January 5, 2022

Commercial Vehicle Insurance

Commercial Vehicle Insurance

Commercial Vehicle Insurance helps businesses cover any loss or damage to their commercial vehicles due to accidents, floods, fires, or other unfortunate events.

Vehicles have been assisting businesses in the transport and trade of goods, materials, and much more ever since the dawn of the first automobile. Many businesses employ motor vehicles such as taxis, tractors, cranes, cargo carrying vehicles, etc. for their day to day operations.

These vehicles often operate outside the commercial premises and are exposed to innumerable risks on the roads, including the risk of  water damage due to rains/floods, physical damage due to accidents or malicious activity, injuries or property damage to third parties, and much more.

To successfully manage these risks, businesses need a Commercial Vehicle Insurance policy. This kind of Insurance is designed to offer third party and own damage covers to commercial vehicles. In fact all vehicles, both personal and commercial mandatorily require Third Party Motor Insurance to drive on Indian roads.

Commercial Vehicle Insurance is further divided into two categories :

  • Motor Insurance for Goods Carrying Vehicles - this category includes vehicles such as  cargo-carrying vehicles such as a trailer, freight car, trucks, tempos, pick - up trucks, etc.
  • Motor Insurance for Miscellaneous Vehicles - this category includes vehicles such as agriculture-related vehicles (tractors, harvesters, etc), construction-related vehicles (bulldozers, concrete mixers, road rollers, etc), and emergency-related vehicles (fire fighting trucks, ambulances, hearse van, etc.)
  • Motor Insurance for Passenger Carrying Vehicles - this category includes taxis, cabs, inter-state / inter-city buses, and other passenger cars

Commercial Vehicle Insurance covers business vehicles against different types of external damages, including coverage for third party liabilities. Coverage under Motor Insurance is divided into two types :

1 Own Damage Cover - this includes coverage for any loss or damage to the insured vehicle and its accessories due to  :

  • Fire, explosion, or lightning
  • Burglary, or theft
  • Riots, strikes, malicious damage
  • Land subsidence like landslide or rockslide
  • Earthquake (fire and shock)
  • Floods, storms, typhoons, inundation, and other natural calamities
  • Terrorism
  • Accidents by external means
  • Whilst in transit by road, inland waterway, lift, elevator or air

In addition to the above, this policy will also cover personal injuries and death of the owner-driver caused by an accident. The personal liability of co-passengers can also be covered.

Towing expenses are paid if the vehicle has broken down somewhere in the middle of the road. However, the liability of damages caused due to towing is on the towing company & not on the vehicle owner’s insurance policy.

2 Third Party Liability cover - this includes the damage to a third party in the event of an accident or collision. Here, the following liabilities are covered :

  • Loss or damage to third party property
  • Death, bodily injuries, or permanent disablement caused to the third party

Most insurance companies offer :

(i) A Package policy / comprehensive policy, which consists of both own damage cover and third party liability cover, and

(ii) A Third party Liability only policy, which only covers the Third party liabilities

Commercial motor Insurance comes with the following exclusions :

  • Depreciation in the value of the vehicle over time (this cover can be availed by paying additional premium)
  • Electrical and mechanical breakdowns
  • Gradual wear and tear
  • Illegal driving, such as driving with an invalid driving license, or under the influence of alcohol
  • Consequential loss of any kind
  • Claims arising out of contractual liability
  • Any damage caused by willful or contributory negligence on the part of the insured
  • Use of a vehicle not in accordance with legal limitations, such as a private car being used as a cab, etc.

If the insured business has a Third Party only Motor Insurance policy, any personal liability or damage (under a own-damage cover) will not be covered.

It is mandatory for businesses in India to buy Commercial Vehicle Insurance, particularly the Third Party Liability cover. Learn about other mandatory Business Insurance policies

Opinions, conclusions and statements of intent expressed in this article are that of the author and Verak does not accept liability for the views expressed unless confirmed by an authorized representative of the Company independently of this communication.