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All about consequential damages in car insurance

When you buy an insurance policy, you must be aware of the finer nuances of the terms and conditions. This will help get the claim smoothly when the need arises. One such term used in all kinds of insurance policies and can be confusing is ‘Consequential Damage.’ You must be aware of this term and its implications on your car insurance policy.

What is consequential damage?

In general, consequential damages are the type of damages that arise due to specific situations that may or may not be under your control. In many cases, the damages arising from an accident are covered under the insurance policy. However, insurance companies will not cover the consequential damages that arise due to avoidable actions.

Let us understand consequential damages in car insurance

Let us assume, you take a road trip during the rainy season. As you drive along, unfortunately, the rain intensifies, and there is a flood. Now, your car may be submerged underwater. In such a situation, if you try to crank the engine to start the car, there is a risk that your car enters a hydrostatic lock, causing severe damage to the engine.

Here, the damage occurred would be attributed to your action of cranking the engine and not to the flooding. Thus, although the damages due to natural calamities like flood may be covered under your comprehensive car insurance policy, damages due to cranking the engine while submerged underwater will be termed consequential loss, and the insurer may deny covering the loss unless it is specified otherwise in your policy papers or you have a specific add-on.

Filing a claim for consequential damages

In the above example, from an insurance company’s perspective, the damage caused to the engine is not a direct outcome of the flood. They will view it as an indirect outcome caused by your action of cranking up the engine while the car was submerged under water, which, according to the insurers, is an ‘avoidable’ action.

So, when it comes to settling the claim for consequential damages, it does not matter whether the action resulting in the damage was done accidentally or intentionally. What matters the most is whether the policy covers such damages.

Before you file a claim for consequential damage, you must go through the car insurance policy documents carefully and check if such losses are covered. If you are not sure, speak to the insurer’s customer support team, understand the wordings and its implication before moving ahead with the claim.

If you are concerned about consequential damages, you can purchase add-ons or riders that cover these risks when you buy or renew your policy. For example, you can purchase an engine protection rider with your comprehensive car insurance policy that would cover hydrostatic lock.

Example of consequential damage in car insurance

Suppose you park your car outside a mall or a movie theatre. After you come from the mall or the theatre, you find that your car has been towed as you had parked in the No Parking zone. When you go to retrieve the car, you find that the vehicle is damaged during the towing process.

This will be termed as consequential damage in car insurance. In most cases, the insurer will not compensate for this loss. They will reject your claim on the grounds that you violated the traffic laws by parking the vehicle in a No Parking zone.

Consequential damage in a nutshell

• Consequential damages occur due to an indirect event and the insurance companies do not cover such events.

• In most cases, the insurer will reject your claim request for consequential damages.

• You can get coverage for consequential damages if you have relevant add-ons with your car insurance policy.

Final Word

Now that you have a fair idea of what consequential damage is in car insurance, read the terms and conditions carefully before you file a claim for such losses. If you still need more clarity on the subject, you can speak to our customer care team at Kotak General Insurance; they will help you understand every detail and answer your queries to your utmost satisfaction.

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Disclaimer: The content provided is for education and informational purpose only, none of the information contained in our blog amounts to any form of opinion or advice. Please go through policy related documents carefully or consult an expert before making any insurance-related decisions.


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