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The festival season is here. As carmakers offer attractive discounts this time of the year, many of us are planning, or drawn up plans, to upgrade from hatchback to sedan. Some others among us have set eyes on SUVs or micro SUVs. In fact, car lovers are spoilt for choices today. We do detailed market research on car models, engine power, mileage, features and so before zeroing in on one model. That much attention, is however, not given when it comes of car insurance. Many buyers, surprisingly, leave it to discretion of car dealers. Some other buy insurance because it has been made mandatory.

It is vital to give equal attention to car insurance policies available in the market today. A study of car insurance policies would help you understand different benefits offered by different policies.

Types of car insurance policies

There are two different types of car insurance policies.  The mandatory third-party liability-only insurance is one of them. A comprehensive car insurance is the other.

i) Third-party liability-only policy: As per the Motor Vehicles Act 1988, a third-party car insurance policy is mandatory for all cars to be eligible to ply on Indian roads.

This type of policy covers financial liabilities towards a third party that might arise in the event of an accident. Do remember other vehicle/s may suffer damages or a person can be injured or even get killed in an accident involving your vehicle. In such an unfortunate event, the third-party liability-only insurance would bear all expenses on your behalf.

This type of insurance is a must because a car owner needs a basic form of insurance that will compensate a third party in case of an unfortunate event.

While third-party property damages are covered up to a sum of Rs.7.5 lakh, there is no upper limit in case of bodily injuries or death.

Third-party liability-only policy, however, as the name suggests cover damages to third party only. In other words, loss or damage your own vehicle is not covered under this policy. This type of policy costs much less compared to the comprehensive insurance policy.

ii) Comprehensive Insurance: It covers both third-party liabilities and loss or damage to your own vehicle in the event of an accident or theft.

Comprehensive car insurance is not mandatory by law. It is, however, preferred as this type of insurance provides 36-degree protection to you and your vehicle. For the same reason, it is costlier than third-party only insurance. The premium depends on own-damage (OD) component which varies basis car make and value of the car, the state of vehicle registration and the year of manufacturing.

It is also possible to enhance the coverage with add-ons with your comprehensive car insurance policy. It goes without saying that add-ons cost extra.

Other types of car insurance

There are three more types of insurance which are not very popular

a) Collision insurance: This type of car insurance covers your vehicle only in the case of a collision.

b) Personal injury protection:  It would cover medical expenses for all those in the vehicle at the time of accident, irrespective of whether they have health insurance or not.

c) Uninsured Motorist Protection: Imagine a situation, you are involved in a road accident and the other party who caused the accident does not carry the third-party liability insurance policy. In such a case, you can use the Uninsured Motorist Protection policy.