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Why is Car Insurance Mandatory in India?
The word insurance roughly paints a picture of financial protection in our mind. It helps us sail through rough times in which we need financial aid. A person secures his/her future against an unfortunate event or peril with insurance. This is the basic purpose served by an insurance policy.
Insurance not only provides financial support to the person who purchases the policy, but car insurance or two-wheeler insurance provides protection against financial harm to other people as well. Without an insurance policy, the owner of a vehicle will have to bear all the consequences by himself. These could prove to be a huge monetary loss.
Be it a vehicle driver, a pedestrian or a property owner, the law requires every person to be compensated for the loss fairly. This is where insurance comes into the picture. Car insurance can be of two types - third-party liability insurance or comprehensive insurance. Buying at least a third-party car insurance policy is mandatory under The Motor Vehicles Act, 1988.
Understanding the Importance of Car Insurance with An Example
Consider, car driver A is driving on a steep narrow road. Around the corner, he saw a water tanker being driven at a slow speed. Driver A wants to overtake the water tanker but that is dangerous since they are driving on a narrow road. As the tanker is going slow, driver A is getting frustrated and wants to desperately overtake the larger vehicle. He increases the speed and without thinking for another second he swerved into the opposite lane. Unfortunately, at the exact same moment, driver B approached from the front and collided with driver A. This resulted in a major accident. Both the drivers were severely injured. Both the vehicles were also severely damaged.
The major setback of this incident was that driver A did not have an active car insurance policy. Thus, along with suffering major injuries, he was to pay a very heavy cost for all the damage caused. He not only had to pay for getting his own injuries treated and his car repaired, but he also had to pay for the injuries and damage suffered by driver B. The entire estimate of damage was more than 4 lakh rupees.
If he simply had bought a comprehensive car insurance policy, he wouldn't have to suffer the sudden financial loss. Also, driver B survived the collision, if he would have lost his life in the accident, of course the loss of life cannot be measured with money but driver B would be responsible for compensating his family as well.
Thus, it is very important to get your vehicle insured with at least a third-party liability policy if not a comprehensive one. Now let's take a look at what is covered in a basic policy.
Inclusions of Third-party Car Insurance
- A personal accident cover for the policyholder or the driver
- The owner or driver of the car is covered for the expenses of a medical treatment in the car he/she gets injured while driving. The maximum limit of this coverage has been recently increased to 15 lakh rupees.
- Injuries caused to the third party
- An unlimited coverage for the medical treatment of any third party
- Death compensation to the family of the deceased third party
- The compensation is calculated by considering the age and income of the deceased.
- Damage caused to third-party property
- Legal liabilities arising due to an accident
- Coverage for any legal action taken against you in case of an accident.
Inclusions of Comprehensive Car Insurance
- Entire coverage offered under a third-party liability policy.
- Damage caused to the insured car due to an accident i.e. own damage.
- Damage due to fire
- A theft cover that pays an amount approximately equal to the car's current market value
- Damage to the insured car caused due to the occurrence of a natural calamity like flood, earthquake, landslide, etc.
- Damage due to a man-made calamity like vandalism, sabotage, riots, etc.
- Extended coverage as per the Add-ons bought along with the policy.
Common Exclusions of Car Insurance
- Normal wear and tear
- Damage incurred when driving under influence of an intoxicating substance
- Intentional Damage
- Damage due to illegal Activities
- Damage caused when not carrying a valid driving license
Why Is It Important To Renew Car Insurance?
Buying car insurance once will ensure that you are financially protected for the duration of the policy period. However, once this expires, you no longer can raise a claim against your car insurance policy. To avoid this, you need to renew car insurance in a timely manner i.e. before your car insurance policy is about to expire. Apart from providing a continuous financial cover against multiple liabilities, you can also avail a discount if you have not raised a claim during the policy period. This is called a No Claim Bonus.
About Acko General Insurance
The company provides a strong financial cover against any unfortunate event related to your car or bike. You can get your vehicle insured in simple and quick steps on www.acko.com. The company ensures a smooth claim process. All you need to do is give a call and your vehicle will be collected from the accident spot. Acko will get it repaired and delivered to your doorstep within as soon as 3 days.