Car Insurance
What is Car Insurance & Why You Need It
It’s a contract between you and an insurer: you pay a premium, they cover certain damages / liabilities in case of accident, theft, etc.
Legally required under the Motor Vehicles Act: at least third-party liability insurance is mandatory.
Without insurance, you can face penalties, fines, or issues during accidents.
Types of Car Insurance in India
Here are the main types/policies you’ll encounter:
| Type | What It Covers | Who Needs It / When Useful |
|---|---|---|
| Third-Party Liability Insurance | Covers damage you cause to someone else — bodily injury or property damage. Does not cover your own car. | Mandatory by law. Cheapest option. |
| Own Damage (OD) Cover | Covers your car’s damages due to accidents, natural disasters, theft, etc. | If you want to protect your own vehicle beyond just third-party. Often bundled with third party in Comprehensive policy. |
| Comprehensive Policy | Includes third-party + own-damage + often extra add-ons (riders). | Best overall protection. Higher premium. |
Also there are add-ons / riders you can include to extend coverage:
Zero depreciation cover (so depreciation on parts does not reduce payout)
Engine protection, roadside assistance, key replacement, consumables cover, etc.
Personal accident cover for owner / driver.
Key Terms to Know
Insured Declared Value (IDV): The maximum sum insurer will pay if the car is totally written off or stolen. It’s essentially the market value of the car minus depreciation.
No-Claim Bonus (NCB): A discount offered by insurers for every year you do not make a claim. Can reduce premium significantly.
Depreciation: Value loss over time; affects both IDV and how much insurer pays for parts. With “zero depreciation” add-ons, this effect is minimized.
What Affects Premium / Cost
Various factors impact how much you pay. Some of the main ones:
| Factor | How It Influences Premium |
|---|---|
| Car’s make-model, engine capacity (cc), and fuel type | Bigger engines, more expensive parts, diesel tend to cost more. Electric sometimes promoted by discounts. |
| Age of car | New cars have less depreciation and more IDV; older cars have lower IDV but sometimes higher risk so third-party might cost more. |
| Location / city | If you live in big cities (traffic, theft risk, etc.), premium tends to be higher. |
| Add-ons chosen | More add-ons = higher premium. But also more protection. |
| Safety / anti-theft features | Cars with airbags, ABS, trackers etc. tend to get lower premium because risk is lower. |
| Driving history / claims history | If you’ve had accidents or claims, premium is higher, and NCB might be lower. Clean history helps reduce cost. |
Legal Requirements & Mandatory Coverage
As mentioned, third-party insurance is mandatory. Driving without it can lead to fines or legal trouble.
The policy needs to be renewed yearly (or for the period chosen).
Some states or insurers may require or recommend certain add-ons (like personal accident).
Tips to Get a Good Car Insurance Deal
Here are things you can do to get decent coverage without overpaying:
Compare multiple Insurers — use online comparison tools.
Choose appropriate IDV — don’t over-insure (paying too much premium) or under-insure (bad payout).
Opt for add-ons smartly — only if you need them, balancing cost vs benefit.
Maintain no-claim bonus — avoid making small claims if possible, sometimes repairing out of pocket is better.
Ensure safety features — even upgrading anti-theft devices or alarms might lower premium.
Avoid unnecessary customizations — they can increase costs.