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• What is motor insurance?
• What are the different types of motor insurance coverage?
• What is Comprehensive insurance?
• What is a no claims bonus and how does it operate?
• What is the claim procedure in case of a vehicle purchased under a hire purchase scheme?
• Under what conditions is a claim not honoured?
• Suppose I lend my car to my friend, is he covered under my automobile insurance policy?

Insurance of Motor vehicles is compulsory under the State of India and Insurance Coverage which is the minimum requirement as prescribed by the Motor Vehicles Act 1988 is known as "Act" insurance.

'Act' insurance indemnifies the insured against liability arising out of accidents by his vehicle causing damage to the public property and this is known as 'Statutory Liability'.The personal injury cover under the 'Act' Insurance gives unlimited liability cover to third parties.

A vehicle owner primarily has five options:'Act' Cover, Comprehensive cover, Fire and Act cover, Theft and Act cover and the Fire,Theft and Act cover.

Act or third party insurance covers you against the damage you may cause to any third party person or their property. Any third party is the one which is not connected with you in any way.

Comprehensive Insurance covers loss or damage to a vehicle due to 'own damage' apart from the third party insurance.Loss or damage to a vehicle is included in the 'Own damage' form of insurance when the contingency is caused by the following perils:

• accidental external means

• fire, explosion, self-ignition, lightning, burglary, house breaking or theft or by malicous acts.

• transit by road, rail, inland waterway, air, lift or elevator.

• act of terrorism

• riot and strike, earthquakes, flood & storm.

• landslide & rockslide.

But the own damage does not include

• Wear and tear and depreciation

• Mechanical or electrical breakdowns,failures or breakages

• Theft of accessories if the vehicle itself is not stolen and

• Consequential loss

In this section, additional protection on payment of extra premium is available against:

• extra fittings like tape recorders,air-conditioners,fans etc.,

• personal accident benefits of passengers.

• wider Legal Liability under Common Law for employees engaged in operation of vehicles such as paid driver and cleaner as also six coolies/bonafide employees carried in/on good trucks.

If you are a good client and have not made any claims on a policy,then the insurance company would like to reward you for being careful by giving you what is called a 'No Claims bonus'.This is given by subsidising your future premium payments.One more bigger advantage is that if you have a policy eligible for a noclaims bonus and you are buying a new or a more expensive car,then the same old policy can be transferred,with all the benefits you have gained.Since the no claims bonus is usually a percentage of your premium, and if you buy a car which attracts a very high premium,your efforts can translate into substantial savings.

This is how a no claims bonus works:

If you have not made any claims in the previous policy year(year1),then you get a 20% discount on the premiums in the next policy year(year2).If you are lucky enough to stay away from claims another year(year2), you get a 30% discount on the premium in the third year.If your lucky time continues ,then in the fourth year you are eligible for 65%.For two wheelers No Claims Bonus ranges from 20-55%.

Technically hire purchase company is the owner of the vehicle, while the registered owner is the hirer. By an endorsement made on the policy any money payable under the policy(except the repairers bill) will be paid only to the financiers and their discharge is final. However in practice the financiers interest is limited to his financial committment to the vehicle and he will receive the entire claim amount as a trustee only. Naturally the financiers will have to refund balance if any after adjusting his outstanding amount to the hirer.

A claim is not honoured under the following circumstances:

• Driving without an effective and valid license,

• Loss or damage by nuclear or allied perils,

• Use outside geographical area ie India,

• Person driving is under influence of liquor or drugs,

• war and allied perils,

• Carrying of persons or goods more than the permitted capacity by R.T.O.

• Wear and tear: consequential loss, depreciation, wear and tear, mechanical or electrical breakdowns failure or breakages.

Yes, provided he holds a valid licence to drive.