For most car owners, their vehicle holds a special place in their heart as it is a consequential part of their daily life. From early outings to long road trips – your car accompanies you everywhere. Hence, it is pertinent that you should also know that by going for a comprehensive motor insurance policy you should take good care of it and protect it from any unforeseen events like accident or theft.
NCRB figures show that there were around 3.5 lakh accidents on Indian roads in 2020. In addition, about 2.5 lakh vehicles are stolen every year, of which only 25 per cent are recovered. This makes vehicle insurance an absolute necessity. However, before buying motor insurance for your vehicle, you should be aware of all the important terms and conditions attached to it. There are a few lesser-known terms in your policy that you should be aware of.
IDV: The Insured Declared Value, or IDV, of a motor vehicle is basically the maximum amount that the insurance company is liable to pay in case of total loss of the vehicle, or if the vehicle is stolen. The insurance premium that needs to be paid is directly proportional to the IDV. So while one can get a lower bid at a premium by setting a lower IDV, one should avoid this mistake. The IDV should be calculated carefully while buying the policy and should be close to the market value of the vehicle so that you do not face any problem while filing the claim. Here, you need to remember that the current IDV of the vehicle should be maximum 90 percent of the IDV of the previous year as per the rules. Taking an IDV higher than this will incur additional expenses. However, in case of claim of total loss, the payment will be only 90 per cent of the IDV of the previous year. Therefore, it is best to keep the IDV at a regulated amount and avoid spending extra on premiums by choosing a higher IDV than the previous year.
NCB: No Claim Bonus, or NCB, is a discount on insurance premium that you get when you ride carefully during the policy year and do not have to make an insurance claim. Also, NCB gets accumulated year after year and can go up to 50 per cent of the premium for the entire year if you do not claim for consecutive years. Essentially, the more you ride without an accident, and without making an insurance claim, the higher the No Claim Bonus you get. It is also worth mentioning that NCB is not vehicle-specific. So even if you sell your vehicle after using it for five years without any insurance claim, you can still get up to 50% NCB discount on the insurance policy of your new vehicle.
Comprehensive Cover vs. Third-Party: When you buy an insurance policy for your motor vehicle, you have the option of taking only mandatory third-party cover, or a comprehensive policy. The difference is that a third-party policy only covers the cost of damage that may be caused to a third party who has been involved in an accident with your vehicle. It does not cover the risk of damage to the insured’s own vehicle, nor does it protect the vehicle against theft. On the other hand, a comprehensive policy provides complete protection against damages to all parties involved in the accident, including your own vehicle, the driver and passenger, as well as the third party vehicle and its drivers. Apart from this, it also covers the vehicle against theft and damage due to natural and man-made calamities. You need to remember that it is mandatory by law for new car owners to have a comprehensive one year + 3 years third-party insurance policy at the time of buying a car. However, for the second and third years, the owner needs to buy only a standalone own damage policy.
Deductible: A deductible is that portion of an insurance claim that has to be paid out of pocket by the policyholder before the balance amount is paid by the policyholder. A mandatory deductible has been fixed by the insurer which has to be compulsorily paid by the policyholder at the time of making a claim. On the other hand, there is also an option to go for voluntary deduction in addition to the mandatory one. The policyholder can opt for this to reduce the premium of the policy. Higher the level of voluntary deduction, lower will be the annual premium of the policy.
riding: Riders, also known as add-ons, are additional covers that you can choose from to get additional protection for your vehicle. These riders cost extra, but can be used to customize a motor insurance policy to meet your specific needs. There are various riders available to choose from. One can also go for a “zero depreciation” rider, which protects the value of your vehicle — in relation to its insurance coverage — against age and obsolescence. Riders are also available to protect the engine, gearbox and even cover key and lock replacement, 24×7 roadside assistance, etc. which are not covered by a standard policy.
By knowing all these terms, which you will find in the policy documents and brochures, you will be able to make an informed decision while choosing a motor insurance policy. After all, a conscious consumer is an empowered consumer.
The author is Head Motor Insurance Renewal at Policybazaar.com. The views expressed are those of the author.