What are the main Kinds of Motor Insurance Policies?
Motor insurance got recently a great momentum. In the older times, persons, who were injured or killed through the negligence of the motorists, could not get financial redress either to them or to their legal’ .airs because no scheme of insurance was present at that time.
To mitigate the financial hardship caused to the persons, the Motor Vehicles Act, 1939, as amended from time to time, has made it compulsory for the motorists to insure against the risk of liability to third parties.
The rate of premium is standardised because the business is tariff. No insurer can charge lower rates than the tariff rates and no insurer can grant benefits exceeding than those prescribed by the tariff.
Vehicles for the purpose of insurance are classified as below:
(i) Private Cars (not used for carrying passengers for hire or reward).
(ii) Commercial vehicles such as goods carrying vehicles, passenger vehicles, tractors and others.
(iii) Motor cycles, scooters and auto cycles.
The policies under motor insurance are as follows:
(i) Act Liability only.
(ii) Third Party only.
(iii) Comprehensive Policy.
1. Act Policies :
This policy is designed to meet the requirements of Motor Vehicles Act, 1939, which provides for compulsory insurance in regard to liabilities arising out of use of motor vehicles in a public place.
This kind of policy is limited to bodily injury or death of the third parties. Section 95(2) of the Motor Vehicles Act lays down that a policy of insurance shall cover any liability incurred in respect of anyone accident up to the following limits:
(i) Goods Vehicle:
Rs. 50,000 in all is including the liabilities if arising under the W.C. Act, 1923, in respect of death of or bodily injury to employees (other than the driver) not exceeding six in number being carried in the vehicle.
This means that liabilities if any towards driver and employees (above six) being carried in the vehicle under W.C. Act in addition to Rs. 50,000.
(ii) Passenger Vehicles:
Vehicles in which passengers are carried:
(a) For hire or reward.
(b) By reason of or in pursuance of contract of employment.
(1) In respect of persons other than passengers carried for hire or reward-Rs. 50,000 in all.
(2) In respect of passengers.
Rs. 50,000 in all where the vehicle is registered to carry not more than 30 passengers;
Rs. 75,000 in all where the vehicle is registered to carry not less than 30 but not more than 60 passengers;
Rs. 1,00,000 in all where the vehicles are registered to carry more than 60 passengers; and Subject to the limit aforesaid, Rs. 10,000 for each individual passenger where the vehicle is a motor car (used to carry not more than 6 passengers excluding the driver) and Rs. 5,000 for each individual passenger in any other case.
(iii) Other Vehicles:
The amount of liability incurred except as provided otherwise. The Act Policy besides the cover as required under the Motor Vehicles Act provides for indemnification of the claimants costs and expenses which the insured shall become legally liable to pay as also costs and expenses incurred with the written consent of the insurer.
The policy may extend to indemnify any driver who is driving the motor vehicles on the Insured’s order or with his permission provided, he is not entitled to indemnify under any other policy.
2. Third Party Policy :
This policy covers the liabilities of the third parties who suffered less in connection with the damage of property and personal injury or death.
Thus, this policy indemnifies the insured against his legal liability in respect of damage to property of third parties over and above 2000. The limit of liability is as follows:
(a) Private Car-Unlimited.
(b) Commercial Vehicle.
(i) Goods or passenger-carrying vehicles-Rs. 20,000.
(ii) Other miscellaneous or special type of vehicles Rs. 50,000. Motor cycle Unlimited.
The policy may be extended to include:
(b) Theft risks,
(c) Legal liabilities to persons employed in connection with the operation and/or maintenance and/ or loading and/or unloading of motor vehicles.
The private car policy extends to indemnify the insured (individual only) against legal liabilities incurred by him subject to limitations of indemnity whilst personally driving a private motor car.
Private car policy covers legal liability of the insured to passengers (not for hire or reward) in the car although under the passengers (not for hire or reward) in the car although under the Motor Vehicles Act, it is not required to be covered.
Liabilities arising while the motor cat is being used in private places is covered. The policy covers bodily injury or death, property damage and medical expenses.
Due to the amendment to the Motor Vehicles Act, 1994, liability on third party claims has gone up as ‘No fault’ liability compensation has been enhanced and Structured Compensation has been introduced.
3. Comprehensive Policy :
The comprehensive policy covers the following risks
1. Damage to car parts or body.
2. Removal charges for repairs.
3. Third Party Liabilities.
4. Costs and Expenses incurred with risk.
5. Repair Charges.
6. Medical expenses.
At the payment of extra premiums, the following risks are also insured:
(i) Death or injury to family members who are above 16 years and below 65 years.
(ii) Riots, strikes, thefts, larceny, etc.
(iii) Loss of Rugs.
Jald Rahat Yojna (Pre-litigation Settlements) has been introduced to help claimants to get payment of compensations without approaching courts. Structured Compensation formula has been used for quick settlements of claims.