Car Insurance Guide
Buying car insurance is mandatory in India because it is illegal to drive a vehicle without insurance. Moreover, insurance protects your vehicle against damages caused by accidents, along with protecting it against the expenses incurred in repairing the damages caused by natural calamities, thefts, and the like. It also offers coverage against third-party injuries and damages.
This guide will help you understand all about car or four wheeler insurance
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Aseen, a 25-year-old HR manager working in Noida, is in seventh heaven these days. After all, her childhood dream of owning a car is going to be fulfilled soon! She has planned everything very meticulously to buy the high-end version of the car she has been eyeing for long now. Everything was going smooth until she had to choose car insurance online for her new vehicle.
Despite knowing about the significance of insurance, Aseen failed to understand some jargon that the policy document presented. She was really confused and wanted someone to guide her about the insurance terminologies so that she could check car insurance online and make an informed decision.
Like Aseen, there are many learned people who fail to understand insurance terms and conditions, and feel alienated at the time of buying auto insurance policies. Hence, in this post, we are providing you a comprehensive guide to the insurance jargon to make your purchase of the best car insurance smooth.
First Things First - What is Car Insurance and Why Do You Need It?
Most of you already know what a car insurance policy is and the reason you must have one.
Auto insurance is like an agreement between a car owner (insured) and an insurance company (insurer), wherein the insurer agrees to pay for the damages done to your car due to accidents, theft, or any other misfortune, in lieu of a premium that you - the insured - pays.
Thus, a car insurance policy protects a person against the expenses incurred for repairing his/her car damages. But that is not the only reason why you buy car insurance. In India, it is mandatory to have car insurance, and each and every car owner has to have at least the basic third-party car insurance policy. This way, the government wants to ensure that a third-party person, property, or vehicle stays financially secured in case of a collision with your car on the road.
Moving on, let us get into the details of the various features or characteristics of the best car insurance in India one by one.
Key Highlights - What Does a Car Insurance Offer?
So, when Aseen finalized on the car she wanted to buy, her next task was to select from the wide range of policies that were available in the market. The mixed bag of plans confused her so much that she almost gave up. So she decided to go step by step to understand the various features of the plan that she was interested in. The first thing in the list was the key highlights.
Highlights of Most Insurance Plans in India
Features |
Car Insurance Benefits |
|---|---|
Third-party policy |
Covers third-party person's injuries and property/vehicle damages
|
Own-damage coverage |
Offered with Comprehensive and Stand Alone Own Damage plans
|
Personal accident coverage |
Over INR 15 lakh can be availed with Car Insurance
|
No-claim bonus |
Over 50% can be availed as awarded by the insurer
|
Add-on coverage |
Over 10 add-on covers can be availed under your car policy
|
Premium payment |
Starts at around INR 2100/annum (minimum for third party)
|
Renewal |
Both online and offline options available
|
Cashless garages |
Available
|
The above list gave Aseen an overall rough idea on what are the benefits of car insurance that she could expect. Now, the next thing on her list was to understand the meaning and difference between the various types of car insurance policies.
Types of Car Insurance in India
Although Aseen knows that there are different types of car insurance to serve different purposes, she was still confused as to which plan offers what benefits and which one would be best for her new car.
To find that out, she must know about all types of car insurance policies and their attached benefits. Luckily for Aseen, her colleague Mira has good knowledge on the insurance sector and she has recently renewed her car insurance policy.
Aseen is relieved. She sits with Mira to clear her doubts on auto insurance and comes to know of the differences between the policy types as well as many other things.
Policy type |
Definition |
Benefits |
|---|---|---|
Third-Party Car Insurance |
It offers coverage against third-party liabilities, including third-party injuries and vehicle and property damages
|
The policy offers coverage in case of death of a third-party person and also in case of vehicle/property damages of third-party of up to INR 7.5 lakh
|
Comprehensive Car Insurance |
Under a comprehensive plan, the insured gets coverage against third-party as well as their own car damages
|
The policy offers wide coverage as compared to third-party policy and better benefits in case of theft, collision, and misfortune caused to your car
|
Own-Damage Car Insurance |
Under this policy, the car owner can get coverage in case of any damage sustained by their car
|
This is not a comprehensive plan and can be bought separately. You can buy this plan together with a third-party car insurance
|
So, as you can see in the list above, third-party insurance, being an obligatory one, is attached with every other plan. If you buy an Own-Damage Insurance, you have to buy the third-party plan separately. But if you decide to buy a comprehensive plan, you can get both third-party and own-car damage combined within a single policy. Although a comprehensive plan is expensive, it is absolutely worth it. However, to save cost, you may choose to buy an Own-Damage and Third-Party policy separately as well. Do check the pros and cons of the policies and how each one fulfills your particular requirement.
Car IDV
Now, you must be thinking what is IDV in car insurance? Let us understand what car IDV means with the example of 35-year-old Mira (Aseen's colleague), who has been driving a car for 10 years now.
Mira bought her first car with an own-damage insurance policy at a lower IDV value of the car. Fortunately, she didn't suffer any breakdown initially. But soon her brand new sedan collided on the road and suffered huge damage. She raised a claim for her policy and was hoping for a good reimbursement. But the disbursement that she got from the insurer was not sufficient to meet her damage-repair needs. This was because of the low IDV that she had chosen.
If you choose an IDV that is lower than the original price of your car, you are covering your car for a value that is lower than its worth. Thus, in this case, you would receive lower value as compensation in the event of damage, theft, or total loss of your car.
Hence, Mira recommended Aseen to go for a plan with a reasonable IDV (neither too less, nor too high) so that it would fulfill her purpose in time of need. She can even use an IDV calculator for the car to find the exact value.
Car Depreciation
The car depreciation rate is the price difference in a car's worth at the time it was originally bought and at the time it was sold. So, car value depreciation means the decrease in the value of the car which takes place due to various factors.
Take the instance of Pranil, 28, who works in the same office with Mira and Aseen. He bought his car worth INR 10 lakh with an insurance premium of INR 14,000 in the initial year. After a year, the value of the car was reduced to INR 8 lakh, and the premium also dropped to INR 10,000. This car depreciation per year continued in the subsequent years. So, the value of the insurance policy also went down with the reduced value of Pranil's car. Pranil used a car depreciation calculator to compute the insurance premium of his car as per the depreciated value.
Since the premium amount of Pranil's car decreased with the depreciation of his car, it affected the compensation that he received from the insurer. This is because while paying a claim, the insurer deducts the depreciation value of the vehicle from its market value before calculating the compensation. Thus, Pranil received the claim amount offered by the insurance company after making the deduction.
So that’s how you calculate car depreciation. Let's proceed to the next feature, which is the grace period.
Car Insurance Grace Period
What is a grace period in insurance? The duration of time that an insurer allows an insured to renew his/her car insurance policy before it expires is called the car insurance grace period. It can be 15 to 30 days as per your policy.
It is important to renew car insurance before it expires so that you do not lose out on the policy benefits like in the case of Saman Ali. Saman, a 26-year-old content developer, had never met with any untoward incident with her car and has never raised a claim in the last 3 years. This helped her earn a good NCB (No-claim Bonus) discount on her premium, making it quite reasonable.
But not anymore! Saman's car insurance was due for renewal and she was supposed to make the payment soon. However, due to some issues on her personal front, she missed her grace period of insurance and the policy lapsed. She was devastated to find out that she had lost all her NCB points and other benefits earned so far.
Hence, to avoid a scenario like Saman’s, be careful about car insurance renewal grace period and restore policy before the expiry time.
Natural Calamities
Does car insurance cover natural calamities? If you were not sure so far, just remember that you can avail coverage against natural disasters under a comprehensive car insurance policy.
Many people think that they do not need protection against natural calamities for their car. Aakash, 32, Lawyer, also had similar views. He was reluctant to spend the extra money to avail car insurance claims for natural calamities which his wife had been insisting on. However, he had to buy the policy with her persistence. Soon, there was a heavy downpour for continuous days leading to a flood-like situation in their city. The water damaged the car to a great extent. Aakash used the insurance policy to repair the damages and thanked his wife.
If you want to avoid such a situation, be mindful of the various natural calamities covered in car insurance.
The next feature in Aseen’s list is policy coverage to know what benefits are offered under different policies.
Coverage under Policy
Generally, people planning to buy car insurance want to know about all the features that are included in car insurance coverage. However, exclusions are what most people miss out on, which later cause issues at the time of raising claims.
What is Covered ?
Accidental injuries and damages
Damages and losses caused due to natural calamities
Damages caused by manmade disasters
Personal accident coverage
Personal accident coverage
Cashless health insurance etc.
Coverage against car theft or fire
Third-party liabilities
What is Not Covered?
Damage due to normal wear and tear
Damage caused while driving under the influence of drugs or alcohol
Damage caused while driving without a valid driver's license
Damage caused while driving outside the geographical area specified in the policy
Damage caused by intentional acts
Damage caused by war or terrorism
Damage caused by natural disasters (depending on the policy)
Damage caused by a driver who is not listed on the policy
Damage caused by participating in motor sports or racing events
Damage caused by mechanical or electrical breakdown (depending on the policy)
Add-Ons in Car Insurance and their Benefits
Car Insurance Add-ons are additional protection features that can be included in a car insurance policy at the time of buying or renewing a plan. But, you must note that add-on coverage in car insurance raises the premium price of your policy. Some of the popular car insurance add-on covers generally available are:
This add-on protects the No-Claim Bonus discount that you have collected by not making claims on your policy in the earlier policy periods. Note that with the NCB protect add-on, you can protect the NCB discount, even if you have to raise an insurance claim later.
This add-on protects your car engine against damages incurred due to issues like water ingression, leakage of lubricating oils, engine failure, and the like. So, if you want to keep your engine safe and protected, buy this engine protection cover car insurance.
Under the zero dep. car insurance add-on, the insurer pays the claim amount without considering any depreciation deduction. Hence, to avoid paying the depreciation amount in your claim, get this add-on with your policy by paying an extra sum.
The consumable cover add-on helps to save money on minute repairs that you may have to incur frequently.
Under this cover, the insurer protects against losses caused due to damage or loss of your personal baggage.
This key replacement cover insurance protects against the cost of replacement of your car key if you happen to lose it.
This add-on helps the insured with 24x7 roadside assistance in case of car breakdown while on the road. Thus, you need this cover for roadside assistance when you get stuck on the highway.
The return to invoice in car insurance add-on allows the insured to avail compensation equal to the amount of the original value of a car.
Note: Not many people are aware that add-ons in car insurance are only available with either comprehensive car insurance plans or stand-alone own-damage car insurance policies, and not with third-party plans.
When Sujeet, 36, who runs a small business, bought his first car, he had no idea about the add-on protection that he can include with his plans. He had bought a third-party plan and wanted to include an engine protection add-on to his plan. The customer care at the insurance company explained to him that he can buy add-ons only if he chooses to buy an Own-Damage or a Comprehensive Car Policy. So, at the time of renewing his policy, Sujeet switched to a comprehensive plan to allow for more protection to his car engine.
Voluntary Deductibles
What is a voluntary deductible in car insurance? This is the specific share of the claim that the insured has to pay from his/her pocket voluntarily. Now, there is a catch in this case. If you choose a higher deductible amount, you pay a lower premium. But in that case, you may be paying a greater share of the claim than what is paid by your insurer.
Take the example of Asma, a 43-year-old school teacher. She got excited when she was offered a low premium for her insurance. But she didn't realize that she agreed to pay a huge amount from her pocket as deductibles while raising claims. She thought that she may never be required to raise a claim as she drives very carefully. However, that was not the case.
Soon she faced an untoward situation on the road that damaged her car badly. While claiming her insurance, she was asked to pay INR 6000 out of the total INR 11000 of the claim amount by the insurer. She was shocked but later realized that she had agreed to paying INR 5000 as voluntary deductible in car insurance. Besides, she had to pay INR 1000 as a compulsory deductible. So, she ended up paying a greater amount of the claim than her insurer.
Compulsory Deductibles
Compulsory deductions, on the other hand, are compulsorily levied on the insured as part of a claim by the Insurance Regulatory And Development Authority of India or IRDAI. This amount has to be paid by the insured without a choice. As per the IRDAI directive, INR 1000 is the compulsory deductible in car insurance if a car's Cubic Capacity (cc) is 1500 or below. If the cc is more than 1500, INR 2000 is levied on the insured.
So, in the above case, if Asma would have decided to pay a lower voluntary deductible amount, such as INR 1000, she would have been paying a total of INR 2000 towards her claim as deductibles and the rest would have been paid by the insurer. Hence, it is important to consider all such aspects at the time of buying your car insurance.
Cashless Garage Network
If you get your car repaired at one of the insurer's network garages, you can be sure to go for a cashless claim. This makes it clear why you need an insurer with the maximum number of cashless garages listed in their network.
Mira too recommended Aseen to go for the insurance company that has a wide network of cashless garage facilities all over the country, so that she can travel without any worries across the length and breadth of India.
Below are some other aspects of car insurance that Mira wants Aseen to keep note of:
Endorsement:
Car insurance endorsements imply a change made in a car insurance policy by the insurance provider on the request of the insured. In other words, an endorsement allows the insured to change, add, replace, or remove a term of his/her policy coverage. There are two types of endorsements in insurance. The first is related to alterations in existing terms/coverage of your policy and the second is related to making new additions to the coverage.
Break in Insurance:
Break in insurance means the duration of time or gap between the last date of the renewal of your vehicle insurance and the date on which you actually renewed the policy. For instance, Sujeet's renewal was due on 1st July but he got the policy renewed on 30th July. So, the gap between the two dates is what is known as a break in insurance.
Compulsory Personal Accident Cover:
Personal accident insurance cover is an additional protection offered against injuries sustained by a car owner/driver in case of a mishap. It includes compensation that is paid against physical injuries, disability, or even death of the driver/owner. Having a personal accident cover is mandatory in India.
Voluntary Deductibles
The most important step in a car-insurance claim process is to notify the insurer about the mishap or damage incurred on your car. If you are wondering how to claim car insurance, all you need is to provide relevant information and documents to the insurer so that they can understand the situation under which your car got damaged. Once they analyze everything, they will compensate accordingly.
Randheer, a 30-year-old graphic designer, bought his first car just before his 29th birthday. On the insistence of his friends, he went to a party on the eve of his birthday. Unluckily for him, his car met with a collision and there was some damage. His friend Nitin suggested that he inform the insurance company immediately to initiate the claim. But Randheer was in a shock and it took him a few days before he could take the required steps of claiming insurance. His claim was unfortunately denied by the insurance company because he informed it late and had also tampered with the car damages.
Documents Required for Car Insurance Claim
Last but not the least, document submission is another very critical aspect of car-insurance claims. You must provide every necessary document to the insurance company at the time of filing a claim. Thus, make sure to check the list of documents required for an insurance claim of a car very carefully like Mira does in the event of raising a claim for her car damages.
Here's a list of the car insurance claim documents that Mira handed over to Aseen:
Conclusion
There are many people who still find buying insurance policies a daunting task. We hope the above guide helps you make better and informed decisions while buying or renewing your car insurance the next time.
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