Vehicle insurance (also known as car insurance, motor insurance or auto insurance) is insurance purchased for cars, trucks, motorcycles, and other road vehicles. Its primary use is to provide financial protection against physical damage and/or bodily injury resulting from traffic collisions and against liability that could also arise there from. The specific terms of vehicle insurance vary with legal regulations in each region.
To a lesser degree vehicle insurance may additionally offer financial protection against theft of the vehicle and possibly damage to the vehicle, sustained from things other than traffic collisions, such as keying and damage sustained by colliding with stationary objects.
The scope of the 'Act only' policy is to pay compensation for death or any bodily injuries and for damage to property of third parties. While the insured is treated as the first party and the insurance company as the second party, all others would be third parties.
In case the vehicle is purchased under a hire-purchase agreement, the financiers insist upon a comprehensive policy to take care of their interest as collateral security. The perils covered under the comprehensive policy are fire or theft or both fire and theft in combination with the minimum requirements of the act (i.e. third party liability).
Comprehensively, these include damage to the vehicle by accidental external means: fire, lightning, explosion, self-ignition, burglary, house-breaking, riot and strike, malicious acts and terrorist acts, earthquake, flood, inundation, cyclone, landslide/rockslide, etc. while in transit by rail, road, air, inland waterways, lift or elevator.
Why Motor Insurance?
- Motor Insurance(Third Party) is compulsory on purchase of new vehicles whether acquired for commercial or private usage as per Motor Vehicle Act in India. One can be penalised for driving without a valid cover.
- An accident can happen to anyone even if the driver of the car is not at fault. This may result into a lot of damages caused in person as well as to the car. Motor Insurance turns to be very beneficial under such circumstances.
- If the driver is liable for an accident which results in bodily injuries to a third party, then the expenses have to be borne by the owner of the car. In such a case third party motor insurance saves from a devastating financial blow.
- Cars are an expensive investment for an individual. An accident can turn this investment into a huge loss as well. Hence it is important to have motor insurance.
- It also helps to cover for damages caused other than an accident like fire, theft, etc.