What Does Car Insurance Actually Cover?

What is Car Insurance Coverage?

Car insurance coverage refers to the financial protection an insurer provides in exchange for premiums. When you purchase a third-party, standalone own-damage, or comprehensive car insurance plan, you enter into a legal contract with the insurance company.

Under this legal obligation, the insurer provides financial protection as coverage against specific risks and liabilities defined in the policy’s terms & conditions.

To clarify, not every policy provides the same type of coverage. In the next sections, we highlight what different types of car insurance plans cover.
 

What Does Car Insurance Cover?

Many first-time policy buyers often wonder what car insurance covers. The answer depends on the type of policy you’re purchasing, because different insurance plans provide varying coverage.

Generally, car insurance covers financial damages/losses arising in the following two broad categories –

• Your financial liability towards others (if you’ve damaged a third-party property or hurt a person in a road accident)
• Loss or damage caused to your own car and self during a road accident

Damages to your own vehicle and yourself are covered under a standalone own-damage and comprehensive car insurance plan. Liability towards third parties is covered under comprehensive and third-party insurance. We’ve talked about the coverage in depth in the following sections.
 

Third-Party Car Insurance: What Does It Protect?

This insurance covers policyholders against legal liability towards another person when their vehicle is involved in an accident that causes –

• Injury
• Death
• Property damage

For instance, third-party insurance will cover the financial liabilities payable to affected parties if your car accidentally collides with another vehicle or a person walking on the road, subject to the eligible limits and terms specified in the policy.

The only drawback of this car insurance cover is that it doesn’t include damage to your own car or yourself during the accident.
 

Comprehensive Car Insurance Coverage Explained

Comprehensive car insurance provides greater coverage compared to third-party and standalone own-damage plans. It covers –

• Financial liability payable to third party
• Damages caused to self or own vehicle

Whether the damage is caused by a road accident, natural disaster (floods, fire, earthquake, etc.), man-made disaster (riots, strikes, etc.), etc., it’s covered under the policy, subject to applicable policy terms. It essentially combines third-party and standalone own-damage coverage into a single policy.

With a comprehensive plan, you can also expand your policy’s coverage by purchasing relevant add-ons, such as roadside assistance and consumables cover. However, the policy also has specific car insurance exclusions, so ensure you read it to avoid unpleasant claim settlement experiences.
 

Own-Damage Cover: What Is Included?

Standalone own-damage insurance is designed to cover damages caused to your own car and self because of

• A road accident
• Accidental collisions
• Natural calamities
• Car theft
• Other situations specified in the policy

Since it only covers damage caused to your own car and self, you can consider purchasing it with a third-party insurance policy to bridge the coverage gap. You can also enhance the coverage by purchasing relevant add-ons, such as an engine protection cover, a key replacement cover, and a zero depreciation cover.
 

Understanding Car Insurance Add-Ons

If you’re purchasing a standalone own-damage or comprehensive car insurance policy, then you have the option to expand coverage by purchasing relevant car insurance add-ons. Each add-on provides distinct additional coverage, so explore all the available options and choose what you really need.

You’ll usually find the following add-on options:

●      Zero Depreciation Cover

During claim settlements, insurers deduct depreciation on certain car parts, which can lower the claim amount. If you want to avoid these out-of-pocket expenses, consider zero depreciation cover. It passes the depreciation component to the insurer, reducing your out-of-pocket repair expenses.

●      Engine Protection Cover

An engine is the car’s most crucial component and also the most expensive to repair or replace. Engine-related damages are usually not covered in a standard policy. If you want your insurer to cover it, purchasing an engine protection cover is ideal.

●      Roadside Assistance Cover

Regardless of your driving route and conditions, your car may break down unexpectedly at any time and anywhere. This add-on provides dependable roadside assistance if your car breaks down due to flat tyres, lack of fuel, a drained battery, a lost vehicle key, etc.

If you don’t want your car to remain stalled in the middle of a road for an extended period, having roadside assistance cover can be useful. It will ensure your car is either towed to a nearby garage or repaired on-site so you can resume driving.

●      Consumables Cover

Consumable items that can only be used once, such as nuts & bolts, engine oil, and lubricants, are not covered under a standard policy. If your car requires repair, the cost of these consumable materials won’t be paid for during claim settlements.

If you want the insurer to include these materials in the policy coverage, then you’ll have to buy consumables cover.

●      Key Replacement Cover

Modern car keys are expensive. If you accidentally lose your car keys or they get stolen, replacement can be expensive. A key replacement cover allows you to pass this expense on to your insurer. This car insurance add-on is useful because it also covers the locksmith charges and cost of replacing broken locks in burglary-related cases.
 

Car Insurance Benefits You Should Know

Car insurance is an unavoidable, recurring expense for every car owner in India. However, the following car insurance benefits make it worth purchasing.

●      Protection from Penalties

You cannot drive uninsured cars on Indian roads. If you’re caught driving a car without valid car insurance, you’ll attract hefty penalties from traffic authorities. Hence, investing in car insurance helps you comply with the law and protects you from penalties that may arise from driving an uninsured vehicle.

●      Financial Protection in Case of Road Accidents

Depending on the type of insurance you’ve purchased, you’ll receive financial protection against damages/losses caused in a road accident or other events specified in the policy. It will limit your out-of-pocket expenses, protecting your financial stability.

●      Coverage for Man-made & Natural Disasters

One of the best parts of a standalone own-damage or comprehensive car insurance policy is financial protection against damage caused by floods, earthquakes, storms, riots, or any violent activity explicitly mentioned in the policy. Even total loss due to burglary is covered, limiting a policyholder’s financial losses.

●      Assistance During Road Emergencies

If you’ve purchased a roadside assistance cover along with a standalone own-damage or comprehensive insurance policy, then you can benefit from prompt on-site assistance.

The insurer will send professional help to your location if your car breaks down due to flat tyres, engine or battery failure, or other reasons covered in the policy. It’s incredibly helpful when a breakdown happens in a remote location or where garages aren’t available nearby.
 

How to Choose the Right Car Insurance Cover?

You can enjoy car insurance benefits only if you’ve chosen the right car insurance cover for your vehicle. If you’re a first-time policy buyer, use the following factors to select the right cover.

●      Understand the Protection You Actually Need

A practical starting point is understanding what type of financial protection you want. Do you want insurance only for legal compliance, or do you want all-round financial protection during road emergencies?

Understanding your precise requirements is crucial to choosing the right coverage. Those seeking only legal compliance can consider third-party coverage, while those wanting enhanced protection can consider comprehensive coverage.

●      Consider Your Car’s Value & Potential Repair Costs

The financial consequences of road accidents, burglary, and total loss due to a man-made or natural disaster vary significantly depending on the car’s value. Premium cars with advanced electrical systems are usually more expensive to repair than an economy model.

Even car parts replacement will cost more for high-end cars. Decide whether you can comfortably pay for costly repairs or want the insurer to cover them.

If you don’t want to pay expensive repair and replacement bills, consider choosing enhanced coverage, which is usually available with comprehensive plans.

●      Read the Policy’s Inclusions & Exclusions

The biggest mistake people usually make while choosing a car insurance cover is assuming that all financial damages/losses are covered in a policy. In reality, not every policy provides the same coverage.

Hence, explore the policy’s inclusions, exclusions, deductibles, etc., to understand what a policy actually covers. It will help you choose the right cover that aligns with your needs.
 

Conclusion

As a car owner in India, insurance cannot be an afterthought. You must purchase it for legal compliance. While car insurance purchase isn’t optional, you still have control over the type of plan and coverage you choose. We’ve highlighted what car insurance covers in this blog so you can choose the right coverage for your vehicle.

If you’ve decided on the type of plan you need, you can explore the different Car Insurance plans at Shriram General Insurance. We have third-party, comprehensive, and standalone own-damage policy options to accommodate diverse coverage needs. You can also personalise the coverage using our wide range of add-on options.
 

FAQs

1. Is engine-related damage covered in a comprehensive insurance policy?

Standard coverage doesn’t include engine-related damage. You’ll have to purchase an engine protection cover to add it in the policy’s coverage scope.

2. Third-party or comprehensive car insurance: which is better?

Neither is universally better than the other. The better policy is the one that provides the coverage you need. If you’re only seeking legal compliance, then a third-party plan might be better. In comparison, a comprehensive plan can be better for someone who seeks enhanced financial protection for their vehicle.

3. Is it necessary to purchase add-ons?

No, it’s not necessary. You can purchase add-ons if you want extra coverage beyond the standard policy.

4. Which add-ons are worth purchasing?

It depends on the type of coverage you’re seeking. For instance, if you want to minimise out-of-pocket expenses during repairs, then zero depreciation and consumables cover can be worth considering.

5. Which car insurance plan covers both third-party liabilities and own damages?

A comprehensive car insurance plan covers both in a single policy.