Types of Motor Insurance Plans and Their Features – Explained

When you purchase a new vehicle, be it a new car or bike, registration is the first thing that follows the purchase. But along with it, insurance is one more requirement that requires compliance. The Motor Vehicles Act of 1988 lays down the mandatory requirement to purchase motor insurance coverage for all vehicles registered in the county. All private as well commercial vehicles need to obtain a vehicle insurance Hence, there is no escaping the requirement if you are a vehicle owner as it is a legal mandate.

Motor insurance is an essential purchase since it has dual benefits—one, of complying the law, and second, of providing protection. While not compliance of the law attracts legal penalties, not having it as a part of your vehicle’s documents may also result in a financial setback in case of accident. Based on the type of policy the coverage and its underlying benefits are defined. Here are the types of motor insurance plans that can be purchased:

  • Third-party vehicle insurance policy

A third-party vehicle insurance is the most basic insurance coverage that is required. It is the mandatory cover that all vehicle owners need to have which offers protection against legal liabilities arising due to an accident or collision. Thus, it is also known as a liability-only policy. Not having a third-party cover attracts hefty fines. Considering its compulsory requirement, the regulator, Insurance Regulatory and Development Authority of India (IRDAI) defines and revises its premium each year and is based on the cubic capacity of the vehicle. You can visit the official website of IRDAI for further details.

A third-party plan provides protection to the policyholder, i.e., you, in the event injury to a third person or damages to their property. Compensation offered by third-party plans is limited to ₹7.5 lakhs in case of property damage whereas there is no limit on compensation for injuries. The tribunal’s order determines the compensation for such bodily injuries. In the absence of such third-party cover, you, the policyholder will be required to compensate for such damages and hence is advisable to buy one at all times. However, it is important to note that a third-party policy does not cover the damages to the insured vehicle. * Standard T&C Apply

  • Comprehensive vehicle insurance policy

A comprehensive policy is comprised of third-party cover and an own-damage cover to protect your vehicle too. The limitations of no coverage for the insured vehicle in a third-party policy can be overcome using a comprehensive plan since it extends own-damage coverage.

The own-damage cover offers protection against natural disaster as well as man made perils including theft and vandalism. Not just that, it also allows you to purchase optional policy covers known as add-ons. These add-ons provide protection for those perils that are specifically excluded even from the comprehensive policy’s scope thereby broadly enhancing the policy coverage. * Standard T&C Apply

Considering the coverage, a comprehensive policy offers, it costs more than a third-party cover. Further, opting for add-ons over will further bump up the premium prices considering the enhanced coverage they offer. Insurance companies are free to decide the premium of the own-damage component where third-party premiums are decided by IRDAI. Thus, the price of such comprehensive policies varies among insurance companies. You can visit the official website of IRDAI for further details.

Final words

For someone with limited resources, a third-party plan during vehicle insurance renewal can ensure legal compliance as well protection against liabilities. Also, digitisation of insurance policies helps you to make vehicle insurance online payment thereby ensuring hassle-free purchase and renewal without having to leave your house. Insurance is the subject matter of solicitation. For more details on benefits, exclusions, limitations, terms and conditions, please read sales brochure/policy wording carefully before concluding a sale.


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