So many terms and conditions to peruse, so many policy papers to pry apart! If only there was some sort of insurance dictionary you could refer to every time you came across a word or term you didn’t know…
Well, now there is.
We’ve simplified the meanings of a list of common terms you will definitely come across when buying or renewing motor insurance.
1. Insured Declared Value (IDV)
Simply put, IDV is the current market value of your vehicle.
IDV refers to the highest sum payable by the insurer for a vehicle insurance policy. It is thus the maximum amount you can claim in case of total loss of your vehicle, for instance if it gets stolen or damaged beyond repair.
Tip: Refrain from quoting an IDV lower than the actual market value of your car. Though you may think that would allow you to pay less premium, it may also result in you receiving inadequate compensation.
2. Own Damage Premium
This is the premium you pay to avail insurance cover equal to the IDV, and forms a major part of your total motor insurance premium.
ODP insures your vehicles against losses caused by events outside of your control. This includes natural disasters like earthquakes and tornadoes, as well as man-made calamities like fires and explosions.
Tip: The ODP differs according to the model, cubic capacity, geographical zones, etc. of the vehicle so make sure you specifically ask about it.
3. Zero Depreciation Cover
When you make a claim, standard insurance policies deduct depreciation on replaced parts. However, if you opt for a Zero Depreciation cover, insurance companies waive off depreciation on such replaced parts, which means that you get a higher claim amount.
Tip: This cover is generally only applicable for the first few claims. Thus, though it may demand a steeper premium, it’s advisable to opt for it given that the claim amount is considerably higher.
4. No Claim Bonus (NCB)
This is essentially the discount you become eligible for when you have not made a claim in the previous year- kind of like a reward for prudent use of your vehicle. This discount considerably lowers the insurance premium you need to pay when you’re renewing the policy.
Since the NCB discount amount can be quite large- starting* at 20% for the 2nd year and up to 50% for the 6th year, it’s worth refraining from registering a claim for minor damages, and instead holding out for the NCB.
Tip: The NCB can generally be transferred from one insurance company to the other but is only allowed if the policy is renewed within 90 days of the expiry of the previous policy, so make sure you claim it as soon as possible.
5. Third Party Cover
Third Party cover protects the vehicle owner against any financial liability as a result of death, physical injury or damage to the property of a third party. The term’ third party’ is used because the beneficiary of the policy is someone other than the two parties involved in the contract i.e. the vehicle owner and the insurance company.
A victim can thus file a third party cover claim against the owner of the vehicle, and the latter’s insurer will pay for this claim on their behalf.
Tip: According to Indian Law, third party cover is mandatory when you’re buying a car, so do ensure that it’s a part of your contract with your insurer.
6. Personal Accident Cover
Beyond just your vehicle, Personal Accident Cover financially safeguards you against unforeseen events causing bodily harm, such as Accidental Death or Permanent Total Disability arising due to a road accident.
Over 1,37,000 people** were killed in road accidents in 2013 alone. India does hold the dubious distinction of most number of road accidents annually.
Tip: Not every motor insurance policy includes personal accident cover so it’s absolutely essential you make sure yours does.
The next time you’re buying or renewing your motor insurance, keep this simple glossary handy so you don’t feel cheated or played on.
Keep reading to learn more about motor insurance and buying insurance online.
** National Crime Records Bureau, Ministry of Road Transport & Highway, Law commission of India, Global status report on road safety 2013
If you’ve just bought a new car or are thinking of getting one, there are some important formalities you must complete.
Beyond popular opinion, here is a list of questions you must ask before deciding to purchase a motor bike or scooter in India.
Before you buy a car insurance policy, it’s important to know exactly how its premium is calculated. Understanding the IDV is the first step in doing so.
One of the 7 major car insurance riders every car owner must know, is the Zero Depreciation Cover which can ensure you receive higher compensation in case of damage
While third party car insurance is compulsory under the Motor Vehicles Act, it does not offer you comprehensive, customised coverage. With the help of carefully chosen riders, however, you can get the exact kind of coverage you really need.