When planning your finances for the future, for retirement or for any other purpose, apart from taking the steps to achieve your financial goals, you will have to make sure that you have sufficient protection for your finances just so that it does not dwindle if something does go wrong. One of the conventional ways of doing so is to have insurance, be it life insurance, health insurance or home insurance, the policy acts as a financial backup. Motor insurance also offers financial backup, and apart from it being mandatory for one to legally drive on the roads of India, following an accident, a motor insurance policy offers coverage for damages caused to the vehicle, and coverage for medical expenses if the accident leads to bodily injury or disability of any of the involved parties.
Following the amendment of the Motor Vehicles Act, 1988, a third-party motor insurance policy is mandatory, and the amount of coverage that one will be granted by the insurer depends on the type of motor insurance policy the policyholder buys. That said, even the base motor insurance policies have limitations, and policyholders have the option of purchasing what is called add-on covers. There are number of add-on covers and each add-on cover has to be purchased over the premium of the base policy. Let’s discuss the types of car insurance policies offered by insurers as well as the add-on covers that enhance the financial protection of the car insurance holder following an accident, damage to the vehicle, or injury, disability or death to the policyholder.
Types of car insurance policies offered by insurers in India
Car insurers offer 2 types of car insurance policies – third-party insurance policy or the liability-only insurance policy and the comprehensive car insurance policy. The third-party car insurance policy is mandatory as per the Motor Vehicles Act, 1988, and offers coverage to the third-party involved in the accident, if his/her vehicle is damaged or has sustained personal bodily injury or disability. This policy is the most basic motor insurance policy and the policyholder does not get any coverage with this policy. On the other hand, a comprehensive car insurance policy offers coverage to both the policyholder and the third-party involved in the accident. It offers coverage for the damage caused to the vehicles of both parties and coverage for medical expenses if the accident leads to injury or disability of the involved parties.
In addition, a comprehensive car insurance policy offers coverage for damages caused to the vehicle of the policyholder following a natural calamity, riot, strike, terrorist activity, etc., if the car catches fire or explodes or if it stolen.
7 car insurance add-on covers that you need to consider buying
Listed below are 7 key add-on covers that enhance the coverage of the policyholder over the coverage of the base policy:
- Zero-depreciation cover
The value of the car starts to depreciate by the time it is 6 months old itself, and for new car owners or those that have a car within 2 years, the zero-depreciation cover will be beneficial. Following a claim to cover the damages, the insurance company takes into consideration the depreciation factor of the vehicle and makes the claim according to this. Without this cover, even if the car is stolen or completely damaged after just a few months, the policyholder will not receive the full value of the car through insurance. The zero-depreciation cover negates the depreciation factor and the policyholder will receive the full claim amount. However, insurers offer this add-on cover to car that are within 2 years old and it is not offered for older cars.
- Roadside assistance cover
Coverage for roadside assistance is not offered with a base policy, and having this cover will take care of the expenses if the car does breakdown. It offers coverage for the service to the car as well towing charges up to a certain amount of times during the policy period – depending on the insurer.
- No Claim Bonus protect cover
For not making a single claim through the policy period, insurers award policyholders with the No Claim Bonus, which basically gives the policyholder of availing a discount for the premium of the motor insurance policy. However, a single claim made, big or small, and this benefit is withdrawn. With this add-on cover, the No Claim Bonus is not withdrawn even if the policyholder makes 1-2 claims during the policy period and he/she is still eligible for the premium discount when renewing the policy.
- Return to invoice cover
If the vehicle of the policyholder is stolen or is deemed as total loss following an accident, then the insurer takes into consideration the Insured Declared Value of the car before extending the compensation. Of course, the policyholder will not receive an amount equivalent to the initial value of the car. That said, the return to invoice cover ensures that policyholder is compensated with invoice value of the car, including the amount paid for road tax, etc.
- Passenger cover
This add-on cover offers medical coverage for the occupants in the car and not just the policyholder who is already benefited by the personal accident cover. It covers the cost of treatment if the passengers of the vehicle are injured or disabled by the accident.
- Personal belongings add-on covers
This add-on covers offers coverage if the personal belongings such as a laptop, mobile phone, other gadgets, etc., of the policyholder are misplaced or stolen following an accident.
Policyholders will have to purchase the above-mentioned add-on covers over the cost of the premium of the base policy and they are not inclusive in the comprehensive car insurance policy. When purchasing or renewing the car insurance policy, the policyholder can purchase any of the above-mentioned add-on cover online itself. Lastly, the coverage of the add-on covers will be extended only if the circumstance of the accident was not one that is listed in the exclusion list of the base policy. For example, if the accident was caused because the policyholder was under the influence of drugs or alcohol.