Basic car insurance jargons that first-time buyers should be aware ofby Kanika Shelatkar Insurance Consultant
Car insurance is an excellent facility that you can encash when your car is damaged in an accident or due to natural calamities and human-made problems. You can get the claim process started by calling your insurance provider. However, there is so much more to insurance than just the claim filing process. So, we’ve listed some of the most common, technical terms mentioned in the policy document. Read on.
Insured Declared Value
One of the most common terms you will find in your car insurance policy agreement, Insured Declared Value is the current market value of your car. This is the sum that your insurance provider will pay as compensation if your vehicle is damaged beyond repair or stolen. The amount you receive as IDV is factored in post depreciation.
Sum assured is the maximum sum your insurance provider will pay when you file an insurance claim for damage. You must bear the remaining amounts. So, if you file an insurance claim worth ₹45,000 and you are eligible for maximum sum assured of ₹35,000; then you will have to bear the remainder amount of ₹10,000 from your pocket.
Break in Insurance
You need to ensure that your insurance policy is always valid. If you fail to complete car insurance renewal within time, your policy can lapse, thus resulting in a ‘break in insurance’. In case your insurance lapses, you will have to purchase a new policy altogether or restore it by paying a penalty.
When you send your car for repairs, you have to pay a fixed portion of the repair bill from your own pockets. This amount is known as ‘deductible’. You can determine the deductible (in percentage) when you buy the insurance policy.
First Party, Second Party and Third Coverage
First, second and third-party coverage are terms that most insurance buyers find confusing. These terms are typically found in comprehensive insurance policies, wherein the first party is the policyholder, and the vehicle he owns. The second party is the insurance provider, and the third party is another individual and their car, in case the first party is involved in an accident.
Another prominent term in four wheeler insurance policies; a no-claims bonus is a reward provided by insurance companies to policyholders for not filing any claims in a calendar year. This bonus is offered in the form of discounts on insurance premiums, starting at 20% and increasing up to 50% for one to five consecutive claim-free years.
Insurance providers allow you to customise your policy to suit your requirements. To this end, they offer additional riders. You can customise your plan by selecting several add-on riders as per your needs. However, you need to pay a separate fee for each rider you choose. Some of the most common types of add-on riders you can avail include roadside assistance, engine protection cover, return to invoice cover, personal and passenger accident cover, etc.
Your car’s market value reduces with each passing day, owing to the wear and tear it endures. The value of the vehicle further depreciates as it ages. However, if you opt for zero depreciation cover with your 4 wheeler insurance policy, the insurance company ignores depreciation and compensates the entire vehicle value when you file an insurance claim.Final word: It is essential to read the policy document before purchasing car insurance. This document consists of several technical terms and jargons that you may not understand. Contact your insurer if you have any doubts.
Created on Jan 24th 2020 00:09. Viewed 366 times.