Vehicle Insurance

Vehicle insurance is a insurance that is purchased to cover vehicles that run on the road. This is known as car insurance, or motor insurance

Vehicle insurance is a insurance that is purchased to cover vehicles that run on the road. This is known as gap insurance, car insurance, or motor insurance. The purpose of this insurance is to provide financial protection against physical damage and any physical injury caused by a traffic collision. The specific terms of auto insurance vary with the legal regulations of each city, state and country. So coverage terms may vary from region to region. Apart from traffic accidents, this insurance also provides financial protection against theft and damage to the vehicle.

History of vehicle insurance and its beginning

Widespread use of the motor car began after the First World War. Cars were relatively fast and dangerous for the time, yet there was no auto insurance option available anywhere in the world. Therefore, vehicle accident victims did not receive any compensation in the accident and vehicle owners often had to face considerable costs for the damage to their cars and property.

Compulsory car insurance scheme initiatives were first introduced in the United Kingdom with the Road Traffic Act 1930. This policy of cover ensured that vehicle owners and drivers were insured for their liability for death. Germany enacted a similar law in 1939 called the “Act on the Implementation of Compulsory Insurance for Motor Vehicle Owners”.

Types of vehicle Insurance

  1. Third Party Motor Insurance
  2. Comprehensive Motor Insurance

1. Third Party Motor Insurance

This insurance is not done for oneself but for a third party. The logic behind this is that if another person or his property gets damaged in an accident, he will get financial relief. This type of insurance is also known as “Act Only Insurance”, which is a statutory requirement for all vehicle owners.

Importance of Third Party Insurance:

  • It is a statutory obligation for all vehicle owners.
  • This provides financial relief to the vehicle owner in case of misfortune.
  • By taking a third party insurance policy, there is no need to worry about compensation for losses incurred in a road accident.

2. Comprehensive Motor Insurance

This insurance is famous because it compensates not only the policy holder but also third parties for any accident. Comprehensive motor insurance does not compensate for motor vehicle collisions. This insurance is also called “Other than collision”.

Importance of Comprehensive Motor Insurance:

  • This is the best protection for the car.
  • It also compensates for any legal compliance arising out of the accident.
  • It provides financial protection not only to the policy holder but also to third parties

There are the following types of comprehensive auto insurance:

  1. Private Car Insurance Policy:- In India, this insurance has been made mandatory for every vehicle owner by the government. This insurance is taken by an individual for his privately owned car. Under this insurance, accidents, theft, natural disasters and other similar financial losses are compensated. This policy also covers any damage caused to third parties.
  2. Two Wheeler Insurance Policy:- The Government of India has made this insurance policy mandatory. This insurance policy compensates for the damage caused to two-wheelers like bikes, scooters. This policy provides financial assistance for losses caused due to fire, disaster, theft and accidents. This insurance provides compensation to both the owner and the passenger in case of an accident.
  3. Commercial Vehicle Insurance:- This policy compensates for damage caused to trucks, buses, heavy commercial vehicles, light commercial vehicles, multi-utility vehicles, agricultural vehicles, etc. This policy does not cover damages caused to personal vehicles.
  4. Zero Depreciation Add On:- The value of an item purchased today reduces over time. Zero Depreciation Add On provides a kind of protection, whereby when a vehicle meets with an accident, the amount that is depreciated at the time of settlement is compensated by adding the depreciated value.
  5. Engine Protection Cover Add On:- This add on compensates for the damage caused when water gets into the engine or due to problems like leaking of lubricant oil.
  6. Road Side Assistance Add On:- If the assurance holder has purchased this add on, then assistance is provided even at midnight if the vehicle breaks down on the way. This add on is very beneficial for those traveling at night.

What is the benefits of vehicle insurance?

Vehicle insurance offers several benefits, both to vehicle owners and society as a whole:

  • Financial Protection: One of the primary benefits of vehicle assurance is financial protection against damages or losses resulting from accidents, theft, natural disasters, vandalism, or other unforeseen events. Without insurance, vehicle owners would have to bear the entire cost of repairs or replacement themselves.
  • Legal Compliance: In many jurisdictions, having vehicle insurance is mandatory by law. Therefore, maintaining insurance coverage ensures compliance with legal requirements, avoiding fines, penalties, or even legal action.
  • Medical Coverage: Many vehicle cover policies include coverage for medical expenses incurred due to injuries sustained in accidents. This coverage can help pay for hospital bills, rehabilitation costs, and other medical expenses, reducing the financial burden on the insured and their families.
  • Liability Coverage: Liability coverage provided by vehicle insurance protects the insured against claims and lawsuits filed by third parties for bodily injury or property damage resulting from a covered accident. This coverage can help cover legal fees, settlements, or court-ordered judgments.
  • Vehicle Replacement: In cases where a vehicle is stolen or damaged beyond repair, insurance coverage may provide for the replacement of the vehicle, helping the insured to get back on the road without significant financial strain.
  • Additional Benefits: Many insurance policies offer additional benefits such as roadside assistance, towing services, rental car reimbursement, and coverage for personal belongings kept inside the vehicle, enhancing the overall value of the assurance coverage.

Why is Vehicle insurance mandatory?

Vehicle insurance is mandatory in many jurisdictions for several reasons:

  • Financial Protection for Third Parties: Mandatory vehicle insurance ensures that third parties involved in accidents caused by insured vehicles are financially protected. Without insurance, individuals who suffer injuries or property damage due to the actions of an uninsured driver may struggle to obtain compensation for their losses.
  • Promotion of Responsibility: Requiring vehicle insurance promotes a culture of responsibility among vehicle owners. Knowing that they are financially responsible for potential damages or injuries caused by their vehicles encourages drivers to operate their vehicles more safely and responsibly.
  • Cost Distribution: Mandatory insurance helps distribute the costs associated with accidents more equitably among all vehicle owners. By pooling premiums from a large number of policyholders, insurance companies can cover the costs of accidents without imposing a significant financial burden on any single individual.
  • Protection of Public Interest: Vehicle cover requirements serve the public interest by ensuring that individuals injured in accidents have access to compensation for their medical expenses, lost wages, and property damage. This helps alleviate the strain on public resources that would otherwise be necessary to provide assistance to accident victims.
  • Risk Management: Mandating vehicle insurance helps manage the risks associated with operating vehicles on public roads. It ensures that financial resources are available to cover the costs of accidents, thereby reducing the likelihood of uncompensated losses and associated economic hardships for accident victims.