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It is a common misconception that Motor Insurance policies cover all vehicle-related expenses. Motor policies, like other insurance policies, have exclusions, and you may likely miss them as they are a part of the policy fine print that details the exclusions and other limitations. Being aware prevents you from filing claims with your insurer beyond the policy coverage terms.Let us quickly look at the types of Motor Insurance policies available before understanding their exclusions. Also read: What is Motor Insurance?
Types of Motor Insurance Policies
There are two broad categories of Motor Insurance:
- Third-Party Liability Insurance
- Comprehensive Motor Insurance
Third-Party Liability Insurance
As per the Insurance Regulatory and Development Authority (IRDA) , Third Party Liability Insurance is mandatory in India. This policy covers all liabilities for physical injury, disability, death, or property damage caused by you to a third party. You and your insurer are the first and second parties, respectively, while the person(s) who suffer injuries or claim damages against you is the third party.A Personal Accident (PA) cover cover is also mandatory in India. It is an add-on cover under which your insurer compensates for any injuries you suffer in an accident or on your death or permanent disability. However, you do not need to buy a fresh PA cover if you own one for another car or have valid individual PA insurance.
Some common exclusions under Third Party Liability policy
Since this is a basic Motor Insurance plan, its scope is relatively limited. Here are some situations not covered under the policy:
Damages caused to your personal vehicle:
Third-Party Liability Insurance caters to your needs but only with damages caused to a third party, implying that the plan does not cover any expenses related to damages to your vehicle in the event of an accident.
Total loss or theft of your vehicle:
Third Party Liability Insurance also does not cover costs if your vehicle is damaged beyond repair or gets stolen.
Damages caused by natural calamities:
Third-Party Insurance does not cover any damages to your vehicle due to floods, earthquakes, tsunamis, hurricanes, and so on.
No add-ons:
Add-ons are options you can opt for on top of your current Motor Insurance policy by paying an extra premium. These add-ons increase your scope of coverage and financially protect you from situations not included in your insurance plan. However, the downside of having just a Third-Party Liability Insurance is that you cannot customise it to include add-ons besides the PA cover. However, you can opt for the add-ons with a Comprehensive Car policy.
Comprehensive Car Policy
As the name suggests, a Comprehensive Car policy covers many liabilities and provides nearly complete protection from unforeseen events or accidents to both you and third parties. The plan covers losses or damages to you and your car while protecting you against third-party liabilities. The policy also provides financial cover if your vehicle gets stolen or damaged by natural calamities and fire.Naturally, the premium payable under a Comprehensive Car Policy is higher than that of a Third-Party Liability Insurance since the former has a broader scope. The higher premium depends on the type of vehicle you own, the make and model of your vehicle, the city or area in which you live, and so on. Comprehensive Car Insurance does not have any specific exclusions, unlike Third Party. However, some exclusions apply to all Motor Insurance policies. Also read: Dos and Don’ts while filing for Motor Insurance claim
Common exclusions for Motor Insurance policies
Exclusions in a policy refer to the cases in which you cannot make a claim. In any of the following conditions, your insurer will not provide you with any monetary assistance.
Damages due to drunken driving or drug abuse:
Any damage caused by your vehicle due to drug abuse or drunken driving is a part of exclusions in all Motor Insurance policies. Your insurer cannot assist you if you are found guilty of such charges.
Driving without a valid driver’s license:
If you do not own a licence or if it has expired or is invalid, you will not receive any financial assistance even if you have a valid Motor Insurance plan.
An expired insurance policy:
You cannot use the benefits of your insurance policy if it has expired. You must keep track of the renewal date and make your premium payments on time.
Damage or loss due to war, invasions or nuclear radiation:
Although a Comprehensive Car Policy covers financial liabilities that could arise from natural or man-made calamities, it does not cover any damages related to war, invasions, or radiation. A General Insurance cover might help in such cases.
Damage or loss due to a deliberate accident or collision:
Motor Insurance policies protect you from unplanned events. Your insurer will not cover any costs associated with deliberate damages caused to your car in an accident or collision.
Violation of traffic rules:
The insurance company excludes any claim from accidents or incidents where the insured violated traffic rules or drove under the influence of alcohol/drugs.
Installing after-market accessories:
The insurer will exclude any non-standard accessories or modifications not approved by the insurer.
Using your vehicle for unlawful activities:
The insurance company may exclude claims that arise when using the vehicle for illegal or unlawful activities.
Racing:
Accidents while participating in racing, speed testing or motorsport events are not covered.There are also certain situations under which your Motor Insurance policy cannot protect you. Here are some examples:
- Using the vehicle for a purpose not specified in the policy, such as using a personal vehicle for commercial use or vice versa.
- Violating the car manufacturer’s guidelines for using the vehicle.
- An accident caused due to a minor child driving your vehicle.
- General wear and tear of your vehicle.
- Consequential damage: If you accidentally start your vehicle in a waterlogged area, your Motor Insurance policy may not provide coverage, as the damage might not have directly resulted from flooding - but a consequence of the car being started when it shouldn’t have been.
While the exclusions may expose you to more significant financial risks in some instances, you can always choose add-ons for an extra layer of protection.
Add-ons for your Motor Insurance
Add-ons can help increase your scope of coverage. Remember, you can opt for these add-ons only if you own an existing and valid Comprehensive Car Insurance policy.
Passenger cover:
This add-on gives financial coverage for passengers inside the insured’s vehicle.
Engine protection cover:
It covers repairing or replacing your vehicle’s engine or engine parts.
Return to invoice cover:
If your car gets stolen or is beyond repair, your insurer provides you compensation based on the vehicle’s current market value. This value may be lower than what you paid to buy your car. However, if you have a return to invoice cover, your insurer will provide you compensation equal to your vehicle’s original value, its invoice value.
Zero-depreciation cover:
Under zero depreciation cover , your insurer will not deduct the depreciation factor attached to your vehicle when you make a claim and will give you a higher payout.
No Claim Bonus (NCB) retention:
A No Claim Bonus is a monetary award that you receive for not making any claims during a particular period. Under this add-on, you can receive an NCB even after you have made a claim, provided your claim is not over 25% of your vehicle’s Insured Declared Value. Also read: Motor Fleet Insurance policy exclusions
Key Takeaway
- Motor Insurance can be categorised into two main types – Third-Party Liability Insurance and Comprehensive Car Policy.
- You must know the exclusions in all Motor Insurance policies.
- You can opt for add-ons if you want to widen your coverage. Remember, this option involves paying a higher premium.
- No Motor Insurance policy or add-on applies in cases such as drug abuse, drunken driving, driving without a valid driver’s licence, etc.
- Read your contract’s terms and conditions carefully to understand what it covers and does not so you can make an informed claim.
FAQS - FREQUENTLY ASKED QUESTIONS
Why do Motor Insurance policies have exclusions ?
Motor Insurance policies have exclusions to mitigate risk for the insurance company and to maintain fairness in premium calculations. Exclusions help define coverage boundaries and protect insurers from specific high-risk scenarios.
Are personal belongings inside my vehicle covered by Motor Insurance ?
Irrespective of which Motor Insurance policy you own, your insurer will not compensate you if personal belongings inside your vehicle are damaged or stolen.
How can I know the specific exclusions in my Motor Insurance policy ?
To understand the exclusions in your Motor Insurance policy, carefully review your policy documents, including the policy wording and terms and conditions. Contact your insurance provider directly for clarifications on the same.
Will my Motor Insurance cover me if I lend my vehicle to someone else ?
It depends on your policy. Some insurance policies may offer coverage for the occasional use of your vehicle by a friend or family member. In contrast, others may exclude coverage if the driver is not listed on the policy.
Are there any exclusions related to regular maintenance and servicing of the vehicle ?
Motor insurance policies exclude coverage for damage from regular maintenance and servicing activities, such as oil changes, tune-ups, or tire replacements.
The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.
