| How long should I cover my vehicle? December 22, 2008 Your vehicle has to be insured at all times. This is required by law. All car insurance plans are annual policies issued for a period of twelve months. Therefore, you need to know when your insurance renewal is coming up. However, an extension for less than 12 months or a policy for a shorter period can be provided with special approval from a competent authority in the car insurance company. Comprehensive insurance or third party only policy? Let's resolve this confusion of choosing between a third party and comprehensive car insurance policy using the following example: Mr. X, due to the bad traffic on the city roads, employs a driver. One day, after dropping Mr. X at the office, the driver collides with another car on the highway and dies on the spot. As an employer, Mr. X is liable to compensate the driver's demise as he was in the vehicle in the course of his job. Now, as the Motor Vehicles Act has made it mandatory to insure liabilities under the Workmen's Compensation Act, the driver's son files an application to the Labour Commissioner and is awarded Rs 1,50,000. Now if Mr. X has had a third party policy then he can approach the insurance company, who in turn compensates the claim. The liability for compensation as per the Workmen's Compensation Act depends on the wages of the employee and her/his age, and largely represents the loss of earnings. Other losses such as mental pain and agony for the family, future expenses of dependents, and loss of prospective earnings are not accommodated. The driver's son now approaches the Motor Accident Claims Tribunal, demanding a compensation of Rs 1,00,000 towards these losses. Let us assume that the Tribunal awards him only Rs 50,000. Now that Mr. X's third party policy does not cover the second award as per the Motor Accidents Claims Tribunal he will have to pay the Tribunal award of Rs 50,000 from his own pocket. If Mr. X had purchased the comprehensive policy with additional personal accident cover for passengers and drivers, the insurance company would have paid the additional compensation as well. Moral of the story: It is always advisable to purchase the comprehensive policy covering additional liabilities.