Find a good direction in your journey of buying a car insurance policy by knowing these terms. To know the importance of these terms visit us today.
This can be an obstacle in figuring out what to include and not include in your policy. While your insurance company will help you throughout the process, here are some basic auto insurance terms and definitions that can help you get started in learning about the insurance jargon.
Comprehensive or first-party car insurance offers you overall protection from damage caused by accidents, weather conditions, natural calamities, man-made calamities, theft, etc. In the event of any of these situations, you can file a claim and the insurance company will reimburse you for it. A comprehensive motor Insurance policy will cover all the damages caused to you, your vehicle, and the third-party damages caused by accident. This motor insurance is not mandatory by law but is equally essential in protecting your car from many possible hazards.
Third-party liability cover is mandatory by law. Any car on the road must at least have this car insurance policy. It covers the damage caused by you to a third-party’s life, vehicle, or property. If you buy a comprehensive car insurance policy, third-party is already included in it.
Add-on coverages, or motor insurance riders, are additional benefits or protection that you can add to your base insurance policy. They can be bought only with a comprehensive insurance plan. These coverages can be obtained by paying an additional premium. Depending on your preference, you can choose any add-on coverage that is offered by your motor insurance company. Such as Roadside assistance, Engine Protection Cover, Return to Invoice Cover, Zero depreciation, Consumables Cover etc.
Deductibles are the amount that you pay from your own pocket. There are two types of deductibles: compulsory and voluntary. In the case of compulsory deductibles, they are mandatory payments that are set by your insurance company before commencing with your policy. This type of deductible is made mandatory by the IRDAI (Insurance Regulatory Development Authority of India). The voluntary deductible is the amount that you choose to pay by yourself at the time of filing a claim. This is inversely proportional to your premium amount. The higher the voluntary deductible, the lower the premium cost and vice versa. However, the compulsory deductible has no effect on the premium amount.
Most motor insurance companies offer a No Claim Bonus which can be availed at the time of renewal of your insurance policy. You are eligible for this benefit if you do not file any claims during the period of your policy, which is usually one year. At the time of renewal, you are entitled to receive a discount on your premium cost. The discount amount is decided beforehand at the time of buying the policy.
Insurance declared value, or IDV, refers to the total sum amount that you receive in case of total damage to your car or theft. This sum amount is decided at the time of buying the policy by your insurance company. IDV is the current price of your car, which can be calculated by deducting depreciation from your purchase value.
If you choose a cashless claim insurance policy, you can have your car repaired without having to pay anything because the insurance company handles the payment directly with the garages. However, certain expenses, like depreciation, deductibles, and consumables, have to be borne by you. Under cashless insurance, you also get access to a network of garages that your insurance company is associated with. You are eligible to receive the benefits of a cashless claim only if you agree to take your car to one of those listed garages. If you do, then right from inspecting your car to receiving the invoice from the garage and settling the payment, everything is being taken care of by your insurance company.
Every vehicle depreciates with time and use. It is the loss of the value of your vehicle. It is important to know about depreciation as it affects your premium amount at the time of buying your car insurance as well as when you renew it. You have to check for the rate of deduction offered by your car insurance. You can also opt for zero depreciation car insurance cover, under which if your car has to be repaired due to any damage, then you will not be subject to depreciation when filing a claim. However, this cover is mostly valid for cars as old as 5 years.
Understanding these eight motor insurance terminologies will help you find a good direction in your journey of buying a motor insurance.
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