Types of Car Insurance Plans in India: Costs & Key Stats
Auto insurance is an essential financial safeguard for vehicle owners in India. With increasing vehicle ownership and rising road accidents, choosing the right auto insurance policy has become more critical than ever. As per a report by the General Insurance Council of India, only about 57% of vehicles on Indian roads are insured, leaving a significant percentage vulnerable to financial losses.
At a glance
| Type of Insurance / Add-on | Coverage | Mandatory? | Key Benefits | Best for | Cost |
|---|---|---|---|---|---|
| Third-Party Insurance | Covers damages to third-party property, injury, or death | Yes | Legal compliance, covers third-party liabilities | All vehicle owners (mandatory by law) | Low |
| Comprehensive Insurance | Covers third-party + own damage (accidents, theft, fire, natural calamities) | No | Protection for own vehicle and third-party liabilities | Car owners seeking complete protection | Moderate to High |
| Own Damage (OD) Insurance | Covers damage to own vehicle due to accidents, theft, or natural disasters | No | Financial protection for vehicle repair | Owners with active third-party insurance | Moderate |
| Zero Depreciation Cover | Ensures full claim without considering depreciation | No | Higher claim amount, full repair cost coverage | New or high-end car owners | Higher premium |
| Engine Protection Cover | Covers engine damage due to water ingress or oil leakage | No | Saves high engine repair costs | People in flood-prone areas | Additional cost |
| Personal Accident (PA) Cover | Covers accidental injuries, disability, and death of owner-driver | Yes (for owner-driver) | Financial security for medical expenses and family support | All vehicle owners | Nominal |
| Roadside Assistance (RSA) | Provides help in case of breakdowns, fuel shortage, towing, etc. | No | Immediate assistance in emergencies | Frequent travelers | Additional cost |
| Return to Invoice Cover | Pays full invoice value of the vehicle in case of total loss/theft | No | Prevents financial loss due to depreciation | New car buyers | Higher premium |
| Pay-As-You-Drive Insurance | Premium based on actual distance driven | No | Cost-effective for low-mileage drivers | Occasional car users | Varies based on usage |
In this article, we will explore the different types of auto insurance available in India, their benefits, and key statistics to help you make an informed decision.
1. Third-Party Insurance (Mandatory by Law)
Third-party insurance is the most basic and legally required auto insurance in India. Under the Motor Vehicles Act, 1988, every vehicle owner must have at least third-party insurance before taking their vehicle on the road.
Coverage:
- Covers damages caused to a third-party person or property
- Provides compensation in case of injury or death of a third party
- Does NOT cover own vehicle damages
Statistics:
- The Insurance Regulatory and Development Authority of India (IRDAI) regulates third-party premium rates annually.
- In 2023, third-party insurance for private cars saw a premium hike of about 6%.
- As per industry reports, nearly 60% of motor insurance claims are third-party related.
Who Should Buy?
- Budget-conscious car owners
- Those using old or rarely driven vehicles
2. Comprehensive Car Insurance
Comprehensive insurance offers extensive coverage beyond third-party liabilities, making it a popular choice among vehicle owners.
Coverage:
- Third-party liabilities
- Own vehicle damages due to accidents
- Theft or total loss
- Natural disasters (floods, earthquakes, cyclones, etc.)
- Man-made calamities (riots, vandalism, fire, etc.)
Statistics:
- Comprehensive insurance accounts for around 70% of total car insurance policies sold in India.
- Claims for vehicle damage due to natural calamities increased by 15% in 2022 due to extreme weather conditions.
- On average, comprehensive policies cost 2-3 times more than third-party policies, depending on the car’s model and location.
Who Should Buy?
- New car owners
- People living in flood-prone or accident-prone areas
- Those who want extensive financial protection
3. Own Damage (OD) Insurance
Own Damage insurance is designed to cover only damages to your own vehicle. This policy is available separately and is ideal for those who already have mandatory third-party insurance but want added protection. Some plans are eligible for No Claim Bonus.
Coverage:
- Covers accidental damages to your vehicle
- Fire, theft, and natural disasters coverage
- NOT applicable for third-party claims
Statistics:
- IRDAI introduced standalone Own Damage policies in 2019, giving policyholders more flexibility.
- Standalone OD policies have seen a 20% increase in adoption in recent years.
- 30% of policyholders prefer OD policies with add-ons rather than full comprehensive coverage.
Who Should Buy?
- People who already have third-party insurance but want own damage coverage
- Those who want to customize their insurance plan with add-ons
4. Pay-As-You-Drive Insurance
Pay-As-You-Drive Insurance This is a relatively new and innovative auto insurance product introduced in India, allowing customers to pay based on their actual vehicle usage.
Coverage:
- Covers both third-party and own damage based on kilometers driven
- Ideal for people who use their cars sparingly
Statistics:
- Launched by IRDAI in 2022, this policy gained popularity among urban car owners.
- Initial reports indicate that 15% of policyholders in metro cities are opting for this policy.
- Premium savings of up to 25% compared to traditional comprehensive plans.
Who Should Buy?
- People who use their cars occasionally
- Those looking to save on premiums while maintaining coverage
5. Zero Depreciation Car Insurance
Zero depreciation (bumper-to-bumper) insurance ensures that you receive the full claim amount without any deductions for depreciation on parts.
Coverage:
- Everything covered under comprehensive insurance
- Full reimbursement of repairs without depreciation costs
Statistics:
- Zero depreciation claims contribute to 40% of total auto insurance claims in India.
- Policyholders pay about 15-20% higher premiums for zero depreciation coverage.
- Most insurers allow this coverage only for cars less than 5 years old.
Who Should Buy?
- Owners of new or luxury cars
- People who want full claim benefits without depreciation cuts
6. Engine Protection Cover
Engine Protection Cover A specific add-on cover that protects against engine damage due to waterlogging, oil leakage, or other non-accidental causes.
Coverage:
- Engine and gearbox damages
- Hydrostatic lock issues
Statistics:
- Reports show that 20% of urban car insurance claims in India are related to engine failures.
- Engine repair costs can range from ₹30,000 to ₹1 lakh, making this cover a valuable add-on.
Who Should Buy?
- Car owners living in flood-prone areas
- Those with high-end cars with expensive engine components
7. Personal Accident Cover
Personal Accident (PA) cover is a mandatory add-on for vehicle owners, providing financial compensation in case of accidental death or disability.
Coverage:
- Accidental death
- Permanent disability
- Partial disability
Statistics:
- IRDAI mandates a minimum PA cover of ₹15 lakh for vehicle owners.
- Road accident deaths in India increased by 9.4% in 2022, highlighting the importance of this cover.
Who Should Buy?
- All vehicle owners (mandatory requirement)
- People who frequently travel long distances
Conclusion
Auto insurance in India offers a wide range of options tailored to different needs. While third-party insurance is mandatory, opting for a comprehensive plan or add-ons like zero depreciation and engine protection ensures better financial security. As per IRDAI data, the motor insurance sector in India is expected to grow at a CAGR of 9% by 2025, reflecting the increasing awareness and necessity of insurance policies.
Before purchasing an auto insurance policy, assess your needs, compare policies from different insurers, and select one that provides optimal coverage at the best price.
Key Takeaways:
- Third-party insurance is mandatory but limited in coverage.
- Comprehensive insurance provides extensive protection, making it the most popular option.
- Add-ons like zero depreciation and engine protection are beneficial for expensive cars.
- Pay-as-you-drive policies offer cost savings for occasional drivers.
Stay informed and choose the right auto insurance policy to safeguard your financial future on the road!