The concept of car insurance is simple – you pay a premium every year, and the insurance company offers compensation if your car is damaged. Sounds easy, right? However, when you try to buy car insurance online, you find so many terms and jargon that you are not aware of, that making an informed decision seems impossible.
To help simplify the process, today, we will talk about seven terms that you must know if you wish to buy car insurance.
1. Insured Declared Value (IDV)
The Insured Declared Value is the current market price of your car. All insurance companies determine the IDV of your vehicle before calculating the sum assured or the maximum amount that the company will pay. In simpler terms, IDV is the maximum amount you can claim from the insurance company if your car is damaged beyond repair (total loss) or stolen. When you renew your policy, the insurer looks at the listing price of the car and adjusts it for depreciation to come up with the right IDV.
2. Parties in car insurance (first, second, and third)
You might have heard that a third-party insurance policy is mandatory for all vehicles in India. Who is a third party? And, who are the first and second parties?
- First Party – The person who buys the insurance policy (you)
- Second Party – The insurance company which settles the claim
- Third Party – The individual who suffers damage due to your car getting into an accident or mishap. This damage can be to the property or person(s).
On this note, a third-party insurance policy is one that offers financial protection against losses arising from damages to a third person or third-party property.
3. Types of policies
There are three types of car insurance policies available to private car owners:
- Third-party liability policy – that covers all third-party damages as explained above
- Own-damage policy – That covers all damages to your car or self, due to an accident or collision
- Comprehensive policy – That offers third-party and own-damage cover bundled into one.
Each of these policy types has different premium rates since the coverage is different. Hence, use one of the websites that offer free calculation of car insurance premium or an online premium calculator, to get the right picture.
4. Personal Accident Cover
In an accident, apart from the damage to the vehicle, you can get injured too. Some serious accidents can lead to the death of the driver or permanent disability as well. It is mandatory for every vehicle to have a personal accident cover for the owner-driver of the car.
5. Deductibles
There are two types of deductibles in car insurance – compulsory and voluntary. A compulsory deductible is an amount that has to be borne by you from the amount of claim filed. This is a mandatory amount and is based on the cubic capacity of your car. A voluntary deductible, on the other hand, is an amount over and above the compulsory deductible that you can choose to pay at the time of filing a claim. This reduces the sum assured and brings down the premium amount.
6. Cashless Garage
Traditionally, vehicles damaged due to an accident or collision would get repaired at any garage, and the costs were borne by the vehicle owner. If the vehicle had a comprehensive policy, the owner would file a claim with the insurance company and receive a reimbursement. However, many new-age insurance companies offer a cashless garage facility where you can get your car repaired for accidental damages at a networked garage, and the insurance company pays the costs directly to the garage owner. While there are certain processes to be followed to avail of this service, it saves the hassle of paying first and waiting for the reimbursement to be released.
7. Zero Depreciation Cover
Most insurance companies offer a range of add-ons to help you customize the car insurance policy. Of these, the zero depreciation cover is the most famous. From the time your car leaves the showroom, depreciation starts eroding its value. Based on the model of the car, its age, and your geographical location, the insurer deducts depreciation from the market value of the car while settling a total loss claim. A zero depreciation cover ensures that the claim is settled without factoring in depreciation. While this comes at an added premium, it is highly beneficial for new and luxury cars, as well as first-time car owners.
Summing Up
When you are looking at car insurance offers, it is important to remember that each vehicle owner has a unique requirement from the insurance policy. Hence, it is important to assess your usage carefully before buying the policy. The terms mentioned above can help you make sense of various services offered by the insurance companies and make an informed decision. Even if you have an existing policy and are looking for online car insurance renewal, these terms can help you find the right policy. Good Luck!
