covers your car against risks like theft, accident, explosion etc.
It is common to see people regretting not having understood their Policy well when they learn their Claim is refused or when they had to pay more out of pocket than they expected. One of the major reasons people face such a situation is that they have little understanding of the various terms and conditions of a car insurance. To make sure that you do not find yourself in the same situation, here is a primer which will help you better negotiate with the agent when you renew you auto insurance policy next time.
Under the Indian Motor Tariff Act, if you own a car, you need to mandatorily hold third party liability insurance. Third Party Liability Insurance protects the Insured from any liability that may accrue due to damage inflicted to a third party life or property during an accident. The Premium for third party liability insurance is minimal and depends on the cubic capacity of your vehicle.
As the name suggests, a Comprehensive insurance would provide Risk Coverage against all potential liabilities which includes third party liability, damage to the car or the driver on account of an Accident or man-made/natural calamity, or loss of car due to theft / burglary. The premium for this comprehensive insurance is obviously higher than third party liability insurance. However, it is always advisable to buy comprehensive insurance.
For any claim that you may file against your car policy, you would need to compulsorily pay out of your pocket a minimum sum which is called the compulsory deductible.
If you are a confident driver, you can opt for a voluntary deductible which is over and above the compulsory deductible. So, if you need to file for a claim, you would be required to shell out more money from your pocket than if you had not opted for this clause. However, your annual premium cost will go down if you opt for a voluntary deductible.
Under a basic car policy, when making claims for damages to plastic, rubber or fibre parts in a car, the insurance company pays only for the book value of these parts as on date. So, basically the owner has to bear the depreciation costs, if these parts were to be replaced. But insurance companies have a ‘Zero Depreciation’ rider under which the insurance company would pay for the full cost of replacing these parts without deducting the depreciation costs.
Insurance companies incentivise car owners who drive responsibly. An insurance contract carries a ‘No Claim Bonus (NCB)’ clause under which the car owner gets a discount on his renewal premium, in the event he does not file a single claim on his policy during the previous Term of the insurance contract. The discount is progressive and can be as high as 50% of the policy premium. If a car owner is well aware about this clause, he can make some prudent decisions. For example, in case your car suffers minor damages and the claim amount is less, you can perhaps forgo the claim value as the no claim discount that you may get at the end of the year would more than compensate for the loss of not filing a claim.
It is advisable to keep the above mentioned facts in mind when you buy car insurance. Also, make it a point to compare insurance online in terms of features and premium costs before you make a purchase decision.