By Anurag Singh
By Anurag Singh
The answer would open your eyes to this seemingly logical question, but it is not as logical as it seems. It is just a misunderstanding of concept or should I say the mis-selling of the concept of auto insurance in India.
So what is mandatory about auto insurance? Why is the government worried that I insure my car ?
Nobody is concerned if your car is insured. What is mandatory is the THIRD PARTY LIABILITY insurance. So God forbid, if your car hits somebody on the road and there is a medical liability invoked by the person (third party here) in court, you would be liable to pay compensation to him. Who will pay this compensation? Your insurance company. So the only insurance mandatory by law is the THIRD PARTY LIABILITY insurance which is not very expensive to buy. It costs somewhere between 1500 to 1800 per year depending on the size of the car/vehicle.
Nobody cares any bit if you don’t have your car insured. You must have the third party liability cover.
However the insurance companies promote this mis-selling where they design a “comprehensive” car insurance plan which includes third party cover(you can see this in the premium receipt as separate charge) as well as a cover for the damage to your car. That is where the money will be made. All this is sold to you as ONE insurance cover claiming that it is mandatory. It’s NOT. So the premium which could be Rs 1500 jumps to Rs 10,000 or more based on the value of the car. Ironically, in India, people are paying more premium for car insurance than their life or health insurance. All because of the rampant non transparent mis-selling approaches the insurance industry adopts.
So what should do? Buy only third party liability cover for your car & you are good for the road. Save the rest of the premium & buy a good life cover term plan for your family. Be wise. And finally, please don’t ask this wisdom from your broker (online / offline doesn’t matter). You can’t expect him telling you this. He has to maximize premium amount after all.
Government doesn’t make health or life insurance mandatory. In the same way it also doesn’t care about your car insurance. Hope this answers.
Honest, Unbiased & Simplified, as always.