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What is Motor Insurance?

Wish

Written by Sharad Bajaj

Updated Oct 14, 2023

Motor insurance is an insurance cover for private cars, private two-wheelers and commercial vehicles.

Roads are always filled with uncertainties and anyone can encounter them anytime which may result in a financial loss for him/her. Thus, having a motor insurance policy becomes imperative to keep oneself safe from sudden financial liabilities. Also, as per the Indian Motor Tariff, it is compulsory for every motor vehicle to have at least a third party liability only motor insurance. Thus, a motor insurance does not only insures you against financial uncertainties, but also helps you fulfil the legal requirement.

Also Read: Fine and Penalty for Driving a Vehicle Without Insurance in India.

What is Motor Insurance?

Motor insurance, also known as automobile insurance is a contract in which an insurance company promises to compensate for the financial liabilities/ losses incurred by the policyholder due to an unfortunate event involving the insured’s vehicle depending upon the type and extent of coverage of the purchased policy.

A motor insurance plan can be opted for the following vehicles:

  • Private Car
  • Private Two-wheeler
  • Commercial Vehicle (Passenger Carrying Vehicles, Goods Carrying Vehicles and Miscellaneous Vehicles)

Types of Motor Insurance

There are three types of motor insurance as described below:

  1. Third Party Liability Only Motor Insurance
  2. Comprehensive Motor Insurance
  3. Standalone Own Damage (OD) Motor Insurance

All the three different types of motor insurance plans are available for all vehicles - private cars, two-wheelers as well as commercial vehicles.

1. Third Party Liability Only Policy: Under this plan, an insurance company compensates the policyholder for all the financial liabilities incurred by him/her due to a road accident involving his/her car. The coverage of the policy is as follows:

Third Party Loss/Damage

Compensation Liability of Insurer

Bodily injury, loss of one limb or one eye sight

50%

Loss of both the limbs or both eye sights

100%

Permanent disability/Death

100%

Third party Property Damage

Up to Rs. 7.5 lakh - For private cars and commercial vehicles

Up to Rs. 1 lakh - For private two-wheelers

2. Comprehensive Motor Insurance: This plan insures the policyholder against all third party liabilities as well as against own damages suffered by a vehicle. The coverage offered under a comprehensive motor insurance policy is as follows:

  • Limited/Unlimited compensation for third party injuries
  • Unlimited compensation in case of death of a third party
  • Limited cover for third party property damage
  • Repair cost for the damages sustained by the insured’s vehicle. The compensation amount depends on the Insured Declared Value (IDV) of the insured’s vehicle for private cars and private two-wheelers and on IDV and passenger/goods carrying capacity in case of commercial vehicles.

3. Standalone Own Damage (OD) Motor Insurance: This cover is only available for private cars and private two-wheelers. It provides coverage for the repair cost for the damages sustained by the insured’s vehicle depending upon its Insured Declared Value (IDV).

Motor Insurance: Private Cars vs Private Two-Wheeler vs Commercial Vehicle

Basis

Private Car

Private Two-wheeler

Commercial Vehicle

Third Party Property Damage Cover

Compensation amount is up to Rs. 7.5 lakh

Compensation amount is up to Rs.1 lakh.

Compensation amount is up to Rs. 7.5 lakh

Availability of Add-on Covers

An extensive list of add-ons such as zero depreciation, NCB protection, key cover, Engine protection, etc. are available.

Generally, less number of add-on covers are available with two-wheeler policy.

Except for a few add-ons such as cover for personal belongings, daily commute allowance, all other add-on covers are available.

Policy Cost

Premium cost depends on IDV, age, make, model of the vehicle and the type of policy purchased.

Premium cost depends on IDV, age, make, model of the vehicle and the type of policy purchased. Its policy is generally cheaper than private car’s policy.

Premium cost depends on IDV, age, make, model, goods/passenger carrying capacity of the vehicle and the type of policy purchased.

For further reading:

What is Third Party Bike Insurance Policy?

What is Bike Insurance?

Disclaimer: This article is issued in general public interest and meant for general information purposes only. Readers are advised not to rely on the contents of the article as conclusive in nature and should research further or consult an expert in this regard.

Wish

Written by Sharad Bajaj

Sharad is an insurance industry veteran who has managed motor insurance products for over a decade. Read More

Disclaimer

This article is issued in the general public interest and meant for general information purposes only. Readers are advised not to rely on the contents of the article as conclusive in nature and should research further or consult an expert in this regard.

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