The worst time to learn what “deductible” means is when you are already filing a claim. Or to find out your IDV was set too low right when your car has been written off. Most motor insurance confusion does not happen at the time of purchase. It happens after, when the terms you glossed over start having real consequences.
The good news is that none of this motor insurance terminology is actually complicated once someone explains it without the jargon. So here is that explanation before you ever need it.
Common Motor Insurance Terms You Should Know
Whether you are looking at your first policy or renewing an old one, these are some of the important motor insurance terms:
Premium
The amount you pay to keep your policy active, calculated based on factors such as your vehicle type, age, engine capacity, location, and the coverage you choose.
Insured Declared Value (IDV)
Your vehicle’s current market value as determined by the insurer, and the maximum amount you would receive in case of theft or total loss.
Third-Party Liability Coverage
Mandatory by law in India, this covers damages you cause to third party another person, their vehicle, or their property. It does not cover your own vehicle.
Comprehensive Coverage
Covers both third-party liabilities and your own vehicle’s damages from accidents, theft, fire, or natural calamities.
No Claim Bonus (NCB)
A discount on your premium that builds every year you do not make a claim. It stays with you, so it follows you when you switch insurers or buy a new car.
Deductible
The portion of a claim you cover before the insurer pays the rest. Opting for a higher voluntary deductible brings your premium down but means more out of your pocket when you do claim.
Depreciation
Depreciation in motor insurance is the steady drop in the value of your vehicle over time due to wear and tear and other such factors , and your claim payout reflects that. When a part is replaced, you receive its depreciated value.
Terms Related to Coverage and Claims
Here are a few more terms in motor insurance, except these are related to coverage and claims:
Cashless Claims
When you repair your vehicle at a garage within your insurer’s network, the insurer settles the bill directly. No upfront payment, no paperwork chase, except your deductibles.
Reimbursement Claims
If repairs happen outside network garages, you pay first and apply for reimbursement later. The insurer reimburses the approved amount (subject to policy terms and conditions), minus any deductibles or depreciation.
Own Damage (OD) Cover
Covers your vehicle for own damages only and doesn’t cover third party liability.. It comes built into comprehensive policies but can also be bought separately.
Add-Ons
Add ons are coverage available at an additional premium which covers what your base policy does not. Zero Depreciation, Roadside Assistance, Engine Protection, and Consumables Cover are common picks, each plugging a different gap in your standard cover.
Tips to Understand Your Motor Insurance Policy Better
Decoding your policy does not have to be a weekend project. Read the policy document when you receive it. Pay attention to the exclusions section specifically. Check whether your preferred garage is in the insurer’s cashless network before an emergency, and track your NCB to make sure it transfers at renewal.
Conclusion
It is important to know Motor insurance terms so that you can decipher your policy terms
Comparing options for a suitable car insurance gets a lot easier when you know what to look for. And now you do.
FAQs
1. Do all add-ons increase the insurance premium?
Yes, add-ons since add ons are available at an additional premium they generally increase the premium because they provide additional coverage beyond the standard policy.
2. How do I choose the right add-ons for my vehicle?
This depends on the coverage you are looking for. Consider factors such as your vehicle’s age, location, usage patterns, and budget when selecting add-ons.
3. Can I remove add-ons during renewal?
Yes, you can usually review your coverage needs and remove add-ons that you no longer require at renewal.
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Disclaimer: The information provided in this blog is for educational and informational purposes only. It may contain outdated data and information regarding the topic featured in the article. It is advised to verify the currency and relevance of the data and information before taking any major steps. Please read the sales brochure/policy wordings carefully for detailed information about on risk factors, terms, conditions and exclusions. ICICI Lombard is not liable for any inaccuracies or consequences resulting from the use of this outdated information.