Introduction of the Host
Mr.Harikumar is a freelance journalist with rich experience gained from working with leading periodicals and dotcoms. His association with leading financial portals has contributed greatly to his ability to deal with classroom sessions in the financial sector, especially investments. Currently, he is a columnist with some of the well known publishing companies. Some of his published works on mutual funds and insurance have got wide acclaim.

MOTOR INSURANCE - A MUST POLICY FOR VEHICLE OWNERS

Evolution of Motor Insurance
When the death rate due to road accident caused by motor vehicles, rose alarmingly in the US in the early '50s, it caught the attention of the world. The Great Britain made it mandatory for all the vehicle owners to insure their vehicles against the liability towards third parties in the event of accident. Taking the cue, many a country followed suit. India was no exception. The Govt. of India passed the Motor Vehicles Act in 1939 making motor vehicle insurance compulsory. Today, `most of the accidents on the roads are covered by various insurance companies, shelling out huge amounts.

This is one of the most popular among general insurance policies. Motor insurance, as a rule is compulsory, because driving on public roads may affect others and their property, i.e., death, injury and damage to the possessions. The insurance is beneficial to the vehicle owner and the aggrieved person as any other settlement such as moving court, etc. would cost them more. The protracted litigation in the court of law and the possible insolvency of the accused has increased the importance of insurance coverage for the vehicle. The policy covers accidents, theft, fire, earthquake, flood, etc.

Here many insurance companies give cover for accident to policy holders or spouse. But money, stamps, documents, securities, etc. inside the car cannot be covered. For these, separate policies are necessary.

Usually, there are two types of Motor insurance - Third party insurance and comprehensive insurance. The Act has made it compulsory that no motor vehicle shall be used in the absence of at least a third party insurance. If one uses his vehicle without third party insurance, it is a penal offence. While third party insurance is mandatory, comprehensive cover is discretionary.

Third Party Insurance:
As the term suggests, it is the protection or cover given to the vehicle as well as the owner of the vehicle against a third party who has suffered injury or whose property is damaged. The policy is otherwise called Act Policy as the law says that no motor vehicle shall be used unless third party insurance is in place. In short, the insurance company will pay for the damages caused to a third person due to an accident involving the vehicle and the owner of the vehicle.

E.g.: X was driving his car and it hit a pedestrian causing injury to him. If the vehicle is insured, the insurance company will pay for the hospitalisation charges of the injured.

Third party policy (Motor Policy A- Act Only) will cover the cost of

a. Damage to property, and fatal/non-fatal injury to body of third party
b. Legal liability of the insured
c. Pecuniary liability for the cost of the claimant

The policy is usually taken for one year with a provision for renewal.

Comprehensive Policy
Comprehensive Policy is also known as Motor Policy (B). This provides for all the damages caused to the vehicle in addition to the benefits of Act Policy. Comprehensive insurance usually covers the following

1. Theft, 2. Fire 3. Riots 4. Flood 5. Earthquake 6. Malicious acts 7. Other forms of accidents caused by natural calamities.

Comprehensive policy also is taken for one year. But the insurer can give option for policies for shorter periods too, but at a higher premium.

Some insurance companies offer bonus at the time of renewal. This comes in the form of discount for timely renewal with no claim during the previous year during which the insurance was taken. Subject to a maximum amount of Rs.300 for motor cycles and Rs.1,500 for taxis and private cars, the insurers can also reimburse for major repairs done for the vehicle, provided necessary evidence is submitted. However the compensation for bodily injury for the passenger is unlimited. If the vehicle is stolen, the insurer shall be liable to pay the price of the vehicle at the current market rate or the price for which the insurance is taken, whichever is less

It is always advisable to take comprehensive policy as one can ride the vehicle with zero risk

Basis for Premium
All India Motor Tariff includes various rates of premium depending upon the type of vehicle and the value of the vehicle. General principle is that for private cars, premium is less and for taxis, premium is higher. Similarly in Metros, premium is higher compared to rural areas. The private passenger automobile insurance has become highly competitive. The new forms and rates will vary from company to company.

Cover Note:
Cover note is a temporary policy of insurance before the original policy is issued. The policy usually covers

a. The name and address of the insured
b. The registration number, make and description of the vehicle
c. The duration of the cover
d. Date and commencement of the policy
e. Any other special terms

Policy conditions:
The insured should intimate the insurance company about the accident as soon as the accident occurred

All relevant documents should be submitted to the company including claim, FIR, writ, etc., which he receives as a result of accident

Common Principles:
The insured should maintain his vehicle in good condition as if it is not insured. This helps in minimising losses.

Days of Grace:
Usually there is no days of grace for motor insurance. If not renewed, there is no effect. For other policies, generally 15 days are allowed.

Growing Importance:
With the opening up of insurance sector to private players and as there is upswing in competition, many car manufactures have approached various insurance companies for further rate concessions and extra cover for their vehicles, according to reports.

Whatever be the legal prescriptions, as far as the safety is concerned, the two entities suffering are passenger and vehicle. And if somebody is ready to bear the brunt of it at a nominal price, it is always recommended to go for it. To that extent, one cannot rule out the relevance of Motor Insurance.