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Insurance Article

All You Need To Know About a Car Insurance Policy

August 27 2015
A car insurance policy safeguards car owners against financial risks that could arise due to various unforeseen situations.

Benefits of a Comprehensive Car Insurance Policy

The benefits of availing a sound car insurance policy can be broadly summarized into:

1. Compliance with Law : Car owners get the mandatory cover against third party legal liability (as per The Motor Vehicles Act, 1988). The insurance company compensates the third party for any damage or loss caused to him/her due to the insured car.

 2. Monetary Security: A car insurance policy provides car owners with financial aid thereby securing them monetarily against the following:
  • Damage or theft of car
  • Medical expenses due to a car accident
  • Permanent total disability or death due to a car accident
  • Car breakdowns

3. Peace of Mind: Insured car owners enjoy peace of mind as the policy comes with a load of value-added services including 24x7 towing assistance, other emergency roadside aid and cashless car repair at select garages. The policy can also be extended to cover car passengers in case of accidents.

Few Policy Terms - Simplified

Let's look at a few jargons before going ahead:

1. IDV (Insured's Declared Value): Ex-showroom Price of Your Car + Cost of Accessories (if any) - Depreciation (as per a pre-determined depreciation rate table provided by the IRDAI - The Insurance Regulatory and Development Authority of India)

2. NCB (No Claim Bonus): These are points awarded to the car owner for driving safely and not making any claim. As an incentive, the NCB is deducted from your car premium amount.


Types of Cover in a Car Insurance Policy

A comprehensive car insurance policy is an amalgam of three types of covers.
These are:

Types of Cover in a Car Insurance Policy

A comprehensive car insurance policy is an amalgam of three types of covers. These are:

Features

Third Party Liability (TPL) Cover

Own Damage (OD) Cover

Personal Accident (PA) Cover

Nature

Compulsory under law

Not compulsory, but advisable as it covers monetary losses that might be incurred by the car owner

Essential for owner-driver and co-passengers as it extends financial security to the traveler and his family in case of an accident

Risks Covered

Legal liability due to:

  • Permanent injury and/or death of a third party
  • Damage to a third party's property

Loss or damage to the car due to various natural (fire, cyclone, earthquake, rockslide, etc.) and man-made calamities (burglary, theft, acts of terrorism, riots, etc.)

Permanent Total Disability (PTD), death and cost of hospitalization due to a car accident

Policy Amount

  • Rs. 7.5 Lac (in case of property damage)
  • Unlimited Amount (in case of death or injury)
  • For cars less than 5 years old - Policy amount depends on car's IDV

  • For cars over 5 years old - Policy amount is mutually decided by the insurer and car owner Where, IDV = Insured's Declared Value
  • Can be chosen from multiple Sum Insured options (PA Range: Rs. 10,000 to Rs. 2,00,000)

    Important Clause

    TPL covers only the third party. It does not cover any cost borne by the owner-driver of the car.

    OD covers out-of-pocket car related expenses.

    PA compensation for accidental death is 100%. However, the scale of compensation for PTD is different. Click here to view the details.

    Costs Not Covered under the Car Insurance Plan

    • Mechanical breakdown
     
  • Any contractual liability
  • Consequential loss
  • Intoxicated driving
  • Depreciation
  • Deliberate accidental loss
  • Wear and tear
  • Damages due to nuclear weapons material or war
  • Car Insurance Premium - Made Easy

    Your car insurance premium is calculated on the basis of three covers mentioned above. In short-

    Car Insurance Premium = Third Party Premium (TPL) + Own Damage Premium (OD) + Personal Accident Premium (PA)

    The TPL premium is decided by the IRDAI and the rates for OD and PA plans are fixed by the insurance company. The Own Damage Premium is arrived at by -

    Step 1: Your Car's IDV x Tariff Rate of Premium
    = A
    Step 2: Add cost of Add-ons = A + B
    Step 3: Deduct NCB and other discounts
    (for example, discount for cars with approved anti-theft devices)
    = (A + B) - (NCB + any other discounts)

    Optional Covers

    You can enhance your car insurance plan by opting for these policy add-ons. Available at a nominal additional cost, these are of great help and offer superb value for money:

    • Zero Depreciation Cover: Availing this add-on makes you eligible to claim the entire amount for replacing damaged parts of your car. With this cover you need not consider the depreciation value of the parts.

      Who Should Opt For It:
      Zero Depreciation cover is advisable if your car is less than three years old.

    • Roadside Assistance: At a charge of Rs. 99 only, this add-on provides emergency services like towing, flat tire change, battery jump-start, mechanic visit, fuel refill, key pickup and a lot more.

      Who Should Opt For It:
      All car owners who seek a 24x7 easy assistance in case of a car breakdown.

    • Garage Cash: This add-on compensates car owners for the inconvenience caused while his/her car is at a garage.

      Who Should Opt For It:
      Car owners who use the car for daily commute would find this feature beneficial.

    • Voluntary Deductible: This add-on lets you pay a lower premium by increasing the deductible amount. In the event of any claim, the amount of voluntary deductible is borne by you.

      Who Should Opt For It: Car owners who are confident of their driving skills and are looking for a discounted premium.
    Secure your ride by opting for a car insurance plan that meets your requirements. Buy the policy online for immediate policy issuance.

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