What Is Car Insurance & How It Works?

When you get a car, protecting that investment is crucial. Car insurance can be confusing, especially for newcomers. Car insurance provides peace of mind for accidents, theft, vandalism, or damage from natural disasters. Instead of paying everything from your pocket, you pay an annual premium to an insurance company, and they handle most or all costs related to accidents or vehicle damage.

If you're wondering about the basics, the coverage options available, and how to get it – we've got you covered with straightforward answers. Before hitting the road, let's see the car insurance definition.

What is Car insurance?

Car insurance is a contract or agreement between you and an insurance company. You agree to pay money regularly (called premiums), and in return, the insurance company helps you out if something bad happens to your car. This could be an accident or damage. 

Auto insurance can cover things like:
• Fixing your car or someone else's car
• Paying for damage or injuries from an accident
• Covering medical bills or funeral costs if you or someone else gets hurt in an accident

The specific things covered can vary. In essence, Car insurance steps in to help you financially after an accident. 

How does Car Insurance work?

When you pay a premium, the insurance company commits to covering your losses as specified in your policy. Customizable to your needs and budget, policies typically last six or twelve months and are renewable. State requirements include bodily injury liability for injuries caused by you or another driver, and some also mandate property damage liability.

Medical payments or personal injury protection (PIP) may be necessary in certain states, covering medical bills and related expenses for injuries sustained in your car.

Uninsured and underinsured motorist coverage comes into play when the other driver lacks insurance or has insufficient coverage.

Car insurance safeguards against various damages, including accidents, third-party harm, collisions, and weather-related incidents. It encompasses cars, bikes, and commercial vehicles not for personal use, distributing risk and costs among policyholders who pay premiums.

Your car insurance extends coverage to you, family members, and even individuals driving your car with your permission. However, it does not cover commercial use or ride-sharing services.

Types of Car Insurance Policies

Different policies cover different losses. For instance, one vehicle insurance policy might protect against accidental damage but not theft. The policies for cars and bikes can also differ. Here are various types of vehicle insurance policies:

1. Third-Party Insurance

This type of insurance shields you from damage or injury caused by someone else. It doesn't cover injuries or damages caused by your fault or theft. The premium for third-party insurance is typically lower than other types.

2. Own Damage Insurance

Loss to a vehicle, whether from theft, natural causes (like fire or weather conditions), or man-made issues (vandalism, riots, etc.), is covered by Own Damage Insurance. This policy takes care of repair costs and also covers the loss of belongings in accidents.

3. Comprehensive Damage Insurance

This policy provides financial coverage for both third-party liabilities and own damage. It's a thorough policy offering protection against various damages, providing end-to-end coverage. Comprehensive insurance comes with a deductible (the amount you pay before insurance kicks in) and usually carries a higher premium.

4. Collision Insurance

Covering damage resulting from collisions with stationary objects or other vehicles, Collision Insurance is specific to damages from accidents on the road. It includes damage from potholes or the rolling of vehicles. However, it doesn't cover breakdowns or damage due to wear and tear, which are usually covered by Own Damage Insurance.

Additional Policies

Beyond the main types of the coverage mentioned earlier, there are additional motor insurance policies that can be added on. These include:
• Glass Insurance (under car insurance): Covers the costs of damage to the glass of rear/side windows and sunroofs.

• Engine Protector Cover: Insurance for expenses related to engine repair after water ingression or oil/lubricant leakage.

• Consumable Cover: Insurance for consumable items like washers, AC gas, bearings, engine oil, fuel filters, etc.

• Gap Insurance Policies or Depreciation Covers: Covers the depreciation cost (the gap between the actual cost and the current market value) of the vehicle at the time of the claim.

Coverage Provision of Car Insurance

The coverage you get depends on the chosen insurance amount and the conditions set by the insurance provider. Terms in a vehicle insurance policy vary based on legal regulations in different regions. Vehicle insurance policies offer three main types of coverage:

1. Property Insurance:

Covers vehicle damage in accidents or collisions, missing parts due to theft, and loss of personal belongings from the vehicle.

2. Liability Insurance:

Deals with public liability arising from damage caused by third parties in collisions or intentional acts.

3. Medical Insurance:

Takes care of treatment costs for the owner/driver in case of accidents or collisions. This includes medical expenses for injuries, rehabilitation, lost wages, or funeral expenses.
 

Exclusions & Clauses in Vehicle Insurance

Certain terms and conditions apply for claiming coverage under a vehicle insurance policy. Exclusions not covered by the policy include:

- No cover for underage drivers or driving without a license.
- No insurance cover if driving under the influence of alcohol or drugs.
- Damage during war/nuclear attacks is not covered.
- Damage due to aging, wear & tear, lack of maintenance, or mechanical breakdown.
- Anything not listed in the policy's exclusions or without specific coverage clauses is not covered.

Claim disqualification may occur if the policy terms are not met and in case of any specified conditions or clauses.

Benefits of Car Insurance

Here are the advantages provided by these policies:

1. Protection Against Theft or Robbery: Coverage for the theft or robbery of the vehicle or its belongings.

2. Coverage for Damage and Repair Costs: Vehicle insurance offers financial protection for damage and repair costs resulting from accidents, collisions, and calamities.

3. Third-Party Protection: Safeguards against the hassle of proving and claiming money or getting into legal battles when it comes to third-party liabilities.

4. Coverage for Physical Injuries: These policies cover physical injuries, ensuring medical expenses are taken care of.

5. Insurance Payout in Case of Driver's Death: Provides insurance money in the unfortunate event of the driver's death.

Conclusion

Having auto insurance is essential for car owners, offering protection against various risks such as accidents, theft, and natural disasters. According to Indian government laws, third-party insurance is mandatory for all new vehicles in India, whether they are for personal or commercial use, and regardless of their size. It's a must-have policy, and getting insurance for your vehicle is a legal requirement. 

When buying a new vehicle, insurance quotes are available from companies through partnerships with manufacturers. It's important to purchase and renew insurance once it expires to avoid legal consequences.