- Date : 09/10/2019
- Read: 5 mins
So many car insurance 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… Well, now there is.
In India, it is mandatory for all vehicle owners to buy motor insurance. With so many different providers offering varied policies with multiple riders, buying the right motor insurance policy can be daunting. There are many jargon and terminology to navigate through. To make it simple for you, we have decoded the meanings of a list of important vehicle insurance terms you will definitely come across when buying or renewing motor insurance.
Before we dive into the terms, let’s first look at what is motor insurance.
Like any other kind of insurance, motor insurance is a financial safety net. Motor insurance safeguards the vehicle owner against financial loss due to damage or theft. So what else is covered in a motor insurance claim? Motor insurance also takes into account damage to third party vehicles or property that could be a result of an unfortunate accident.
1. Insured Declared Value (IDV)
One of the most commonly used insurance claim terms, Insured Declared Value or 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 if, for instance, it gets stolen or damaged beyond repair.
Tip: Refrain from quoting an Insured Declared Value 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
Own Damage Premium is the premium you pay to avail an 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: Own Damage Premium 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 motor insurance claims, 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 motor insurance claims. Though it may demand a steeper premium, it’s advisable to opt for Zero Depreciation Cover given that the claim amount is considerably higher.
4. No Claim Bonus (NCB)
One of the most commonly used vehicle insurance terms, No Claim Bonus 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. No Claim Bonus 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 No Claim Bonus 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
Another popular insurance claim term that is used is Third Party cover. This 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.
So, the next time you’re buying or renewing your motor insurance, keep this simple glossary of motor insurance terms handy, so you don’t feel cheated or played on.
Keep reading to learn more about motor insurance and buying insurance online.