Car insurance is mandatory by law, and without it, you cannot drive your car on Indian roads. Most of us get car insurance for this very reason because it is a necessity. Most of us think that getting mandatory third-party insurance will be more than enough. However, when the time comes to file a claim on the policy, the insurance company refuses to provide any cover. So what has happened here? The thing is, you missed out on learning the meaning of third-party cover.
There are many terms that the insurance companies use in car insurance policies. You should know about these terms so that you do not face financial burden in case of an unforeseen accident or theft. Here is a list of car insurance terms you need to know about.
Insured Declared Value
Insured Declared Value, commonly known as IDV in the insurance forms, is the current market price of your car. The insurance company calculates it based on the model, usage, and condition of the vehicle. In case your vehicle gets destroyed, or someone steals it, you can claim the amount equivalent to IDV. It affects the premium cost, as well. Many car owners put lower IDV in their form to reduce the premium amount, which is not a wise decision. You will not get a fair value of your car in case of damage or theft.
Own Damage Premium
Own Damage Premium or commonly known as ODP, is the cover that provides you financial support in case of any loss or damage caused by natural or man-made events that are not in your control. Such a list of events includes fire, tsunami, earthquake, and more. Please note that the amount you have to pay to get this cover depends on various factors, including model, cubic capacity, and location. Insurance companies avoid providing ODP in areas where natural disasters are frequent. If they offer such cover, you will have to pay an extra premium because of the high risk involved.
Zero Depreciation Cover
As time passes by, the market value of your car decreases. It also affects the amount you can claim on spare parts. In case you need to replace a car part, you will get only the amount according to the market value. However, if you get Zero Depreciation Cover with your insurance policy, you can get a higher claim amount on replaced parts. A breakdown can happen because of an accident or a faulty part. Replacement of such part can be expensive, and ZDC cover will save your money.
No Claim Bonus
No Claim Bonus or NCB is the discount that the insurance company offers you for not claiming for a year. Every year NCB increases. In the first year, the company provides you a discount of 20% and increases it every year. You can get a maximum of 50% off on premium that you have to pay with NCB. Please note that in case you file a claim, your NCB gets nullify, and you have to pay full premium next time. However, if you get the NCB protection add-on, you will get a discount as per the previous slab on the next premium. In case you are buying a new car, you can transfer your NCB to it as NCB does not apply to the vehicle but the person.
When you cause an accident, you are financially liable for the damage, injuries, or loss of life. A third-party cover provides you protection against these financial liabilities. The insurance company will pay for the damage and medical expenses in case you cause an accident. Please note that a victim can file a third-party claim on the insurance that you have bought, and the insurance company will pay the application on your behalf. As per the Indian law, you cannot drive a car on Indian roads without a Third-Party Insurance cover.
Personal Accident Cover
Personal Accident cover provides financial support to the policyholder in case of disability caused by an accident while you were driving the car. It also offers financial support for your family in case of your unforeseen demise because of an accident. Though it is not mandatory, it is advised that you should get a personal accident cover.
There are several terms that insurance companies use in documentation of car insurance policies. If you are not aware of what these terms mean, you can end up paying extra or loose financial benefits. To make sure you are entirely insured, and in case of an accident, the damage to your car is covered by the insurance policy, you should go for a comprehensive insurance plan. Also, you should get the required add-ons based on your usage. Learning essential terms related to car insurance will help you in getting the right claim amount.