Insurance policies are a great tool to reduce personal or business tax liability.
They can broadly be divided into two simple categories- General and Non-General Insurance.
One of the most popular sub-categories central to a business’s tax saving plan is Commercial Vehicle Insurance, which comes under General Insurance.
Why is Commercial Vehicle Insurance Important?
Vehicles that are used for transportation of goods, passengers or both, come under the purview of commercial vehicles.
In India, buses, taxis, tractors, trucks, trailers, cranes, and other goods and passenger transport vehicles are covered under most commercial vehicle insurance plans offered by companies.
People who drive these vehicles are often exposed to a plethora of trying situations that increase their chances of risk exponentially. The high-stress conditions that they function under can lead to various unforeseen mishaps and unfortunate situations like accidents, loss of goods, or in some dire cases, even loss of lives (be it driver’s or passengers’).
The expenses incurred during these untoward incidents, if not covered by a robust insurance policy, could lead to severe financial and legal implications for the business.
Commercial Vehicle Insurance is specially designed to safeguard the policyholder from damages caused by bodily injury, death in the event of an accident, and third-party liability.
Types Of Commercial Vehicle Insurance
There are two predominant types of Commercial Vehicle Insurance policies-
- Comprehensive Commercial Vehicle Cover:This is more holistic in terms of its coverage.
A good comprehensive Commercial Vehicle Insurance will protect you against the following:
- Third-Party Personal Liability with unlimited coverage
- Third-Party Property Damage with a fixed maximum cover in the case of private cars
- Personal Accident Cover with compensation
- Own Damage Cover that protects against damage or loss due to:
Fire, lightning, self-ignition or explosion; burglary, theft or housebreaking; strike or riot; earthquake (shock damage and fire), Flood, inundation, storm, tempest, typhoon, hurricane, Cyclone and Hailstorm; accidental external means; Malicious acts; terrorist activity- during transit by rail, road, inland waterway, air or lift Landslide and rockslide.
- Third-party cover: This only provides coverage in case of injury or property damage to a third-party vehicle. It doesn’t cover the insured for any other loss.
Does Commercial Vehicle Insurance have any tax benefits?
Yes, the premium paid towards a Commercial Vehicle Insurance policy is eligible to be written off as ‘Business Expenditure’.
This option is strictly available only for those vehicles that are being used to aid business operations and the onus of proving the same, lies on the taxpayer.
If a vehicle that is a part of the business’s asset is being used for both personal and business purposes, only the proportion which attests to the business will be eligible. Therefore, substantial records will have to be maintained in order to claim the benefit.
Before taking any insurance policy it is always prudent to do considerable research and consult a tax advisor to gain a detailed understanding and awareness on its implications.