Own Damage Car Insurance

Investing in a car comes with its own share of additional expenses. Maintaining a car can be a costly affair owing to the ever-rising maintenance costs.  This just doubles in case of luxury or sports cars. Therefore, investing in a sensible auto insurance plan makes sense to cover those additional expenses arising out of an eventuality!

Does Basic Car Insurance Cover Own-damage?

As per the Motor Vehicles Act, purchasing car insurance is mandatory in India. However, you need to be aware of the fact that the basic car insurance generally covers liability insurance only. Hence, it will not entertain car insurance claim for self-damage. Let’s dig into a bit detail:

What is Liability Insurance?

Liability insurance basically covers legal liabilities that have been caused by your vehicle to a third party, leading to loss of life and property of the third party. So even if there is damage caused by natural calamities like floods etc. or even accidents to your own vehicle, you cannot claim compensation under your liability insurance. This is where the importance of own damage car insurance is realised. You need to re-evaluate your auto insurance and shop accordingly to ensure that you are adequately covered.

What is Own Damage Insurance?

Unlike liability insurance, own damage car insurance is optional. However, it is important that you buy own damage car insurance if you want to receive reimbursements for damages caused to your car owing to natural calamities such as storms, earthquakes, floods etc. Own damage car insurance also covers man-made disasters such as vandalism, riots and terror attacks along with providing coverage for external accidents. So, make sure that you renew your own damage insurance without fail to avoid bearing unnecessarily high costs for minor or major damage caused to your vehicle.

However, you need to be cautious while calculating the premiums for your auto insurance as it can be expensive. Especially when you are about to renew your insurance, it is imperative that you take the age of your vehicle into account, because that is an important deciding factor for the premium that you pay.

How Do You Calculate the Premium for Own Damage Insurance?

Liability premiums constitute a significantly lower portion of the premium of a detailed auto insurance policy, while own damage car insurance takes up a larger portion. However, there seems to be a strong possibility of car insurance becoming costlier and hence the premiums for own damage covers are also expected to subsequently rise. Although in the near term, the possibility of a rise in premiums is waived off, it might be an eventuality if third-party premiums continue to remain low. The own damage premium is determined mainly by the Insurance Declared Value of the vehicle.

What is the Insured's Declared Value (IDV)?

As you would know, the claim you make on your motor insurance policy is entirely dependent on the damage suffered by your car or any other vehicle. In case of the total loss of the vehicle, when it cannot be used again, you will be duly compensated based on the depreciation value of your vehicle, which is deducted on the basis of the number of years the car has been used. This is commonly known as IDV, which is calculated after considering the depreciation rate of the vehicle.

We will  simplify the calculation of the IDV through a chart:

Vehicle Age Depreciation
Less than 6 months 5%
6 months-1 year 15%
1-2 years 20%
2-3 years 30%
3-4 years 40%

After you arrive at the IDV, the rest of the process is simple. You simply multiply the IDV by the premium rate as stated by the insurer, make deductions related to discounts and benefits to arrive at your own damage premium.

Standalone Own Damage Policy

Own damage policy is a part of the standard motor insurance, where both third party liability and OD cover is offered. Earlier, it was only the liability insurance that could be purchased separately. But with the introduction of new features and advancement in insurance sector, OD cover can be availed separately now. With the recent updates of IRDA, one can separately buy both these covers as per the insurance needs. In this regard, an OD policy can be termed as ‘Standalone Own Damage Policy’.

Other than liability and OD, a comprehensive car insurance policy also covers the insured for personal accidents leading to disability or death. So, knowing the importance of possessing own damage auto insurance, make sure that now you invest in one comprehensive coverage to safeguard your vehicle against external risks.

Written By: PolicyBazaar - Updated: 23 July 2020
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