Car Insurance 101 - The Basics Explained

With 4 lakh road accidents occurring in India each year, it would be pragmatic to opt for an insurance if you own a car. Costs for damage to the vehicle and the third-party might easily run into lakhs of rupees. This is when an insurance can be really helpful!

When you have active car insurance, the insurance company will pay out claims and cover losses if any accident/damage occurs to your car. In this blog, we shall explain the very basics of car insurance so that you can make an informed decision while purchasing one!

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Types of Car Insurance 

There are three types of car insurance policies.

Comprehensive Car Insurance - This insurance policy provides damage cover for your vehicle, and also to the third-party. This cover offers the highest protection and is slightly expensive compared to others.

Third-Party Car Insurance - This policy provides coverage to the third-party in case of any damages caused through your vehicle.

Standalone Own Damage Car Insurance - This policy covers own damages to your vehicle during an accident or natural calamities or man-made calamities. This is applicable when there is an existing third party policy in place.

Car insurance jargon and what it means

When you decide on which plan to choose, you will encounter multiple jargons that may seem intimidating. Here is the simple meaning of some of those terms for your understanding.

No Claim Bonus- Discount/Cashback/Reward offered when you do not claim insurance for a specific time interval.

Insured Declared Value (IDV) - Maximum payable amount by the insurance company in the case of theft/damage beyond repairs.

Zero Depreciation Cover- IDV is calculated based on the depreciation of cars. Zero Depreciation Cover ensures depreciation is not taken into consideration while calculating IDV.

Third-Party Liability Cover- Offers protection against damage/injury to an affected third party.

How is the Insurance Premium calculated? 

The premium to be paid is dependent on factors such as model, age, and fuel type of the vehicle. For example, petrol cars typically have a lower premium than diesel cars. Another factor is the location. Insurance premiums are lower in rural areas than in urban areas. The claim record also impact the premium to be paid.

Tips to cut costs on the Premium

Prioritize clearly on the features you want in your vehicle insurance. Do not enrol in an insurance plan that offers the lowest premium.

Drive safely for a year and obtain a No-Claim Bonus. Utilise it to lower your premium rates at the time of renewal.

Install safety gadgets in your cars such as GPS, Adaptive Headlights, and Airbags.

Types of damages generally covered

There are multiple options available for a customer. In general, comprehensive car insurance covers -

● Third-party claims and liabilities

● Damages due natural calamities like falling trees, floods, etc.

● Damages due to man-made calamities such as protests/riots, etc.

● Theft

● Accidents

Type of damages not covered

· Driver without License

· Drunk Driving

· Wear and Tear/ Depreciation

· Damages when insurance is inactive

· Claim regarding any personal item in car

· Regular servicing

· Damage due to wilful negligence

Steps for car insurance claim 

Step 1: Contact the law enforcement (police) with details of the accident and file a FIR.

Step 2: Contact the insurance provider with details of the accident.

Step 3: File a claim with the insurance provider.

Step 4: Submit the necessary documents to the insurance provider and request for the claim to be approved.

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