A Complete Guide on Commercial Motor Insurance

A commercial vehicle is an income-generating asset for your business, and since it is used frequently, it may face a higher risk of costly repairs. Events such as accidents, theft, or liability can damage your business operations and cause significant financial losses. You need commercial motor insurance to protect against these sudden expenses.

Let’s understand in detail what commercial motor insurance is, how it works, its coverage, and exclusions.

What Is Commercial Motor Insurance?

Commercial vehicle insurance is a type of insurance that protects vehicles used for business purposes against high and unexpected repair costs arising from accidents, theft, fire, and natural disasters, while also covering third-party legal liabilities.

In India, all personal and commercial motor vehicles must have a third-party liability insurance plan as per the Motor Vehicles Act, 1988.

You must get commercial motor insurance if your vehicle falls under any of the following categories.

What Is the Difference Between Commercial Motor Insurance and Private Motor Insurance?

Let’s explore and understand the differences between commercial and private motor insurance.

Types of Commercial Vehicle Insurance

The following are the types of commercial motor insurance plans you can choose based on your coverage requirements.

Third-Party Motor Vehicle Insurance

A third-party commercial vehicle insurance plan is mandatory for all commercial vehicles as it covers repair expenses arising from third-party property damage, physical injuries, or death. This ensures that the third party suffering loss due to the vehicle owner is fairly compensated.

Comprehensive Motor Vehicle Insurance

A comprehensive commercial vehicle insurance plan covers both damage to your commercial vehicle and third-party liabilities. This insurance plan combines third-party liability cover and own-damage cover, offering comprehensive protection for your vehicle.

Own-Damage Commercial Vehicle Insurance

A damaged commercial vehicle insurance plan only covers repair expenses of your commercial vehicle and does not cover third-party liabilities. In India, own-damage cover is typically purchased alongside third-party insurance plans.

Fleet Insurance

Fleet insurance is a type of commercial motor insurance plan that covers multiple company-owned vehicles under one master policy. This plan is ideal for businesses with multiple commercial vehicles, offering centralised administration, easy tracking of policy expiry, and bulk discounts.

What Does Commercial Motor Insurance Cover?

Here’s a detailed table about the commercial Insurance cover.

What Is Not Covered by Commercial Vehicle Insurance?

Damage to your commercial vehicle caused by the following events is not covered under the commercial motor insurance policy.

Regular Wear and Tear

If your commercial vehicle requires repairs due to aging or physical deterioration of the vehicle parts from normal wear and tear.

Mechanical or Electrical Failures

Vehicle breakdowns and damage caused by internal mechanical or electrical malfunctions, rather than external accidents, will not be covered.

Driver Intoxication

Damages caused by accidents arising when the driver is under the influence of alcohol, narcotics, or other drugs will not be covered.

Invalid Licensing

If your commercial vehicle gets into an accident and the driver does not have a valid driving licence, the repair costs for the damage will not be covered.

Geographical Limits

Some commercial motor insurance plans cover only a specific city or operational zone. If your vehicle is stolen, damaged, or involved in an accident that causes third-party liability outside the covered area, the insurance provider may not cover the repair costs.

Misuse or Illegal Use

If your commercial vehicle is damaged while being used for illegal acts, or speeding or racing, the insurance provider will not cover the damages.

Consequential Losses

Secondary or indirect financial losses resulting from an accident or damage to a certain part would not be covered.

War and Nuclear Risks

Damage to your commercial vehicle resulting from war or nuclear attacks would not be covered by the insurance provider.

Commercial Vehicle Insurance Add-Ons

You can customise your commercial motor insurance coverage by selecting certain add-ons or riders. The following are a few must-have commercial vehicle insurance add-ons.

Zero Depreciation

When you file a repair claim for commercial vehicle damage, a standard policy subtracts the depreciation value of the replaced parts. Adding a zero-depreciation cover eliminates these deductions, ensuring maximum final claim payout.

IMT 23 Cover

The IMT 23 cover is specifically designed for commercial vehicles to cover parts that are usually excluded from standard commercial motor insurance policies, such as tires, tubes, lamps, and bumpers, after depreciation.

Consumables Cover

A consumables cover ensures the insurer pays for items used during repairs, such as engine oil, nuts, bolts, screws, and washers, that are excluded in a standard policy.

Engine & Gearbox Protection

The engine and gearbox protection add-on covers repair costs for damage caused to the internal engine parts or gearbox due to waterlogging or oil leakage. This add-on is suitable for vehicles in flood-prone areas such as Mumbai.

Loss of Revenue / Daily Allowance

This add-on compensates for the daily business income lost while your commercial vehicle is being repaired after an accident.

Roadside Assistance (RSA)

The roadside assistance cover provides emergency assistance such as towing, flat tire changes, or jump-starts if your vehicle breaks down unexpectedly on a street.

Electrical or Non-Electrical Accessories Cover

You can insure the additional accessories installed in your car by opting for an electrical or non-electrical accessories cover.

Factors That Affect Commercial Vehicle Insurance Premium

The following are the factors that affect the premium on your commercial motor insurance.

Insured Declared Value (IDV)

IDV is the maximum payout your insurer will pay if your commercial vehicle is stolen or damaged beyond repair. It is the current market value of the vehicle after accounting for depreciation. The higher the IDV, the higher the commercial vehicle insurance premium.

Engine Capacity (CC)

Vehicles with larger, more powerful engines typically have higher premiums, as their repair costs are significantly higher.

Vehicle Type

Heavy-duty vehicles, such as trucks or commercial loaders, are charged higher premiums than light-duty vehicles because they cause more severe damage in accidents, carry heavy or hazardous loads, and cost more to repair or replace.

Purpose and Cargo

If your business transports hazardous materials or heavy goods, you may have to pay a higher premium. These vehicles pose a greater risk to r the insurer than those carrying general light freight or passengers.

Geographical Location

If your business operates in congested metropolitan areas that are prone to heavy traffic accidents and theft, such as Mumbai and Bangalore, the premium charged would be higher.

Deductibles

If you opt for commercial motor insurance with a deductible, the premium will be lower than for a policy with no deductible. The higher the deductible, the lower the premium.

Add-On Covers

Customising and selecting additional covers, such as zero depreciation, roadside assistance, and consumables cover, would increase the insurance premium.

How to Reduce Commercial Vehicle Insurance Premium

Here’s how you can reduce commercial vehicle insurance premiums.

Compare Plans Online

Before buying commercial motor insurance, compare plans offered by various insurers to find an affordable policy with a low premium and the right coverage for your needs.

Optimize IDV

Set a realistic Insured Declared Value (IDV). Do not reduce your IDV significantly just to reduce your premium because if your car is stolen or totaled beyond repair, the claim payout would be low and insufficient.

Avoid Unnecessary Add-ons

You don’t need to add every rider to your commercial motor insurance policy. Select add-ons that truly add value and align with your operational risk profile.

Protect Your NCB

Pay for small scratches, dents, or minor repairs out of pocket instead of filing a claim, to preserve your No Claim Bonus benefit, which will help lower your premium at renewal.

Increase Voluntary Deductibles

If you want to reduce your premium, you can opt for a voluntary deductible, under which you will have to pay a fixed amount for the damages out of pocket during a claim before your insurance kicks in.

Avoid Risky Modifications

Avoid risky and non-essential vehicle modifications intended to enhance performance, as they increase the vehicle’s value, leading to higher insurance premiums.

Timely Renewals

Renew your commercial vehicle insurance on time. A coverage gap can reset your policy benefits and raise your premium as the vehicle ages, and driving without valid insurance will lead to heavy fines.

How to Buy Commercial Vehicle Insurance Online

Buying commercial motor insurance online is quick and easy; just follow the steps below.

Step 1: Visit an insurance provider’s official website or a web aggregator’s platform such as Upstox.

Step 2: Choose the Commercial Vehicle Insurance option in the motor insurance segment.

Step 3: Enter your vehicle registration number and RTO details.

Step 4: Provide details of the vehicle’s business use, make, model, and weight.

Step 5: Select the Insured Declared Value (IDV) and policy type, such as Third-Party or Comprehensive, or Own Damage.

Step 6: Pick any extra add-on covers as per your vehicle requirements and customise your coverage.

Step 7: Upstox provides a list of insurers that offer the insurance you need. Select one and pay the first premium using UPI, net banking, or a card. You will receive a soft copy of your policy by email. Keep a digital or physical copy of the insurance certificate in your vehicle as required.

Documents Required To Buy Commercial Vehicle Insurance

If you’re planning to buy commercial motor insurance, you will need the following documents.

• Vehicle Registration Certificate (RC) copy
• Previous policy paper, for insurance policy renewal
• Identity and address proof such as PAN or Aadhaar Card.
• Business registration proof such as Certificate of Incorporation, GST Registration Certificate, Udyam Registration Certificate, Shop and Establishment License, Import Export Code (IEC), or Partnership Deed.

FAQs

What is commercial motor insurance in India?

Commercial motor insurance protects business vehicles, such as trucks, taxis, buses, vans, and auto-rickshaws, against unexpected damage, theft, and financial liabilities. Depending on your needs, you can choose third-party liability, own-damage, or comprehensive insurance coverage.

Is commercial vehicle insurance mandatory in India?

Yes, third-party insurance is mandatory for all commercial and personal vehicles in India as per the Motor Vehicles Act, 1988.

What is the difference between third-party and comprehensive commercial vehicle insurance?

In commercial motor insurance, third-party insurance covers injury, death, or property damage caused to others, whereas comprehensive insurance covers damage to your own commercial vehicle as well as third-party liabilities.

How is commercial vehicle insurance premium calculated?

The premium on commercial vehicle insurance is calculated as the sum of regulated third-party liability rates based on vehicle type, cubic capacity, or gross weight, and own-damage costs based on the vehicle's Insured Declared Value, age, and location, minus applicable discounts such as the No Claim Bonus (NCB), and then GST is added.

How can I buy commercial vehicle insurance online?

You can buy commercial motor insurance online via a web aggregator such as Upstox, which allows you to compare commercial insurance plans online, or the official web portal of a motor insurance provider.