Five important car insurance terminologies you must know about
The Motor Vehicles Act of India mandates all the car owners in India to have at least a third-party car insurance cover. Driving without a valid insurance is a punishable offence. So, if you own a four-wheeler, you must have a suitable insurance cover for your beloved asset.
If you are a first-time insurance buyer, you may find it challenging to understand the coverage offered, and other terms and conditions of the plan. The hard-to-comprehend legal terms and jargons in the policy papers could only add to the woes. So, before you buy a car insurance policy, you must be aware of the common terminologies and its meaning so that you can make an informed purchase decision.
Car insurance premium
Premium is a fixed sum that you agree to pay periodically or in lump sum for buying the car insurance policy. In other words, it is the amount that you pay the insurer to get coverage for your car against unexpected incidents while driving. Your insurance cover remains valid as long as you keep paying the premium diligently on or before the due date and renew it from time to time.
Deductibles
All car insurance policies have a deductible clause. It is essentially the part of the claim amount that you pay from your pocket during the claim settlement process. The insurance company pays the balance amount.
There are two types of deductibles – compulsory and voluntary. As the name suggests, compulsory deductible is the amount that you must mandatorily pay when you file a claim. On the other hand, voluntary deductible is that amount that you choose to pay during claim settlement.
No claim bonus or NCB discount
Another important car insurance terminology is NCB. It is a reward that the insurance companies offer to motor insurance policyholders who do not file a single claim in a policy year. You may receive a maximum bonus of up to 50%, if you have not made any claim for five consecutive years. You get the bonus benefit during policy renewal.
Additionally, most insurance companies allow you to retain the accumulated NCB, if you switch your car insurance policy from one company to another.
Insured declared value or IDV
IDV is one of the important motor insurance terms that you must know. It is the maximum sum that the insurance company pays if your car suffers total damage or gets stolen. Generally, the insurance companies calculate the IDV based on the current market value of the car. The IDV is subject to reduce overtime due to depreciation.
Add-ons
Add-ons or riders are additional covers that you can purchase voluntarily by paying an additional premium. The riders allow you to get financial protection against specific risks that may not be covered under your regular policy.
Some of the most common add-ons that all insurance companies offer include:
• engine protection cover
• depreciation cover
• roadside assistance cover
• loss of personal belongings cover
• daily car allowance
• tyre protection cover
• return to invoice cover
• consumables cover
You can purchase a rider only with a comprehensive or own damage car insurance policy for an additional premium amount. However, when you buy car insurance online, you must be prudent with choosing the right add-ons as it will increase your premium.
Final word
As a first-time motor insurance buyer, you can consider buying the policy from Kotak General Insurance. The experts at the company will guide through the full process and help you understand the legal implications of the policy wordings so that you can be stress free while signing the policy documents. Visit their website to know about their car insurance policy.
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.