1. What is motor insurance?

A. A motor insurance is purchased for cars, trucks, motorcycles and commercial road vehicles. It is an agreement between the insurer and insured, wherein insurer agrees to give financial coverage to the vehicle and the insured in return agrees to pay premium annually.

Is it important to have a motor insurance?

A. According to Motor Vehicles Act, it is mandatory that every motor vehicle plying on the road should be insured with ‘liability only cover’. It ensures that any damage done by your vehicle to another person’s property will be covered in a claim. By buying motor insurance, you can protect your vehicle from natural disasters or theft.

What Motor Insurance cover should I buy? Should I buy Comprehensive Insurance or Liability Policy only?

A. Third-Party Liability insurance is mandatory for all vehicles plying on public roads in India. This covers liability for injuries and damages to others that you are responsible for. In addition, it is prudent to cover loss or damages to the vehicle itself by way of Comprehensive/Package policy, which covers both “Liability” as well as “Own damage” to the insured vehicle. Liability Only cover is also known as Act Only cover.

How is the premium determined?

Many factors determine the premium you will pay. The following items that are commonly used to determine your premium: Vehicle registration details with Engine No., Chassis no., Class of vehicle, cubic capacity, seating capacity, etc. (In fact, all relevant details are in the RC book/card and a copy of same may be handed over) Tax paid details; Certificate of fitness, Driver details - age, gender, qualifications, license validity, previous insurance history, if any. Also, according to India Motor Tariff, India is divided into two parts-

Zone A: Ahmedabad, Bangalore, Chennai, Hyderabad, Kolkata, Mumbai, New Delhi, and Pune

Zone B: Rest of Indian cities

What is the period of the policy?

A motor policy is usually valid for a period of one year and has to be renewed before the due date by paying the premium on time. No insurer offers a grace period for paying the premium. In case of lapse of policy by even one day, the vehicle has to be inspected. Moreover, if a comprehensive policy is allowed to lapse for more than 90 days, the accrued benefit of NCB (No Claim Bonus) is also lost.

What is "No Claim Bonus"?

No Claim Bonus (NCB) is the benefit accrued to an insured for not making any claims during the previous policy period. As per current norms in India, it ranges from 20% on the Own Damage premium (and not on Liability premium) and progressively increases to a maximum of 50%. If, however, a claim is lodged, the No Claim Bonus is lost in the subsequent policy period. NCB is given to the insured and not to the insured vehicle. Hence, on transfer of the vehicle, the insurance policy can be transferred to new owner but not the NCB. The new owner has to pay the difference on account of NCB for the balance policy period. The original owner can, however, use the NCB on a new vehicle purchased by him.