Most of us know that our motor vehicle on road price is higher than ex-showroom price, quoted by motor retailers. This difference in price is due to additional cost of registration of vehicle, taxes to be paid to government of India and the insurance of your vehicle. Registration of the vehicle seems necessary and taxes are something we pay to government in all forms and we can’t debate on that. (How many types of tax do you pay?) But why we need this insurance?
What is Motor Insurance?
Motor insurance is the insurance of the financial risk of operating the motor vehicle. This includes car damages when it meets any accident or the car is stolen. In any of the scenarios the insurance company will compensate the owner of the motor vehicle as per the policy terms. This is something similar to our life insurance.
What type of motor vehicle insurance is necessary?
Under the motor vehicles act, all the vehicles that operate in public places need to have an insurance that definitely covers the third party liability, although it may or may not cover the damages of the vehicle in case of an accident.
There are two types of insurance policies mainly third party liability policy and comprehensive plan policy.
Under third party coverage insurance policy, only the damages to the third party are covered and the damages to the owner of the insured vehicle may or may not be provided (This depends entirely on the policy).
Under the comprehensive plan the damages to the owner as well as the third party is covered. So it seems that comprehensive plan makes sense as taking just a policy that covers third party liability only is not worth.
Even though only third party insurance is necessary, most of the motor vehicle insurers will never tell you this information and they will only market the comprehensive plan as it costs more to you thus more profit to the insurance company. So next time you go to buy a vehicle then just don’t buy anything, assuming that it is necessary.
Why Motor Vehicle Insurance is compulsory?
Motor Vehicle insurance for the third party liability is necessary as government doesn’t want the third party to be in a problem just because you can’t help the third party.
Act liability insurance
A motor vehicle in a public place is potentially a dangerous and lethal instrument. Even when it is without its engine or without petrol, if it is moved down on an incline even un intentionally it can cause considerable damage and human injury. Hence, unlike other properties which may be insured or not at the option of the owner, a motor vehicle is required by law to be insured in respect of the user’s liability for death, bodily injury or damage to property of third party.This kind of insurance contract are based on indemnity and only cover the damage and not the whole insurance amount is given everytime. As sometimes the driver of the vehicle is often a person of small means and injured person goes without adequate compensation, insurance of motor vehicle covering the third party risk is made compulsory in India and the Motor Vehicles Act provides that, vehicle should not be used in public place without having insurance policy covering third party risks. Third party risk means risk covered for bodily injury, death and damage of property of third party. Third party means any person except owner or passenger in the private vehicle. So pillion rider of the motor cycle, passengers in private cars, jeeps etc. are not third party. However, passengers in public vehicle such as bus, contract carriage vehicle, taxi etc. are also third party and hence covered by third party or statutory policy.
The occupants of private vehicles and pillion riders are not covered by the Act policy. However, they can be covered by paying additional premium of insurance. If additional premium is not paid to cover the risk of occupants of private vehicle and pillion rider, insurance company will not be liable to compensate such victims. However, Hon’ble Supreme court held that if the policy is package/comprehensive policy, then the occupants of private vehicles and pillion rider are covered, even if the additional premium of coverage of such person is not paid.
So next time you buy a vehicle ask the insurance guy about all the insurance plans and then decide the best plan suitable for you.