However, in order to ensure that you get the maximum value for your money, you need to read the policy document carefully. Given below are some of the basic car insurance terms that will guide you in making an informed decision:
The term for which the car is insured is referred to as the 'period' or 'policy period'. Any claims arising prior to or beyond such period of insurance cannot be claimed. The period is generally one year.
Sum Insured (Insured's declared Value (IDV))
IDV is the most important aspect of your motor insurance policy. Simply put, it is the market value of your vehicle at the time of commencement of the policy. It is calculated by the insurer on the basis of the manufacturer's listed selling price of the vehicle (plus the listed price of any accessories) after deducting the depreciation for every year as per the schedule provided by the Indian Motor Tariff. In case of theft or total loss of the vehicle, the claim amount may be less than or equivalent to the IDV.
No claim bonus (NCB)
NCB denotes the discount on premium offered to policyholders for not making a claim in the previous policy period. It may be considered as a reward for driving safely. You can opt to transfer the accumulated NCB from your old vehicle to your new vehicle thereby saving on the premium. NCB is applicable even if you opt for insurance portability (change in insurer).
Third party premium
Anyone apart from the insured or the insurer is known as a third party. Third party liability premium (TPL) covers liability arising from injuries and/ or damages to third parties, for whom the car owner is responsible and hence it is mandatory for all vehicle owners in India. The premium rate for TPL is decided by IRDA (Insurance Regulatory and Development Authority), the apex and statutory body of the insurance industry.
Zero depreciation cover
Depreciation refers to the decrease in market value of an asset due to wear and tear. Insurance policies with a zero depreciation cover, reimburses the full claim amount without deducting depreciation for replaced parts.
Road side assistance
Under this facility, the insurer provides assistance in case your vehicle breaks down anywhere. The rider encompasses costs incurred for towing, technician visit fees, and the rentals for a service vehicle, to name a few.
Garage cash cover
Garage cash cover entails a daily allowance for meeting your travelling and conveyance expenses during a period when your car is undergoing repairs.
Based on the place of registration, India has been divided into geographical zones called 'A' and 'B'. The insurance premium for zone ‘A’ cities is higher, due to a greater chance of road accidents and mishaps in metropolitan cities. Cities like Ahmedabad, Bangalore, Chennai, Hyderabad, Kolkata, Mumbai, New Delhi, and Pune make up the zone 'A", the rest of the country forms the zone 'B'.
Knowing these terms allows you to read between the lines of a policy document and choose the best offer.