10 Essential Car Insurance Terms You Need to Know

Know These 10 Important Car Insurance Terminologies

Understanding various terminologies of four-wheeler insurance is essential to know so that you can buy a suitable motor insurance policy for your four-wheeler. Here are 10 important car insurance terms that you must know before buying a policy:

1. Third-Party Liability Coverage

   Third-party liability coverage is mandatory coverage that every car owner must have to legally drive on Indian roads. This four-wheeler insurance coverage financially protects against liabilities arising out of third parties during a road accident involving the insured car. A third-party liability policy provides unlimited coverage for the death and injury of a third party. It also covers third-party property damage, which is limited to an extent of Rs. 7.5 lakh. If you are a car owner in India, you must at least own a third-party car insurance policy.

2. Comprehensive Coverage

   Comprehensive coverage is the second type of coverage offered in motor insurance. This coverage is not mandatory but is advisable as it offers extensive coverage to the car owner. A comprehensive car policy covers the insured car against own damages as well as third party damages. It compensates the policyholder if the insured car has sustained damages due to events like road accidents, natural disasters, man made calamities, theft, fire, etc. along with third party liabilities. If you are looking for wider car coverage, then the comprehensive car policy can be the right choice for you.

3. Car Insurance Premium

   A premium is the fixed amount that you will have to pay for purchasing a car insurance policy. In other words, it is the price of the motor insurance policy that you pay to get your car covered against any unanticipated accident while driving. You can compare motor insurance premiums offered by different insurance companies on websites like Policybazaar.com before purchasing a policy for your four-wheeler.

4. Insured Declared Value

   An Insured Declared Value or the IDV is one of the most important car insurance terms. It is the maximum amount that you will receive from your insurer if the insured car has suffered a total loss or theft. The Insured Declared Value is essential as it is the maximum compensation paid during claim settlement. The IDV is calculated by deducting the amount of depreciation borne by the insured vehicle till the time of claim settlement from its total value.

   Thus, you must pay attention to the IDV of the car when purchasing a four-wheeler insurance policy. Make sure it is at par with the current market value of your car.

5. Deductibles

   Deductible in motor insurance is a part of the claim amount that you will pay from your pocket during claim settlement. The rest of the claim amount is paid by the insurance company. It is classified as voluntary and compulsory deductible. A compulsory deductible is the deductible that you will be required to pay mandatorily whenever a claim is registered. The value of compulsory deductibles is based on the cubic capacity of a car's engine.

   On the other hand, a voluntary deductible is the part of the claim amount that you voluntarily choose to pay at the time of claim settlement. You can also choose not to pay voluntary deductibles by opting for zero voluntary deductibles when you purchase a car policy. However, opting for a higher voluntary deductible will reduce the premium of your motor insurance policy.

6. No Claim Bonus

   A No Claim Bonus is yet another one of the important car insurance terminologies. It is a discount on your renewal premium that you receive for not making a claim during a policy tenure. You can get up to a 20% to 50% NCB discount if you have not made a claim for up to 5 consecutive policy years. Moreover, an NCB can also be transferred if you renew your four-wheeler insurance policy from some other insurance company.

7. Cashless Garages

   A cashless garage is the authorized network garage of the insurance company whose motor insurance policy you have purchased. In a cashless garage, you can get your car repaired without having to pay the repair amount from your pocket. Once the repairs are complete, the insurance company pays the repair bill directly to the cashless garage and your claim gets settled. Cashless garages are beneficial as they are authorized and less cumbersome when it comes to claiming for repairs.

8. Policy Endorsements

   An endorsement refers to amendments or updates that are done to a car policy document after it has been issued. Endorsements can be either premium bearing or non-premium bearing. Any endorsement that increases the amount of premium is termed a premium-bearing endorsement. These include the addition of a CNG/LPG kit, updates in the price of the vehicle, installation of additional accessories, modifications to the car, etc. A non-premium-bearing endorsement doesn't affect the premium directly. These are changes in the car's registration number, policyholder's address, nominee details, etc.

9. Add-on Covers

   Add-on covers are additional covers that you can purchase to enhance the coverage of your four-wheeler insurance policy. An add-on cover can be purchased by the same insurance company by paying an extra premium over your existing four-wheeler insurance premium amount. Some add-on covers that are offered by almost all motor insurers include zero depreciation cover, engine protect cover, NCB retention cover, personal belongings cover, roadside assistance cover, etc.

   You can purchase an add-on cover only with a comprehensive or own damages policy to further increase their coverage. However, make sure to not purchase unnecessary add-ons as they will only increase your premium amount.

10. Personal Accident Cover

    A personal accident cover is a compulsory cover provided by an insurance company to financially protect the owner/driver of the insured car. It compensates the owner/driver against accidental injuries, disability, or death. It is mandatory only for the owner/driver but can also be purchased for other passengers as an add-on cover by paying an extra premium. The amount of personal accident cover to be provided under a comprehensive car policy is set to Rs.15 lakh by the IRDAI.

5 Points to Take Care of Before Buying Car Insurance

Understanding car insurance important points mentioned below can help ensure you purchase the right policy for your car:

• Understand Your Coverage Requirements: The first thing to consider when buying car insurance is your coverage needs. These requirements are based on factors like your car's current market value, budget, the rates of accidents and natural disasters in your area, and the instances of car theft lately in your locality.
• Insurer's Reputation: Another crucial thing to do before buying a car policy is to verify that the insurer is legitimate and registered with the Insurance Regulatory and Development Authority of India (IRDAI). Moreover, evaluate the insurer's financial stability by reviewing annual records and claim settlement ratios (CSRs). These measures will ensure you select the right insurer for your coverage requirements.
• Insurer's Garage Network: Cashless garages are car repair shops authorized by an insurance company where you can get your car repaired without paying out-of-pocket. An insurer with an extensive network implies a higher chance of finding a garage near your area.
• Online Policy Comparison: Before deciding on your desired policy, you must compare car insurance quotes from different providers. This comparison would enable you to understand their scope of coverage, premium costs, and available add-ons. The ideal insurance provider should provide extensive coverage while keeping premium prices competitive.
• Customer Reviews of Insurers: While searching for the right car insurance, you should check customer feedback on different insurers, focusing on the buying process, benefits provided, customer support, etc. Many car owners depend on reviews of the top car insurance companies in India when purchasing a policy.

Wrapping Up!

Apart from being a mandatory cover, car insurance is very essential to protect your car against heavy repair expenses that may arise due to unexpected events like a road accident. Knowing the above-mentioned car insurance terminologies can help you purchase the right motor insurance policy for your car. Moreover, maintaining a good driving record is among the most essential car insurance things to know to ensure lower premium rates. Before selecting a four-wheeler policy, you can also compare multiple motor insurance plans on insurance broker platforms like Policybazaar.com.