Vehicle Insurance

Charu R.

The nature of a contract of motor vehicle insurance has been observed in National Insurance Co Ltd vs. Seema Malhotra, wherein the following was stated:

• The essence of the insurance business is the coverage of risk by undertaking to indemnify the insured against loss or damage.

• Motivation of the insurance business is that the premium would turn out to be the profit of the business in case no damage occurs. Such business can be carried on only with the premium paid by the insured. The only profit of the insurance business is the premium paid when no accident or damage occurs.

• To ask the insurance company to bear the entire loss or damage of somebody else without the company receiving a pie towards premium is contrary to the principles of equity, though insurance companies are made liable to third parties on account of statutory compulsions due to the initial agreement, entered between the insured and the company concerned.

Need for Vehicle Insurance

The most important reason to obtain vehicle insurance is for financial, medical and personal protection. Motor insurance covers the cases of body injuries, vehicle damage, theft, payment of medical bills etc. If a person is uninsured and gets involved in a dangerous accident, he may find himself in a financially compromising situation. Keeping in mind these financial and physical stresses, it is important/necessary to purchase a motor insurance.

Another important reason for owning a motor insurance policy, is in view of the cost of repairs which would be incurred, if the driver hits a third party’s vehicle. Vehicle repairs can be very expensive. If the driver is at fault in an accident, he may be required to pay for the repairs or the replacement of the vehicle that has been hit.

Consequences of not taking motor vehicle insurance

As per the new Motor Vehicles (MV) Act 2019, the fine for the first offence of driving without insurance policy is Rs. 2,000/- and/or imprisonment up to 3 months. Earlier, the fine applicable was Rs. 1,000/- and/or imprisonment up to 3 months.