-to-bumper" insurance for five years for motor vehicles. This was done after the General Insurance Company (GIC) made a submission that the direction could not be implemented without the approval of the Insurance Regulatory and Development Authority of India (IRDAI) and that it would require 90 days to do so.

Bumper-to-bumper motor insurance offers complete coverage for vehicles regardless of the depreciation of their parts.

Last month, the Madras High Court ruled that "bumper-to-bumper" insurance should be mandatory whenever a new vehicle is sold, from September 1. This must be in addition to covering the driver, passengers and owner of the vehicle, for a period of five years, the court had held.

This order was made after an insurer filed a challenge against compensation of Rs 14.65 lakh awarded by the Motor Accidents Claims Tribunal in Erode. The court ruled that the insurer is not liable to pay compensation to the victim and that the owner of the vehicle could be held liable to pay compensation for the victim.

However, the same has been kept in abeyance now.

For uninitiated, a motor insurance policy protects the vehicle owner against the covered financial losses due to damage/theft of the insured vehicle as per applicable terms and conditions.

In India, the nature of vehicles has been categorised in 3 different ways i.e. two-wheeler, private and commercial vehicles. Furthermore, based on the nature of coverage the insurance policies are broadly divided into two types i.e. third party and comprehensive for all nature of vehicles.

One of the most common types of motor insurance, third-party offers the insurance for damages and losses caused to a third-party person, vehicle, or property. It uniformly applies to all vehicles, including motorbikes, scooters, private cars, commercial vehicles. This liability insurance is mandatory for every vehicle owner in India.

The third-party insurance is beneficial for those who use vehicles only occasionally and not as daily commute and carries lesser chances of a mishap happening right, said Naval Goel, Founder & CEO at PolicyX.com.

The opposite of third-party is comprehensive insurance, and as the name suggests covers more than just third-party liabilities.

As per Rakesh Goyal, Director at Probus Insurance, a comprehensive motor insurance policy covers both — the damage of the insured vehicle as well as third party cover. In case if the policyholder is injured, the personal accident cover entitles the policyholder to claim compensation due to death or injury due to an accident.

Goel of PolicX says that it is always better to have a comprehensive plan as it provides complete protection to the vehicle where the car owners can be relaxed about any expense.

Also, it is helpful for the car owner when he/she is selling their car anytime soon.

There are some additional riders that can be clubbed with these insurance plans too such as zero depreciation, return of invoice cover, road assistance, consumable cover and etc.

"These additional riders make an insurance plan quite effective for the car owner as they get a variety of additional benefits and services from the insurance partner with an addition of a nominee of fee," opines Goel.