How motor insurance policy add-on covers work

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How motor insurance policy add-on covers work

Unlike a few years ago when general insurers offered standard motor insurance fare, today they serve a plethora of optional covers for additional premium along with your base motor insurance policy.

Add-on plans, as the name suggests, offers a way to enhance motor insurance terms and conditions to cover several damages or events in addition to own damage and third party liability insurance that a regular motor policy offers. "It's a great way to make your car insurance work a lot better for you. Depending on your car type, each add-on has the potential to save you a huge amount of money, which you may have had to pay from your pocket otherwise, at the time of claims," says Varun Dua, founder and CEO of insurance portal

Read on to find out more about these optional added benefits available to policyholders:

Zero depreciation

Probably the most commonly recommended add-on, this cover entitles you to claim the full cost of replacing car parts damaged in accidents without having to pay from your pocket. As per standard motor insurance policy conditions, only the depreciated value of car parts is reimbursable and not the replacement value. Typically, insurance companies deduct a value from your claim before making the payout as they factor in standard depreciation, which is the loss in the value of car parts with time. "Zero depreciation add-on helps you receive the full claim without such deductions for depreciation," says Dua. Generally, vehicles up to three to five years old are eligible for this cover and it is available for a maximum of two claims during the policy period.

Engine protect

This add-on is considered particularly relevant for owners of brand new high-end cars and is normally available for cars that are up to three years of age. Essentially, Engine Protect or Machinery Breakdown cover compensates for even those engine-related repairs that are not related to accidents. "It is useful and worth purchasing because the cost of repairs in case of damage to engine can be significantly high," says Arvind Laddha, CEO, Vantage Insurance Brokers. The purpose of this cover is to ensure that damage to your engine does not burn a hole in your pocket. It could be particularly useful for those living in Mumbai where frequent water-logging during the monsoon increases the chances of damage to the engine. However, this add-on insurance cannot be claimed for damages due to regular wear and tear or negligence on your part.

Return to invoice

Buying a Return to invoice cover will ensure that in case of total loss or theft of your car, you will get the original invoice value, including registration charges and road tax paid, of the car and not just the insured declared value (IDV). In simple terms, IDV is the market value of your car which depreciates with time. Such add-on plans pay the difference between the approved claim amount for your car and the original purchase (on road) price of the vehicle in case of a total loss. However, if the same model is available at a price lower than the original purchase price, the former will be taken into account. "Invoice cover is a good option for theft prone areas or drivers who commute on the highway or have to undertake long distance driving," says Dua. Bear in mind that the cover may not be extended to imported vehicles. This cover is typically available for vehicles that are up to three years old.


NCB Protect

A car insurance policy earns No Claim Bonus (NCB) in the year when the policyholder makes no claim. This NCB starts at 20% and increases annually with every claim-free year up to a maximum of 50%. It directly translates into lower premium for the subsequent year. "NCB Protect add-on allows you to retain your accumulated no-claim bonus even if there is a claim, helping you preserve the discount available on subsequent year's premium," says Laddha. Do watch out for the exclusions though - the benefit under this cover may not be available if you make more than one own damage claim or if you have made a total loss claim. Also, to avail of the benefit, you should have not made a claim in the two preceding years. Again, this cover is usually not available for vehicles that are older than three years.

Roadside Assistance

Under this add-on cover, insurers provide certain round-the-clock services like refuelling, towing, change of flat tyre, arranging for a mechanic's services and so on in case of a car breakdown. While some companies offer this service for small fee i.e. as an add-on insurance cover, others offer it as an in-built component of the base policy. Some companies extend this cover only for renewed and not fresh policies.

Accident coverage for car passengers

Several insurers offer this add-on, which, like any other personal accident cover, provides a lump-sum compensation to the passengers insured, in case of death or permanent total or partial disabilities suffered during accidents. Typically, the maximum sum assured as per the policy conditions of motor insurance for this add-on is around Rs 1 lakh per insured but may vary from insurer to insurer.

Daily Allowance

This add-on cover compensates you for the cost of hiring an alternative vehicle if your car is stolen or is under repairs. The amount could range from Rs 500-100 per day, depending on the car model. The number of days for which the allowance is handed out can range from 10-15 days. However, depending on the insurer's terms and conditions, this add-on cover is subject to certain exclusions too. For instance, the benefit of this cover may not be available if your car is not repaired at an authorised garage or if it's under repairs for less than three days.

Key Replacement Compensation

Typically, this add-on will come into play if you happen to misplace your keys or they get stolen. The insurer will also compensate you for the cost of replacing your lock and key if your vehicle is burgled. In the case of the latter, however, you will have to produce the police complaint registered for the break-in.

Consumables Cover

You can buy this add-on if you wish to seek compensation for money spent on nuts and bolts, screen washers, engine oil, bearings and so on, in case your car meets with an accident. The insurer will make a payout for the value of such consumables replaced which are normally excluded from claim amounts under standard motor insurance. Generally, vehicles older than three years are not eligible for this add-on cover.


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