As per Section 146 of Motor Vehicles Act 1988 No person can drive a vehicle without proper insurance, which reads as   under:

146. Necessity for insurance against third party risk. — (1) No person shall use, except as a passenger, or cause or allow any other person to use, a motor vehicle in a public place, unless there is in force in relation to the use of the vehicle by that person or that other person a policy of insurance complying with the requirements of this Chapter:

^[1][Provided that in the case of a vehicle carrying, or meant to carry, dangerous or hazardous goods, there shall also be a policy of insurance under the Public Liability Insurance Act, 1991 (6 of 1991).]

1. Types of Policies:  

There are two types of Policies:

(i)  Liability Only Policy:  This covers Third Party Liability for bodily injury and/ or death and Property Damage. Personal Accident Cover for Owner Driver is also included. This policy is also known as ACT only policy etc. 

(ii)  Package Policy(Comprehensive):  This covers loss or damage to the vehicle insured in addition to (i) above.

In Indian Market there are number of covers offered by Insurance companies under various names the basic cover will be either of these two policies, of course, with some addon covers.

Comprehensive (Package)car insurance policy

In Car insurance, a comprehensive car insurance policy covers damage to your vehicle caused by certain events. These include (but are not limited to) fire, theft, vandalism and falling objects. This also comes with a deductible you volunteer to pay and which you are obliged to pay before the insurance company pays the remainder.

It is advisable to buy the Comprehensive insurance policy for your car because it covers the insured, vehicle and third party in a single policy.  This type of insurance covers all the risks covered in the Motor Vehicles Act plus loss or damage caused to the vehicle :

1. by fire, explosion, self-ignition or lightning;
2. by burglary, housebreaking or theft;
3. by riot and strike;
4. by earthquake (fire and shock damage);
5. by flood typhoon hurricane storm tempest inundation cyclone hailstorm frost;
6. by accidental external means;
7. by malicious act;
8. by terrorist activity;
9. whilst in transit by road rail inland-waterway lift elevator or air;
10. by landslide rockslide.

Personal Accident Cover -Coverage of ` 2 lakhs for the individual driver of the vehicle while travelling, mounting or dismounting from the car. Optional personal accident covers for co-passengers are also available.

 Third Party Legal Liability -Protection against legal liability due to accidental damages resulting in the permanent injury or death of a person, and damage caused to the surrounding property.

Subject to the limits of liability as laid down in Motor Vehicles Act 1988 as amended from time to time, the insurance Company under this section will indemnify the insured in the event of an accident caused by or arising out of the use of the vehicle against all sums which the insured shall become legally liable to pay in respect of: -

 (i) death of or bodily injury to any person including occupants carried in the vehicle (provided such occupants are not carried for hire or reward) but except as far as it is necessary to meet the requirements of Motor Vehicles Act, the Company shall not be liable where such death or injury arises out of and during the employment of such person by the insured.

 (ii) damage to property other than property belonging to the insured or held in trust or in the custody or control of the insured.

 Exclusions

The Comprehensive Insurance policy excludes the loss or damage caused due to:

• Normal wear and tear and general ageing of the vehicle
• Depreciation or any consequential loss
• Mechanical/ electrical breakdown
• Loss/ damage due to war, mutiny or nuclear risk
• Damage to/ by a person driving any vehicles or cars without a valid license
• Damage to/ by a person driving the vehicle under the influence of drugs or liquor
• Vehicles including cars being used otherwise than in accordance with limitations as to use
• Wear and tear
• Consumables
• Damage to tyres and tubes unless the vehicle is damaged at the same time, in which case the liability of the company shall be limited to 50% of the cost of replacement
• Driving the vehicle against the limitations as to use.

 INSURED DECLARED VALUE:

 Each car is insured at a fixed value which is termed as the Insured’s Declared Value (IDV). This sum insured is calculated based on several factors. Here’s how it works:

• IDV is calculated based on the manufacturer's listed selling price of the vehicle plus the listed price of any accessories after deducting the depreciation for every year as provided by the Indian Motor Tariff.
• If the price of any electrical and / or electronic item installed in the vehicle is not included in the manufacturer's listed selling price, then the actual value (after depreciation) of this item can be added to the sum insured over and above the IDV.
  In case of vehicles fitted with bi-fuel system such as ​petrol/​diesel and CNG/LPG, permitted by the concerned RTO, the CNG/LPG kit fitted to the vehicle is to be insured separately at an additional premium of 4% on the value of such kit. You need to specifically declare this in the proposal form.

What Insurance Cover Is Right for You?

If what you are looking for is coverage for yourself, against damages to lives and properties of third parties (as required by M V Act) and your vehicle, a comprehensive car insurance policy is what you need. It is a wider coverage plan since it has provisions for third-party along with cover for the damages to your vehicle due to accidents. Comprehensive coverage policy is expensive as compared to just third-party insurance cover.

Various insurers are offering covers as mentioned above and in addition to that add on covers also. There might be slight variations in the benefits and exclusions depending on the insurance company and it is advisable to check the terms and conditions in detail before taking a policy