Insurance is a fastest growing marketplace around the world; it offers coverage against insured event for example; life insurance covers an insured person against death, health insurance provides reimbursement for medical expenses incurred in a hospital. In the same way, auto insurance or motor insurance covers vehicle and third parties against accidental damages. Motor insurance is a part of general insurance. In our daily life, we use certain types of vehicle to travel here and there. Though, no one wants to be hospitalized; but in reality, everyone is exposed to danger while traveling on road. Motor insurance or auto insurance helps us to bear the financial loss in case of an accident. As per law, it’s mandatory to have liability insurance if you own a vehicle for example; car, motor cycle, commercial vehicle and the like. If your vehicle hits a person or an object then you’re liable to pay for the loss (as per law).
Importance of Motor Insurance: Automobile is a precious part of our life; we can travel anywhere with the help of it. You might be obeying all traffic rules and regulations but accident may happen any time due to your fault or someone else’s. You might have seen some reckless people; driving recklessly on the road; so imagine what will happen if they hit you or your vehicle? In other case, acknowledging the fact that you drive very carefully but mistake can happen anytime which may cause injury to a third parson or his property. In the event of mishap, due to an accident, you bear financial loss or physical loss or both; therefore, having a motor insurance can help you minimize financial loss.
Types of Motor Insurance or Vehicle Insurance
- Third Party Liability Only Insurance Policy
- Package Policy or Comprehensive Policy
Third Party Liability Only Insurance Policy-
As per Public Insurance Act, 1991, it’s mandatory to have a liability insurance policy. Liability insurance policies cover your legal liability towards third parties; in case third parties suffer from injuries or death due to your vehicle. Liability insurance polices also cover loss to third parties’ properties due to your vehicle. In any of the above scenarios (injury to third parties or damage to their property), if victims seek compensation then you’ve to pay for the loss or injury (compensation to be paid would decided by a civil court); therefore, having a liability insurance policy would save you against financial crisis. Third party liability insurance provides personal accidental cover and cover for third party liability; it does not cover damage to own vehicle due an accident.
Package Policy or Comprehensive Policy-
Benefits of Motor Insurance
- damage to third party vehicle
- damage to third party’s property
- damage to insured vehicle due to self-ignorance, fire, explosion, riots, terrorist acts etc
- damage to insured vehicle due to natural calamities like; earthquake, storm, flood and the like
- accident caused by external factors
- theft/burglary/house braking.
Exclusions in Motor Insurance
- Wear and tear due to age of a vehicle.
- Insurance companies do not pay any type of claim if the driver does not have a valid driving license.
- Periodic depreciation applicable on insured vehicle.
- Electrical/mechanical breakdowns are not covered.
- If the vehicle is used for unlawful activities then no claim shall be paid.