Car insurance (also known as motor or auto insurance) is an agreement between you (car owner) and the insurance company. The insurance company covers for loss or damage caused to your car in respect of the premiums paid by you (car owner). Car insurance is mandatory in India, as per the Indian Motor Vehicle Act.
The premium of the car insurance is dependent on certain parameters and acts as a boon to the insurance holder. It helps cover against financial loss caused by accidents, theft and any subsequent liabilities.
Before You Claim: Motor/Car Insurance Terms You Should Know
You must have seen a lot of immense words and jargons while going through your carinsurance documents. But, you don’t need to worry, as we have covered all the key car/motor insurance terms below:
- Insured Declared Value (IDV)
The value of insurance policy is based on the Insured Declared Value (IDV) of your car. IDV state the maximum insured amount the insurer can pay you which is calculated based on the showroom’s listed price. And therefore, the IDV value of a car is not constant.
How IDV is calculated?
IDV = (Manufacturers listing price – Depreciation) + (Cost of vehicle accessories – Depreciation)
The insurance cost and registration are excluded from IDV. IDV value of your car decreases when you renew your motorcycle, because of the depreciation rate that is applied to vehicles between one and two years old.
It is advisable to get IDV which is near your cost of the market value of the car. Insurers provide a range of 5% to 10% to decrease IDV which could be selected by the customer. Less IDV would attract less premium.
- No Claim Bonus (NCB)
NCB or No claim bonus is essentially the discount that you (policyholder) gets from the insurer during the policy term for making zero claims. In India, NCB can be earned starting from 20% and go up to a maximum of 50% for the 6th year. No Claim Bonus is only allowed if you renew the policy within 90 days of the expiry of the previous policy.
- Zero Depreciation Cover
When you claim carinsurance, standard insurance policies deduct depreciation on replaced parts. But, insurance companies waive off depreciation on replaced parts under Zero Depreciation cover. This states that one will get a higher claim amount.
- Third-Party Cover
Third-party is the most popular insurance claim term. This claim is mandatory when you are buying a car, according to Indian Law. The third-Party cover protects the car owner against any financial liability as a result of physical injury, death or damage to the property of a third party.
- Own Damage Premium
Own Damage Premium insures your car against losses caused by events that are beyond your control. This includes natural disasters like tornadoes, earthquakes, fires, explosions. This premium differs according to geographical zones, capacity, model, etc of a vehicle.
Types of Car Insurance in India
Listed below are the two types of carinsurance in India.
- Third-party liability insurance cover- Third-party liability insurance offers protection only against the costs incurred from the damage done by your car to another car, property or person. Therefore, protection is limited.
- Comprehensive insurance cover- Comprehensive car insurance offers cover against damage to the death of the driver or passengers, vehicle and damage caused by the vehicle to a third party vehicle, property or person.
What Does Comprehensive Insurance Cover?
The following is generally covered under Comprehensive Insurance cover:
- Damage to the third party
- Damage to your car caused by falling objects like trees
- Damage caused by weather or Natural disasters
- Damage or destruction of vehicle/car caused by civil disturbance such as riots
Depreciation, Wear and tear of the vehicle, and Electrical or Mechanical breakdown are not covered under Comprehensive Insurance cover.
Key Factors That Determine Car Insurance Premium in India:
The following are the factors that will determine your car insurance premium in India:
- Model of the vehicle
- Purpose of the vehicle
- Insurance Zones
- Safety devices
- Your credit history
- Additional factors include- distance your car has traveled, history of getting into car accidents or how many times your car serviced by an authorized dealer
Car registration RTO car insurance premiums are calculated on the basis of the vehicle registration location. The locations are categorized as the following:
- Zone A
- Zone B
While Mumbai, Chennai, Delhi, Bangalore, Kolkata, Ahmedabad, Pune, and Hyderabad, falls under Zone A, the rest of India falls under Zone B. Higher premiums are registered under Zone A as compared to Zone B.
Exclusions under Car Insurance Policy
There are certain exclusions on motor/car insurance policy which means that the insurer will not cover the liabilities under the following circumstances:
- If the car driver doesn’t hold a valid license
- If the person driving the car was under the influence of any intoxicants
- If the mishap took place outside the geographical location mentioned in the document
- Electrical or mechanical failure of the car
- If the car was being used for any illegal purpose
How to Make a Car Insurance Claim in India?
The following are the steps you can follow to claim your car insurance after an accident to get insurance benefits:
- Immediately after the accident, inform your insurance company about the damage along with the number plate of another car.
- Intimate to the nearest concerned police station about the incident and obtain an FIR.
- File a claim with your insurance company, note down the claim insurance number and ask them to assign a surveyor to evaluate the loss.
- Submit the necessary documents required to make a claim
- The online claim can also be done, provided that your insurer provides this facility.
To Wrap Up
While selecting the car insurance policy, it’s better to compare insurance quotes online. Be safe and drive safe. It can save your life and money.