what is Vehicle insurance- and the Terms and condition that you would encounter during Vehicle insurance
Vehicle insurance
Vehicle insurance protects you against financial loss if you have an accident. It is a contract between you and the insurance company. You agree to pay the premium and the insurance company agrees to pay your losses as defined in your policy. It’s a protection against physical damage or bodily injury resulting from traffic collisions and against liability that could also arise therefrom. Vehicle insurance may additionally offer financial protection against as theft of the vehicle, and against damage to the vehicle sustained from events other than traffic collisions, such as keying and damage sustained by colliding with stationary objects.
Terms and condition that you would encounter during Vehicle insurance
list of important vehicle insurance terms you will definitely come across when buying or renewing motor insurance.
Insured Declared Value (IDV)
One of the most commonly used insurance claim terms, 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.
Own Damage Premium
This 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: The ODP differs according to the model, cubic capacity, geographical zones, etc. of the vehicle so make sure you specifically ask about it.
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 to the first few motor insurance claims. Thus, though it may demand a steeper premium, it’s advisable to opt for it given that the claim amount is considerably higher.
No Claim Bonus (NCB)
One of the most commonly used vehicle insurance terms, 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 the 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 of 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.
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 to ensure that it’s a part of your contract with your insurer.
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.
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 vehicle insurance terms handy so you don’t feel cheated or played on.
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