Updated: 21st July 2020
Broadly, car insurance policies can be categorized into two types:
- Comprehensive insurance policy (Own Damage + Third Party Liability): A Comprehensive insurance policy covers two types of risks – Own Damage and Third Party Liability. Own Damage covers damages caused to your car. Third party liability covers damage to life and property of other people.
- Third party liability only: This is the minimum every motor vehicle in India MUST have to legally drive on public roads. In other words, it is mandatory. It is illegal to drive without at least a Third party liability insurance policy. Comprehensive policies include Third party liability in them. So what does Third party liability coverage get you? In the event of an accident, if an affected third party claims that you must pay them a certain sum as damages because it is established that it was your fault, and your insurance company agrees (usually with the Police and the Court in the loop), then your insurance company pays the third party – not you. And understandably, Third Party Liability coverage is mandatory as per law. Did you know that the Third Party Liability premium is set by the Government (IRDAI)?
Additional coverages (or add ons) are what to add to your basic comprehensive insurance policy. Here are the most common additional coverages, offered by most insurance companies:
- 24 x 7 Roadside Assistance [Covers Tyre change, Jump start, or Accident] [Highly Recommended].
- Zero Depreciation (Nil Depreciation) (Bumper to Bumper) [Expense of depreciation is covered by the insurance company after an accident [Highly Recommended].
- Engine Protector [Mainly covers water ingression in the Engine][Highly Recommended].
- Consumables [Covers cost of consumables after an accident].
- Key and Lock Replacement [Cost of lock and key replacement is covered by the insurance company].
Demystifying some more terminology:
Here are some important terms that you absolutely need to be aware of, when evaluating your next insurance policy:
- IDV (Insured Declared Value): When you tell the insurance company the make and model of your car along with its age, the insurance company assigns a certain value to your car. Sometimes they allow you to choose within a range – not a wide range – a small delta below and above the pre set IDV. The lesser the IDV, lower your premium. Keep in mind that in the event of a major accident and the car being labeled a ‘total loss’, you will only receive up to a maximum of your IDV amount against your claim. Therefore, it is important to not set a very low IDV, just to save a small amount on insurance premium.
- NCB (No Claim Bonus): If you don’t make a claim during the first policy year, you receive a 20% discount on your second year (own damage) premium. If you don’t claim during the second year as well, you get a 25% No Claim Bonus (discount) on your third year (own damage) premium. This eventually goes up to 50% in case you’ve had no claims in five consecutive years. The maximum NCB applicable on car insurance is up to 50%. As you can see, the NCB is a way to reward safe drivers. Did you know that when you sell your car and buy a new one, you can transfer your NCB percentage to your brand new car? It results in huge savings, given then your new car will have a higher IDV, and a higher Own Damage premium. NCB discount is applied on the Own Damage premium.
Buy online or offline?
Both methods have their pros and cons. When you buy online, and particularly when buying from aggregators who sell multiple brands on the same website, it is easy to get carried away by low premiums, and buy the policy with the lowest premium. However, it is in the event of a claim that many customers realize what they signed up for was not what they ‘thought’ they had signed up for. On the other hand, when you buy from a trusted advisor like Wheels Wisdom, chances are that you will make an informed decision. Remember, at the time of claim, no insurance company will let you alter your policy terms.
We hope sharing our experience on car insurance has been useful to you! Never drive without a valid motor insurance policy because it is illegal. Always keep a copy of your insurance policy in the glove box. Drive safe!