What is car insurance?

Car insurance is done to protect your vehicle against theft, financial loss caused by accident of any unforeseen risks. It covers the insured party, the insured vehicle and third parties at very nominal premiums to the insurance company. In short, instead of paying out of pocket for auto accidents, you pay annual premiums to an auto insurance company; the company then pays all or most of the costs associated with an auto accident or other vehicle damage.

Here at Spike Insurance Solutions you get an expert advice and support for buying best car policies available in different different companies in India. Our experts compare all the car policies based on certain parameters like value of the car, type of coverage, vehicle classification, voluntary excess, etc.

Why car insurance is important?

It is mandatory by law

As per section 146 of the motor vehicles act, 1988, insurance is compulsory. If you don't insure it, then official fine is Rs. 1000. Only third party liability is compulsory and you can keep own damage part to zero if you are mega-confident.

It pays for damages

Not only are cars expensive, paying for their repairs is costly, too. Sometimes, your car may be damaged due to someone else’s negligence. A car colliding with yours, or you swerving to avoid a jaywalker and crashing into a wall, or even a stray cricket ball cracking your windshield can set you back by a considerable amount of money. However, if you have car insurance, you need not pay for these repairs by yourself.

It reduces your liability

Taking Third Party Liability (TPL) car insurance coverage is mandatory in India. The TPL policy covers you against the legal ramifications of an accident caused by you. For example, if you happen to cause an accident that results in damages to another person’s property or injuries to another driver/pedestrian, the insurance will pay for their treatment and save you from the legal repercussions of the case.

It pays for your hospitalisation

Not every car owner who suffers an accident is fortunate to get away with a few cuts and bruises. Some accidents result in fractures and other serious injuries that require hospitalisation. Instead of shelling out the high hospital and treatment costs from your own pocket, you can get your motor insurance to pay these expenses.

It compensates your family after your demise

The most unfortunate outcome of a road accident is the car owner’s demise. Once the bread-earning policy holder has passed away, it might become difficult for his or her family to sustain its daily life. However, a motor insurance policy can help pay the family’s expenses after the unfortunate event.

Benefits of Car Insurance

  • Provides benefits to survivors when an accident results in death.
  • It covers lawsuits, including legal fees brought against you as the result of an accident.
  • Covers the bills of vehicle repairs due to damage caused in an accident.
  • Covers damage caused by other than an accident for example, theft, fire, etc.
  • Additional discounts: Car insurance policies allow premium discounts for theft or for owning more than one policy with the same insurer. It also provides added advantage to extend coverage to others driving your car with your permission.
  • No Claim Bonus: If you do not make a claim during the policy period, a No Claim Bonus is offered on renewals provided you fulfill certain terms and conditions

Types of Car Insurance

There are three levels of cover you can choose from - third party i.e. third party, fire and theft and comprehensive.

  • Third party - This is the bare minimum required by law, but isn't always the cheapest. It covers injuries to other people and damage to others property.
  • Third party, fire and theft - This is the same as third party but also covers the cost of repairs or a replacement vehicle if your car is stolen or damaged by fire.
  • Comprehensive - This is the highest level of cover you can get. It protects against damage to your own car as well as accidents involving other people. It can also include a courtesy car and legal expenses insurance; however this may be at an additional cost.

Your insurer may also allow you to add named drivers to your policy who can also drive your car, but it’s important to remember that the main driver must be the person who drives the car the most.

Car insurance premium calculation

Your premium is based on a number of factors, including your age, where you live, the type of car you drive, your occupation, where your car is kept, what you use it for and whether you’ve been convicted of any motoring offences.

You can often lower your premium by paying a higher excess, which is the amount you have to contribute towards the cost of a claim you make.

Young people in particular face high premiums because of the greater accident risk they carry, and some may be tempted to cut corners to get a cheap deal.

Factors affecting on car insurance premium

Your car insurance rates may increase or decrease when there is a change to any of these risk factors e.g. Geographical Location, Kind of Insurance Cover, The Type of Engine, Add-ons, Car Modification, etc.