Car insurance can be a daunting experience, especially for new buyers. The different terminologies and jargons used in the brochures and policy documents can confuse them and as a result deterring a few completely from buying one. However, the law, Motor Vehicles Act of 1988, makes it mandatory for all car owners to have a car insurance policy. So, to stay on the right side of law, many buyers buy a policy that is either recommended by their vehicle dealer or by peers.
While a policy suggested by your dealer may not always be right, most times it can be either insufficient or inadequate. To make things right, it is best if you do a thorough research and then buy a car insurance policy. This article comes to the rescue of all you buyers trying to know more about car insurance terminologies to get the right policy.
Third-party car insurance plan
The very first terms that requires careful understanding is the third party car insurance policy. It is a type of insurance cover that is the minimum mandate by the law. It only covers for any third-party liabilities i.e., any injuries to third person or damages to their property, which may occur as a result of an accident or collision. No other coverage is offered by a third-party policy. Such limited coverage policy is mandatory for all vehicle owners by the regulator, IRDAI, and hence its premium is regulated by it.
Comprehensive car insurance plan
To compensate for the limitation of third-party policy, one can opt to buy a comprehensive policy. This policy includes three components—third-party cover, own damage cover and personal accident cover. The third-party cover is essentially third-party policy as described above, but own damage cover protects the policyholder against damages to their vehicle. This includes damages due to natural disasters and other man-made perils too. In addition to it, a personal accident insurance is also what is bundled in a comprehensive plan that provides compensation for disabilities and death of the owner driver in case of an accident or collision.
Add-ons are optional covers that can be purchased with an own damage policy. This facility allows policyholders to customise the coverage that otherwise is not available with a standard comprehensive policy. These add-ons are over and above your existing comprehensive policy and thus impact the premiums. While there are myriad add-ons that can be chosen, a car insurance calculator can help your balance its cost vis-à-vis the benefits it offers.
Deductible or excess is that component of your car insurance policy that is required to be borne by you each time a claim is made. There are two types of deductibles—compulsory deductible or voluntary deductible. As the name suggests, each of them functions in that fashion wherein all car insurance plans have a compulsory deductible whereas a voluntary deductible can be opted for over the mandatory deductible. Since the deductible increases the out-of-pocket expenses during a claim, it has an impact by lowering the premium of your policy. * Standard T&C Apply
Insured declared value (IDV)
All comprehensive insurance policies have a specified IDV mentioned which specify the maximum amount the insurer shall compensate in the event of total loss or damages beyond repair. The IDV determines the risk an insurance company must undertake and hence has direct bearing on the premium amounts. * Standard T&C Apply
These are some terms that can help you get started in selecting the right choice of policy. Insurance is the subject matter of solicitation. For more details on benefits, exclusions, limitations, terms and conditions, please read sales brochure/policy wording carefully before concluding a sale.