Insurance can be defined as a contract, where there is a transfer of financial risk from an individual to a pooled group of risks by means of a two-party contract. The insured party obtains a specified coverage against an uncertain event for pre-stipulated payment, called a premium. After the payment of the scheduled premiums, if the insured experiences a loss which is potentially covered by the insurance policy, he can claim the financial losses and the insurance company indemnifies the insured as per the insurance policy. Violation of this rule can lead to:
- Suspension of the individual’s driving license.
- Suspension of the vehicle’s registration license
- Fine of ₹2000 and/or imprisonment for a period of three months.
In the case when the claim is valid, insurers will indemnify the insured for the losses incurred. Insurance being a kind of contract of indemnity, insurers and indeed re-insurers have the right of subrogation. Once the insurers have indemnified the insured under the policy, they step into the shoes in relation to any recovery rights which may be available to the insured against the third parties.
Read Also: Hit and Run cases and legal consequences
Minimum Third Party Cover
Statutorily, the minimum level of insurance owner of a motor vehicle is required to have third party liability. This insurance policy covers only the damages which the third party (i.e., the party other than the insured and insurer) has incurred and ay liability for causing injury. However, it is to be proved in the court of law that the accident which the third party has incurred has occurred from the insured vehicle.
However, if the owner of the vehicle wishes to cover the damages incurred to the insured vehicle as well, he can opt for a comprehensive insurance policy. Motor insurance with comprehensive cover does not cover the following risks:
- Normal vehicle depreciation
- Regular wear and tear
- Any damage/loss incurred due to drunken driving
- Any damage/loss incurred when driving without proper licenses
If in the Court of law, it is proved by the insurer that the driver of the vehicle has breached the terms and conditions of the policy Then in this case the insurer is exonerated from the liability to pay the insurance claim amount.
Motor Vehicles (Amendment) Bill in 2017
The lower house of the parliament passed the Motor Vehicles (Amendment) Bill in 2017. The amendment brought in the legislature aims to bring changes in the transport sector to promote safe driving practices among the commuters. This can be achieved by making stringent laws that impose a heavy penalty for a traffic rules violation.
Specific Changes brought by the bill
- If an underage child is found driving and causing fatal accidents, the parents of such a child may get imprisonment, which may extend to three years.
- The bill was passed to take stringent actions against the taxi aggregators.
- This bill aims to increase the compensation for the family members of the deceased who have met with an accident.
- As per the Motor Vehicle Act, 1988, under the third party motor vehicle insurance, there was no cap on the insurance claim amount. However, with this passing of this bill, the amount may fix to ₹10 Lakh for death and ₹5 Lakh for serious injury cases.
- A fund must be raised, which may offer mandatory insurance cover to pedestrians in India for specific types of motor vehicle accidents.
- The poor condition of roads is also a major reason for the increase in accidents. Therefore, contractors must be held liable and blacklisted for the poor condition of roads.
- Promoting e-Governance, aiming to increase the driving license validity period, enabling online learning licenses, and waiving off the pre-requisite of educational qualifications while applying for the transport license.
- Making Aadhar Number mandatory while applying for a driver’s license – to ensure incorporation of online services and to restrict duplicate or fake licenses.
- Significant increase in the amount of penalty imposed for traffic rules violations such as drunken driving, rash driving, driving without wearing seatbelt/helmets.
- Bill also aims to penalize regular offenders with a hefty sum of penalty.
Central Motor Vehicles Rules, 1989
As per the Central Motor Vehicle Rules, 1989, an insurance provider is required to produce a certificate of insurance for all policies. This will be other than the policy documentation, which comprises of the terms and condition of the policy. Also, irrespective of the plan he chooses, an insured must be provided with the policy copy. The same shall be produced by the insured while claiming the insurance amount. It is mandatory to carry this certificate of insurance at all times, specifically while driving.
This amendment was introduced to promote an approach to promote safe and sustainable mobility in India. Also, it is mandatory as per the Indian laws to get your vehicles insured. This was made mandatory by the lawmakers so that no person should suffer financially from the accident. Buying an insurance cover is equivalent to saving money to cover yourself financially in case of a motor vehicle accident. However, the cases where the cost to cover yourself may be huge. In those cases, the owner of the vehicle needs to get the insurance cover backed by an insurance agency. Thus increasing the risk management to a great level.