Car Insurance Introduction

In this post I will give an introduction to car insurance.

Car insurance provides protection and helps in coping with financial loss caused by theft, accidents or damage to a car. When somebody drives she is responsible for her passengers, fellow drivers, private property, public property and herself.

Car insurance helps to cover the cost of potential injuries or damages o your vehicle caused by theft, accident, fire, explosion, self ignition, lightning, riots, strikes or act of terrorism, natural calamities.

Car Insurance is mandatory in India as per law for anyone owning a car. This protects one against third party liability.

Car insurance is also known as motor insurance. In US it is known as auto insurance.

Car Insurance Terms

IDV – Insured Declared Value

When calculating car insurance, Insured Declared Value is an important term. The IDV of a vehicle is derived based on the following factors:

  • manufacturers listed selling price of the brand and the model.
  • adjustment for depreciation.
  • adjustment for accessories.


Premium is the fixed amount paid to an insurance company to avail cover benefits.

Car Insurance Policy

The premium amount of your car insurance policy will depend on the IDV (Insured Declared Value) that you have stated. A higher IDV will attract a higher premium and a lower IDV will attract a lower premium. Insurance companies have tie-ups with leading automobile manufacturers and offer their customers instant auto quotes.

Natural Calamities

Natural calamities include fire, explosion, self ignition or lightning, earthquake, flood, typhoon, hurricane, storm, tempest, inundation, cyclone, hailstorm, frost landslide and rock-slide.

Man-made Calamities

Man-made Calamities include burglary, theft, riot,strike, malicious act, accident by external means, terrorist activity, any damage in transit byroad, rail, inland waterway, lift elevator or air, etc.

Features of Car Insurance

  • Provides coverage against loss of insured vehicle.
  • Provides coverage against damage of insured vehicle.
  • Provides coverage against financial liability of a third party.
  • Provides coverage against death of a third party.
  • Provides coverage against damage to a property.
  • Personal accident cover.

What is not covered in Car Insurance?

  • Gradual wear and tear of car.
  • Loss or damage to vehicle when driving under influence if drugs/ alcohol.
  • Loss or damage due to vehicle abuse/ misuse.
  • Loss or damage when vehicle is driven by someone who does not have a valid license.
  • Damages due to nuclear weapons material or war.
  • Deliberate accidental loss.

Types of Car Insurance

Third Party Liability Coverage

  • A Third Party Liability Coverage is mandated by law under Motor Vehicles Act.
  • It provides cover against third party legal liability when you are the at fault driver.
  • Covers damage caused by you to another property.
  • Covers injury caused by you to another person.

Collision Coverage

Provides coverage against damage of own vehicle. Does not cover theft or vandalism.

Comprehensive Coverage

Most popular type of policy providing end-to-end coverage including damage of car, theft of vehicle, third party legal liability and personal accident cover.

Companies providing Car Insurance in India (Alphabetical)

  1. Bajaj Allianz
  2. Bharti AXA
  3. HDFC Ergo
  4. ICICI Lombard General Insurance Co. Ltd.
  5. IFFCo Tokio General Insurance
  6. The New India Assurance Co. Ltd.
  7. The Oriental Insurance Co. Ltd.
  8. Reliance General
  9. Royal Sundaram
  10. Tata AIG General Insurance Company
  11. United India Insurance

Final Words

Private Car Insurance is the fastest growing sector in India as it is mandated by law for all the new cars. Auto Insurance is compulsory in India for all new personal and commercial vehicles. Car Insurance provides financial protection against physical damage and/or bodily injury resulting from traffic collisions and against liability that could also arise there from.

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I hope you found this article useful. I have provided this introductory article on car insurance for educational purpose only.

If you have any comments on Car Insurance introduction, please feel free to contact me. Before making any investment decision, please contact your financial adviser.

Subhodeep Mukhopadhyay

I am a Management Consultant in the Education Sector. In my previous corporate career, I have worked in Banking, Private Equity and Software industry. I am an MBA in Finance/ Computer Engineer and enjoy doing equity research and financial analysis in my free time.

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