Commercial Vehicle Insurance

Updated On: 2023-04-22

Author : Team Policybachat

Commercial vehicle insurance is taken by the vehicles which are categorized as Commercial vehicles driven for the purpose of business. Vehicles driven for the purpose of pleasure are classified as Private carriers. Commercial vehicle insurance is taken for vehicles which are used for business purpose such as carriage of goods or transport of passengers from one place to the other. Commercial vehicles such as Trucks, Tractors, Cabs, Taxi, Pickup trucks etc. require separate insurance policy which is known as Commercial vehicle insurance.

Commercial vehicles are subject to higher wear and tear when compared to the private cars since the usage of commercial vehicles would be higher. This heavy usage also increases the probability of the accidents and loss to the commercial vehicles when compared to the private cars which are driven less thereby reducing the probability of accidents. The best commercial vehicle insurance company in India can be found on the portal Car Insurance where you can have interaction with our agents who are well trained to assist you in providing the best commercial vehicle insurance for you on the basis of your requirements.

Commercial vehicles are mostly the goods carrying trucks and the passenger carrying cars which constitute more than 90% of the commercial vehicles plying on the Indian roads. It is of utmost importance to select the best commercial insurance for your commercial vehicle to get the proper claim at the time of accident. Commercial vehicle insurance is usually valid for a period of 12 months from the risk inception date or the policy start date. Construction equipment used for the construction purpose of buildings such as Cranes, Mixers, Road rollers etc. can also be insured under the commercial vehicle insurance policy if there is a valid registration certificate for the same.

Commercial vehicle insurance is costly compared to the private car insurance due to the higher risk and higher liability associated with it. The main risk factor in the commercial vehicle is the death of passengers or third party claims where the losses would run into unexpected numbers. Most of the third party claims arising in India would be from the Commercial vehicles as these vehicles record the highest number of accidents. For instance, let us assume a passenger carrying commercial vehicle is met with an accident, then the third party claims in this case would be many times higher than that of the claim amount in case of a private car.

There are only few private insurance companies in India which are interested to underwrite the commercial vehicle insurance due to the heavy claims associated with the portfolio. Commercial vehicle insurance is done by all the public sector insurance companies in India without any rejections, while the claim settlement experience differs from one company to the other.

Why is Commercial Vehicle Insurance Important/Need for Commercial Vehicle Insurance?

Commercial vehicle insurance is the most sought after insurance in India. As per the Motor vehicles act, 1938 it is mandatory for every commercial vehicle to have a third party insurance while driving in public places. The commercial vehicle insurance importance is explained below:-

  • Commercial vehicles need a valid third party insurance to be driven on public roads without which the owner/driver may be fined up to Rs.5000 or up to 3 months of imprisonment or both. To avoid the fine or imprisonment most people having commercial vehicles opt for commercial vehicle insurance.
  • Commercial vehicles travel a lot as well as cover more distance when compared to the private cars which means that the probability of accident or loss is high in the commercial vehicles. It is important to have commercial vehicle insurance to get the claim at the time of accident of loss.
  • There is a high chance of a commercial vehicle meeting with an accident resulting in third party claims which cannot be borne by the owner/driver without the support of insurance. Hence, it is important to have the commercial vehicle insurance in India for every commercial vehicle.
  • Commercial vehicles such as School buses are less prone to accidents but may have severe fatalities at the time of accidents, thereby increasing the need to have commercial vehicle insurance.
  • There might be business where the day to day operations are dependent on the commercial vehicles such as transportation of goods or transportation of passengers. In case of any accidental damage to the commercial vehicle the business might come to a halt without a proper insurance plan which provides the claim. For instance if the customer doesn’t have a commercial insurance, the claim amount has to borne from his account which may impact his business operation which otherwise the amount could have been used for expanding his business.
  • As per the mandate of the government of India it is important to have a third party insurance for every commercial vehicle and the own damage section can be taken as per the will of the customer.
  • A small amount each year paid for insurance can save you from incurring huge losses at the time of accident. The insurance companies will settle the loss as the maximum liability mentioned in the policy copy.

Types of Commercial Vehicle Insurance

Commercial vehicle insurance comes in 2 types: Third-party only commercial vehicle insurance or Act only or Liability only commercial vehicle insurance & Comprehensive insurance.

  • Third party Commercial vehicle insurance: Third party commercial vehicle insurance covers the loss of life or bodily injury or third party property damage in case of accident involving the insured motorcycle. The third party death claims are awarded by the honorable courts and the insurance companies are complied, while the property damage claims are settled directly by the insurance companies up to the maximum limit mentioned in the policy copy.
  • Third party commercial vehicle insurance is mandatory by law for every commercial vehicle plying in public places without which the owner/driver of the vehicle would be fined or imprisoned. The premium for third party commercial vehicle insurance would be decided by the Insurance regulatory and development authority of India (IRDAI) depending in many factors such as the previous year GWP, previous year loss ratio etc. IRDA may change the third party commercial vehicle insurance rates each year and the same would be followed by all the insurance companies.

  • First party commercial vehicle insurance: First party commercial vehicle insurance covers the loss or damage to the commercial vehicle insured due to any insured peril such as accident or natural disaster. The insurance company would indemnify the insured customer up to the Insured declared value which is the maximum liability of the insurance company in case of an accident. First party commercial vehicle insurance is also called as Own damage insurance which covers the vehicle in case of any loss or damage.
  • As per the Motor vehicles act, 1938 own damage insurance or first party commercial vehicle insurance is not mandatory while the third party commercial vehicle insurance is mandatory. The premium for own damage commercial vehicle insurance is decided by the insurance companies after taking into consideration many factors such as previous year loss ratio, claim costs, and any other expenses.

  • Comprehensive commercial vehicle insurance: Comprehensive commercial vehicle insurance includes both the third party insurance and first party insurance. It is also known as Full insurance in the market and the premium is dependent on the cubic capacity of the vehicle as well as the make model. The comprehensive commercial vehicle insurance in India can be purchased online from Two Wheeler Insurance in 3 basic steps by entering all the basic details such as Make Model, Variant of the, Date of registration, RTO etc. and paying the premium. The comprehensive commercial vehicle insurance is valid for a period of 12 months from the date of risk inception.
  • Comprehensive commercial insurance with add-ons: Comprehensive commercial vehicle insurance is also offered along with add-ons or riders which offer extra coverage in the form of nil depreciation or Zero depreciation. The riders or add-ons can be taken by paying extra premium at the time of policy purchase. In commercial vehicles there is a concept of IMT sections which can be deleted or added at the will of the customer. IMT 23 covers lamps, tires, mudguards, bonnet, side parts without which the claim is not admissible for the damages caused to the above mentioned parts.
  • The reason for including this clause is that the depreciation in commercial vehicles would be on the higher side and thereby the chance of these parts getting damaged is high which result in frequent claims. To avoid petty claims and reduce the claims on the part of the insurance companies, this clause has been added where the customer can purchase on payment of additional premium.

    Apart from these add-ons there are other riders such as Road side assistance in which the insurance company provides the assistance to the vehicles getting stranded on the road side. The major add-on opted by the commercial vehicles such as Trucks, Lorries, Auto-rickshaws is the Bumper to Bumper cover on payment of extra premium.

Commercial Vehicle Insurance without RC Copy:

There could be commercial vehicles such as Construction equipment vehicles which do not have any Registration copies. It is to be noted that only the vehicles which have valid RC can be insured under a motor insurance policy. For vehicles without any RC copy, there is a separate insurance known as the Contractors Plant and Machinery (CPM) insurance which insures the construction equipment.

Any vehicle without a valid third party motor insurance is not permitted to move on the road or public place. All the vehicles insured under CPM are not permitted to move on road and are supposed to be transported to the construction site with the help of another vehicle.

CPM policies are not considered as Motor insurance policies, in case the construction equipment which is not insured under a motor insurance policy travels on public road and causes a third party loss or life or property damage, then it would be the responsibility of the owner-driver to settle the claim to the kin of the deceased as there would not be a valid third party insurance policy.

How to Calculate Commercial Vehicle Insurance Premium?

  • Make & Model: The make and model of your commercial vehicle determines the premium charged by the insurance company. Some make models are charged higher premium due to the repair costs involved with that particular models. The cost of parts to be replaced or repaired is higher for some make of cars which results in higher premium.
  • IDV:Insured declared value is the sum insured opted by the customer for the commercial vehicle. IDV would be the maximum liability of the insurance company in case of any loss or damage. Higher the IDV, higher would be the premium of your commercial vehicle.
  • GVW: GVW is the gross vehicle weight which is the same as the cubic capacity in case of private cars and two wheelers. Gross vehicle weight is the weight of the vehicle plus the weight of the passengers, fuel and any other accessories. Higher the GVW, higher would be premium payable.
  • No claim bonus: The No Claim Bonus is given to the drivers who do not make any claim in the previous years of insurance. The NCB bonus is given in 5 slabs and ranges from 0% to 50% for each claim free year. The NCB discount is applied on the own damage premium before arriving at the final premium.Higher the NCB, lower would be the premium.
  • Manufacturing Date/Registration Date: The Date of Manufacture or the Date of registration is taken for the premium calculation to determine the age of the vehicle. Some insurance companies take the manufacturing date for determining the age of the vehicle while some insurance companies take the registration date to determine the age of the vehicle.
  • Loss Ratio: The loss ratio of the insurance company will also determine the premium to be charged for that particular model of commercial vehicle. If there are heavy losses for any particular make model of commercial vehicle the premium would be high and in some cases insurance companies may altogether decline such make models.
  • Zone: For the purpose of insurance, India is divided into 2 zones namely Zone A and Zone B. Zone A consists of the State capitals and Metropolitan cities while the Zone B consists of the other places excluding those in the Zone A. This is due to the experience that the cars in Zone A are more prone to accidents compared to that of the cars from Zone B.
  • Addition of IMT 23: As discussed above the premium of commercial vehicle would be calculated based on the selection of the IMT 23 clause. Having this clause increases the premium and provides extra coverage to the owner of the commercial vehicle.

Factors to be considered while Buying / Renewing Commercial Vehicle Insurance?

  • Insured Declared Value (IDV): Insured declared value is the sum insured provided by the insurance company for your commercial vehicle and is the maximum liability of the insurance company in case of an accident. The IDV provided by the insurance companies vary from one another in a particular range. Increase in IDV increases the premium to be paid by the customer. It is advisable to opt for the maximum IDV and chose the insurance plan that is offering the maximum IDV at the least possible price. IDV comes into play in case of total loss or constructive total loss.
  • Claim Settlement Ratio: Claims are the most important part of the insurance process. The real usage of insurance comes into play at the time of claim settlement.  It is important to compare the claim settlement ratio of the insurance companies before purchasing the commercial vehicle insurance policy as the claim settlement ratio reflects the chances of your claims getting settled. Higher the claim settlement ratio, higher the chance of your claim getting settled. Any company with the claim settlement ratio of 92% - 99% can be considered as the best insurance company.
  • Cashless Garages: Claim settlement can be done either cashless or reimbursement but the basic essence of taking an insurance policy is not to spend money at the time of claim. Cashless claim settlement option allows the customers to get their commercial vehicles repaired at any of the tie-up garages without paying the claim amount. The claim amount in case of cashless settlement is paid by the insurance company directly to the garages.
  • It is important to check for the list of Cashless garages available in your area of operation to enable you to go for cashless claim. If there are no cashless garages available in your place of residence then that insurance provider is to be avoided. The best commercial vehicle insurance in India is the one which has more number of cashless garages in your place of residence.

  • Riders/Add-ons: Riders or add-ons are the extra benefit provided in the insurance policy with the payment of extra premium. The best commercial vehicle insurance policy should contain the riders or add-ons which help at the time of accidental damage and claim settlement. Riders or add-ons include extra coverage to the commercial vehicle insurance such as Zero depreciation or bumper to bumper coverage, Consumables, Key protection etc.
  • The riders / add-ons are offered by the insurance companies for a period of 2-3 years after which the riders would not be available. The rider premium varies from one company to the other. The major part of the premium paid for your commercial vehicle is the third party premium and the add-on premium if any opted. IMT 23 add-ons should be taken by the customers while taking the insurance policy to increase the coverage of your commercial vehicle.

  • Premium: Premium is the amount paid by the insured customer for the insurance coverage provided by the insurance company. The premium to be paid by the customer should not be high and at the same time coverage should be adequate. Premium amount is decided by the insurance companies and it should be reasonable and competitive. Too high premium or too less premium quotes should be avoided by the customers as there might be some hidden clause in it which reduces or increases the premium. The premium comparison for your commercial vehicle can be done on the portal by entering the basic details of your commercial vehicle.
  • After Sales Service: Insurance is intangible and the need for insurance comes at the time of claims and after sales. There might be endorsements or changes in the policy which might be necessitated. The response and the turnaround time taken by the insurance company for the after sales service is to be taken into consideration before deciding on the purchase. After sales service includes all the endorsement requests from the customers such as Name change, address correction etc. and the claim settlement which is the major part of insurance.
  • Commercial vehicles are the source of income for many people and with each passing day of these vehicles in garages the income generating capacity of the customers would be reduced drastically. Hence, it is advisable to check for the insurance companies which can settle the claim in a minimum period of time

Commercial Vehicle Insurance Cost

Subject to deduction of depreciation, commercial vehicle insurance price or IDV is fixed at the commencement of the policy. The IDV is decided based on the manufacturer’s listed selling price and brand of the vehicle.

However, depreciation is a major factor that contributes a lot to commercial vehicle insurance. With age, the value of a vehicle depreciates and based on this rate, IDV is decided.

For best commercial vehicle insurance quotes online, please visit PolicyBachat and get the best quotes from the top general insurance companies. Talk to our agent to decide the suitable add-ons or IDV for your vehicle depending on the area of driving the vehicle.

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