Commercial vehicle insurance in India is a vital safeguard for businesses reliant on vehicle operations. Whether trucks transport goods or taxis convey passengers, securing insurance coverage transcends mere regulatory compliance and represents a prudent financial strategy.
This insurance protects against accidents, theft, and liabilities incurred from third-party involvement. Additionally, policyholders can enhance coverage with additional features such as cashless repair services and no-claim bonuses.
In this article, we will learn about commercial vehicle insurance in India and examine its various types, benefits, and significant features.
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Wed 16 Oct. 2024
What is Commercial Vehicle Insurance?
As its name suggests, commercial vehicle insurance is a form of auto insurance designed to safeguard both the owner-driver and the commercial vehicle against losses and damages. In India, where it is mandatory, this insurance covers all parties involved in an accident, encompassing injuries and even fatalities.
With the flexibility to customise coverage through add-ons, people can tailor the insurance policy to suit their needs. This comprehensive coverage extends to losses or damages incurred due to accidents, collisions, fires, and unforeseen events.
Is it Mandatory to Have Insurance for Commercial Vehicles?
Insurance is mandatory for commercial vehicles. This requirement ensures that any damage or injury caused by your vehicle to third parties is financially covered. The law in many countries, including India, mandates this to protect public safety and reduce financial risks for businesses.
Failure to comply can result in legal penalties and fines. Ensuring your commercial vehicles are insured demonstrates your commitment to responsible business practices.
In particular, having at least a third-party insurance policy is mandatory. This covers any damage or injury your vehicle may cause to others.
In India, business vehicles must carry third-party liability insurance at a minimum. If your car causes damage or loss, this insurance policy will only cover the assets or people of third parties.
Types of Vehicles Covered in Commercial Vehicle Insurance
Commercial vehicle insurance provides essential coverage tailored to the unique requirements of each vehicle type, ensuring comprehensive protection for businesses.
- Taxi/Cab: If you operate a business taxi, the law requires you or your organisation to purchase a third-party liability-only policy. This provides financial protection for your company, controls your profit margin, and minimises downtime if your cab suffers losses or damage to another person’s property, car, or property.
- Auto Rickshaw: If you use your auto rickshaw as your business’s primary income source, buying a standard or comprehensive auto rickshaw insurance policy is important. This will shield both your vehicle and the owner-driver from any losses brought on by unanticipated events such as fires, thefts, natural disasters, terrorist attacks, and malicious acts.
- Truck: Suppose your company often employs trucks to move items from one location to another. In that case, loss or damage caused by fires, accidents, natural disasters, etc., is also covered by commercial vehicle insurance.
- Tractor: Purchasing tractor insurance is the very least you can do to safeguard your tractors against losses and damages, including harm to the tractor and the driver-owner. This is especially important if your company is asset-heavy and uses multiple tractors for business operations.
- Commercial Two-Wheeler Insurance: This insurance does not cover personal two-wheelers; it only covers two-wheelers used for commercial or passenger transportation.
Types of Commercial Vehicle Insurance Policies
Commercial vehicle insurance policies offer diverse coverage options tailored to businesses’ needs. The two main types of commercial vehicle insurance policies are:
1. Third-Party Insurance Policy
If your vehicle causes damage or loss, this insurance policy will only cover third parties’ assets or injured persons. In India, business vehicles must carry third-party liability insurance at the very least. Furthermore, this policy does not allow add-ons, and IRDAI sets the premium cost for third-party liability insurance.
2. Comprehensive Insurance Policy
Besides safeguarding your vehicle, comprehensive insurance covers property damage or bodily injury to others. This plan protects against harm, damage, theft, and natural calamities. The comprehensive policy also includes several add-on covers, improving the coverage.
What is Covered in Commercial Vehicle Insurance?
Commercial vehicle insurance policies offer comprehensive coverage for businesses, safeguarding against various risks. This insurance protects the vehicle owner-driver duo, ensuring financial security amidst unforeseen events on the road.
- Accidents: The damage due to an accident of a commercial vehicle.
- Theft: Theft-related loss or damage to a commercial vehicle.
- Fire: The commercial vehicle sustained fire-related damage.
- Natural Calamities: Damages brought on by a natural disaster to the commercial vehicle.
- Individual Mishap: If a commercial vehicle is involved in an accident and the driver is hurt or killed.
- Losses to Third Parties: Any harm a third party may sustain due to the commercial vehicle.
- Towing Incapable Automobiles: Any damage caused by the commercial vehicle to the vehicle being towed.
Add-on Options Available with Commercial Vehicle Insurance
Commercial vehicle insurance policies offer a variety of add-ons to enhance coverage and cater to specific needs. These optional features protect against various risks, ensuring comprehensive insurance solutions for commercial vehicle owners.
- Consumable Cover: This add-on protects miscellaneous vehicle parts, such as nuts, bolts, engine oil, and grease, in an accident.
- Parts Depreciation Protect: It covers the depreciation of vehicle parts like rubber or fibreglass if they need replacement due to an accident, ensuring the policyholder doesn’t bear the cost.
- Engine and Gear Box Protect: This add-on covers consequential damage to the engine or gearbox after an accident, including scenarios like hydrostatic loss, which isn’t covered under a standard policy.
- Breakdown Assistance (Roadside Assistance): This service offers 24×7 assistance for vehicle breakdowns, including flat tyres, battery malfunctions, or accidents, ensuring prompt support whenever needed.
- Loss of Revenue: Compensates income loss while the vehicle is under repair due to damage, ensuring financial stability for the policyholder during downtime.
- Additional Towing Expenses: This coverage covers extra expenses incurred during vehicle towing from the accident spot to the nearest garage or place of safety.
- EMI Protection Cover: This policy reimburses regular EMIs payable to the financier if the vehicle is damaged and undergoing repairs, preventing financial strain on the policyholder.
- Return to Invoice (Passenger Carrying Vehicle): Provides compensation in case of total loss or theft of the insured vehicle, ensuring the policyholder receives payment equivalent to the vehicle’s invoice value.
- Key and Lock Replacement (Passenger Carrying Vehicle): Covers the cost of replacing the vehicle’s lockset or keys if lost or misplaced, ensuring the policyholder isn’t burdened with replacement expenses.
What is Not Covered in Commercial Vehicle Insurance?
Understanding the scope of coverage under your commercial car insurance policy is essential to prevent unwelcome surprises during the claims process. Here are some examples of scenarios that your policy may not cover:
- Own Damages for Policyholders of Third Parties: If you have a Third-Party Liability Only Policy, it won’t cover damage to your car.
- Without a Licence or While Intoxicated: If the claimed vehicle’s owner-driver is intoxicated (drunk) or operating a vehicle without a legal licence.
- Contributory Errors: Any harm brought on by the driver’s contributory negligence (for example, driving during an active flood).
- Consequential Damages: Any harm that does not directly stem from the mishap or natural disaster, such as indirect losses like lost revenue or market share.
How to Buy Commercial Vehicle Insurance?
Buying commercial vehicle insurance requires careful consideration of your business needs and the available coverage options. This ensures you obtain a policy that offers adequate protection for your commercial vehicles.
Online
Online insurance is frequently regarded as more convenient and cost-effective than its offline counterpart. It allows for easier coverage comparison and provides access to 24/7 customer support. You can get business car insurance online by visiting the insurer’s website. You can also use an aggregator website to obtain several quotes and coverages simultaneously.
Offline
You can get commercial vehicle insurance offline by going to the insurer’s office or contacting an agent. Alternatively, you can go to the insurer’s closest branch to see policies and purchase insurance. The offline process can be more time-consuming and may involve influence from an agent, potentially affecting decision-making.
What Affects the Premium of Commercial Vehicle Insurance?
Several factors influence commercial vehicle insurance premiums, impacting costs and coverage decisions. Understanding these variables is essential for businesses seeking optimal insurance solutions.
- Vehicle Type and Usage: How a vehicle is used for business and its type influences insurance coverage, with factors like transporting goods or passengers impacting categorisation.
- Driver: The driver’s identity significantly affects premiums; individual claim histories are assessed, making prudent driver selection crucial for cost savings.
- Location: Geographical context plays a crucial role in insurance premiums; varied driving environments determine risk profiles, with states categorised accordingly.
- Credit Score: Financial metrics, including bankruptcy history and payment records, shape premiums, emphasising the importance of sound financial management for insurance considerations.
Benefits of Commercial Vehicle Insurance
Commercial vehicle insurance provides essential financial protection against various risks and obligations for companies that depend on automobiles for operations. Understanding its advantages is imperative to maintaining operational continuity and minimising economic losses.
- Commercial vehicle insurance is a tax-deductible business expense, providing businesses with financial benefits.
- Bulk purchasing options are available for entities like travel agencies or car rental services, streamlining the process and offering affordability.
- It offers essential financial protection against accident-related damages, including coverage for injured parties’ medical expenses.
- Coverage extends to uninsured individuals driving with consent and settlement amounts for losses due to theft, fire, vandalism, or natural calamities.
- Legal fees in lawsuits are covered, ensuring comprehensive protection against legal liabilities.
- Supplementary benefits include coverage for fatalities resulting from accidents.
- No-claim bonuses are awarded during policy renewals for claim-free periods.
- Financial assistance is provided to settle third-party penalty claims.
- Towing assistance is available for vehicle breakdowns, offering peace of mind during roadside emergencies.
Commercial vehicle insurance is a vital asset for businesses, providing essential financial protection against various risks associated with vehicular operations. From safeguarding against accidents, theft, and natural disasters to offering coverage for legal liabilities and medical expenses, its comprehensive nature ensures businesses can confidently operate.
