10 Essential Car Insurance Terms You Need to Know

The Motor Vehicle Act has made it mandatory for every car owner in India to have a valid car insurance policy. And so, if a car owner is driving their vehicle without insurance coverage, they can be penalised. As a result, car insurance has become an indispensable document for every four-wheeler owner. However, while purchasing a car insurance policy, customers often complain about not being able to understand the jargon in the policy document. This also negatively impacts their understanding of the coverage offered and the car insurance terms and conditions.

A complete understanding of the terms used in car insurance can ensure a hassle-free car insurance claim process from the policyholder’s end. To this end, here is a car insurance glossary of terms that will enable informed insurance purchases:

Third-Party Liability Coverage

To legally drive on Indian roads, every vehicle owner must have third-party liability coverage. Under third-party car insurance, the policyholder is financially protected against liabilities to the third party in the event of an unfortunate accident involving the insured vehicle. With your third-party four-wheeler insurance, your insurance provider can take care of distressing scenarios such as death or injury to the third party. It also secures the insured member against liabilities incurred on the damages to the third-party property.

Comprehensive Coverage

As the word suggests, a comprehensive car insurance policy offers more wholesome protection when compared to third-party cover. Although comprehensive four-wheeler insurance is not a mandatory document, it is always recommended that every vehicle owner invests in this cover. This is because, with a comprehensive cover, both third-party and damage to the insured vehicle and property are looked after by the insurance provider. In the absence of a comprehensive cover, damages to your vehicle have to be paid from your pocket, which can significantly dent your savings. Comprehensive car insurance by Tata AIG protects the policyholder against several unpleasant scenarios on the road, from accidents to natural disasters and man-made calamities such as fire, theft, etc. This well-rounded protection is offered in addition to compensating for third-party liabilities.

Four-Wheeler Insurance Premium

Insurance is a service offered by an insurance company. Under this service, the vehicle and the owner are protected from unfortunate eventualities on the road. In exchange for this service, the insurance company charges a pre-defined cost to the policyholder, which is the insurance premium. This premium amount payable by the policyholder is influenced by several factors, right from the make and model of the vehicle to the driver. When buying insurance, it is recommended to check the coverage offered along with the premium to find suitable coverage at a reasonable price.

Insured Declared Value

IDV, or the insured declared value, is one of the most important factors to consider when it comes to insurance. It refers to the maximum sum insured that is fixed by your insurance provider to be offered to you in case of total loss or theft of your vehicle. In simpler terms, IDV is the current market value of your vehicle. The IDV of your vehicle is directly proportional to the premium payable. The higher the IDV, the higher the premium payable.

Deductibles

This refers to the amount that the policyholder will be paying from their pocket at the time of settlement of the insurance claim. The amount that remains is paid by the insurance provider. Deductibles are classified into two categories: voluntary and compulsory. A compulsory deductible is a mandatory amount the insurance holder must pay every time he/she raises a claim. The compulsory deductible is determined by the cubic capacity of your car’s engine.

On the other hand, a voluntary deductible is an amount that the policyholder voluntarily chooses to pay while settling the claim. You can opt for zero voluntary deductibles while investing in your car insurance. However, choosing a higher voluntary deductible will lower your premium payable.

No Claim Bonus (NCB)

The NCB is a discount or reward offered to the insurance holder at the time of policy renewal. However, this discount is only applicable to insurance holders who did not raise a single claim during the policy tenure. Insurance holders can get a discount of as much as 50% on their premiums as the NCB accumulates when an individual has not raised a claim for five consecutive years. The NCB can also be transferred from one insurance provider to the next at the time of policy renewal.

Cashless Claims/Garages

Reputed insurance providers usually have an authorised network of garages. If an insurance holder gets their vehicle fixed in any of these authorised service centres, they need not pay anything from their pocket. The claim is directly settled with your insurance provider. This is highly convenient to the policyholder as they need not worry about collecting and submitting documents to get a reimbursement for the repairs from the insurance company.

Policy Endorsements

Endorsements refer to the amendments to the car insurance policy after it has been issued. Endorsements are also classified into two categories:

Premium-bearing endorsements: These are amendments that increase the premium payable. Some examples include modifying the vehicle, any updates in the vehicle prices, installing accessories, etc.

Non-premium bearing endorsements: These are revisions that don’t affect the premium amount, for example, changes in the vehicle’s registration number, changes in the nominee details, changes in the address of the insured member, etc.

Add-On Covers

Add-ons or riders are an additional protective layer that helps further strengthen your basic four-wheeler insurance. This added security is offered at a higher premium payable. Some add-ons examples are:

NCB protection that helps retain the NCB discount despite raising a claim

Roadside assistance wherein your insurance provider sends aid if your vehicle breaks down in a remote location

Key replacement cover that helps replace the lost keys by paying for the new ones

Personal Accident Cover

This is a mandatory cover that is offered by the insurance company to financially secure the vehicle owner/driver of the insured vehicle. It compensates the policyholder against accidental injury, disability, or death. This cover, however, is only mandatory for the owner/driver and not the other passengers. You can purchase this as an add-on by paying an additional premium. The Insurance Regulatory and Development Authority of India (IRDAI) has set a personal accidental cover of ₹15 lakhs under a comprehensive car insurance policy.

Knowing the basic car insurance terms can help you navigate your insurance needs so that you find a suitable cover by making an informed decision. Before investing in car insurance, it is important to compare different policies. Carefully read the inclusions and exclusions to your policy cover to not be unpleasantly surprised at the time of raising a claim.