SABU LAMA

Unit 4 –Auto Insurance

1. What are the types of motor Vehicles?

Ans: The types of motor vehicles that are eligible for insurance coverage can vary depending
on the insurance company and the types of policy being offered.
Some of the types of motor vehicles that are covered under insurance are:
 Private Vehicle:
They are such types of vehicle owned by individual, business and institution. Private
vehicles can include car, scooter, motorcycle, jeep, van and other types of motor
vehicles that re used for personal transportation.
 Public Vehicle:
They are such types of vehicles owned by individual, institution and organization for
the purpose of rendering transport facilities to the public. Public vehicles include bus,
micro buses, mini buses, taxis, etc.
 Commercial Vehicle:
They are such types of vehicles owned by an individual, organization for the
commercial purpose to carry goods, material, equipment, livestock, etc. commercial
Vehicles can include a wide range of vehicles including trucks, vans, buses, taxis,
vans, buses, etc.
These are some specific types of motor vehicles that can be insured and may vary
from insurance company and the policy.

2. What is add on covers?

Ans: Add on covers means providing additional coverage for a particular risk that may not be
covered by the existing motor vehicle insurance policy. It is provided by all vehicle insurance
to fulfill the requirement of insured. But insured doesnot allow to add exclusions within the
existing policy.
3. What is exclusions?
Ans: Exclusions means any risk which are not covered by auto insurance. In other words, if
any loss insured due to excluded peril then such losses are not paid by the insurance company
4. What is auto insurance? Explain the types of motor vehicle insurance.
Ans: Auto Insurance is the type of insurance which provides protection against the loss and
damage of vehicle. Some of the important perils are to be covered by the auto insurance like
accident, theft, stolen, vehicle damage, fire and lightening, riots, vandalism, strike, medical
expenses, etc.
There are different types of motor vehicle insurance. They are:
 Comprehensive Auto Insurance:
It is also known as package or full motor vehicle insurance. It is such type of
insurance which provides protection against vehicle damage, lost, theft, stolen,
owner/driver. Crew member, passenger, goods and services, liability risk, strike, riots,
vandalism, uninsured or underinsured driver, flood, earthquake, etc. It is clear that it
covers all the perils which are mentioned in the agreement.
 Third Party Insurance:
This is the type of insurance which provides protection against loss and damage of
third party caused by vehicle. Third party insurance is mandatory in Nepal to provide
financial protection to third parties in the event of an accident.
Specification of Third Party Insurance
a) Provides protection against financial burden.
b) Peace of Mind
c) Increase efficiency
d) Easy regulation and control
e) Dispute settlement
f) Increase Social Welfare
g) Economic Activities
h) Financial Soundness
Disadvantages of Third Party Insurance
a) Increase carelessness
b) No renewing of vehicle blue book
 c) Premium becomes financial burden
These are the types of motor vehicle insurance which may have limitations and
exclusions.
5. Write about knock for knock agreement.
Ans: Knock for knock agreement is a mutual agreement between 2 or more insurance
companies to simplify the claim process and minimize the costs in the event of an accident.
Under knock for knock agreement each insurance company agrees to pay loss amount of
money to both parties when loss caused by some perils, regardless of who is negligent in the
accident.
Advantages
 Saves time, effort and cost
 Avoid delay in work
 Convenient
Limitations
 Doesnot make claim for third party liability.
 Settles the claim of vehicle damage only.
 Allows claim only for comprehensive motor vehicle insurance.
 Tram ways and railways are not covered.
 Pays loss when loss incurred within specified geographical location.
 Pays only specified amount.

6. Explain the risk covered and risk not covered by the auto insurance.
Ans: Auto insurance is designed to provide financial protection against certain risk associated
with owning and operating a motor vehicle.

Risk Covered by Auto Insurance.

a. Accident: This covers damage to vehicle that results from accident.
b. Liability: This covers damage to another party’s vehicle or property as well as any injury
sustained by another person in an accident where policyholder is at fault.
c. Personal Injury: This covers medical expenses, lost wages and other related expenses that
results from an accident regardless of who is at fault.
d. Comprehensive: This covers damage to the vehicle that result from events such as theft,
fire, vandalism or natural disasters.

Risk not Covered by Auto Insurance.

a. Wear and Tear: Auto Insurance does not cover the normal wear and tear that occurs
to a vehicle over time such as mechanical breakdowns or routine maintenance.
b. Intentional Damage: Insurance Companies generally do not cover damages that are
intentionally caused by the insurer.
c. Vehicle used for racing: Most auto insurance policies do not cover damages or
injuries sustained while participating in illegal or high – risk activities such as racing
or reckless driving.
d. Non – Owned vehicles: Auto insurance doesnot cover damages while driving a
vehicle that is not owned by the policy holder such as rental car or friend’s car.
e. No valid driving license
f. No driving license
g. Vehicles used other than insurance purpose
h. Drink and drive
i. Depreciation
j. War
These are some of the risks that are covered and not covered by auto insurance.

7. Third Party Liability Insurance is compulsory in Nepal. Explain The significance of third
party liability insurance in Nepal.
Ans: Third party liability insurance is compulsory in Nepal as mandated by the Motor
Vehicle and Transport Management Act. This type of insurance provides coverage for
damages or injuries caused by the insured’s vehicle to third party individuals or property.
In Nepal, third party insurance coverage is mandatory because it helps to ensure that
victims of the accidents involving insured vehicles are able to receive compensation for the
damages or injuries they may sustain. It is important for vehicle owners in Nepal to ensure
that they have third party liability insurance coverage before driving their vehicles on public
roads.
The significance of third party liability insurance in Nepal are:
 Protection Against financial Loss:
Accidents can happen any time and anywhere and they can result in significant
financial losses. Third party liability Insurance provides protection against such losses
by covering the cost of damage or injury caused to a third party.
 Peace of Mind:
Third party liability insurance provides peace of mind to individuals and business
knowing that they are protected against financial losses that may arise from accidental
damage or injury caused to a third party.
 Increase Efficiency:
Third party liability insurance can increase efficiency by reducing the financial
burden, quick settlement of claims, improved risk management and improved
reputation.
 Legal Compliance:
Third party liability insurance is mandatory in Nepal and individuals or businesses that
fail to purchase it can face legal consequences. Therefore, having this insurance is a
legal requirement for individuals and businesses operating in Nepal.
 Social Responsibility:
Third party liability insurance helps to fulfill the social responsibility of individuals
and business by providing financial protection to third parties who may be affected by
their operations.
Thus,, these are some significance of third party liability insurance in Nepal.