A Car Insurance policy is extremely important for all vehicle owners in addition to being mandatory. Here are some FAQs that you might need answers to.
Buying a car can be a very exciting prospect. We put so much time, thought and effort into finding out all about the latest models, the most eye-catching colours and the best features. Unfortunately, people tend to pay little attention when it comes to acquiring a good Car Insurance policy, even though it is extremely important for all vehicle owners.
If you think Car Insurance is important and have many questions on your mind, you have come to the right place. Here we try to answer some of the most Frequently Asked Questions on Car Insurance. This will help you choose the right policy. Shall we begin?
What exactly is Car Insurance?
The concept of Car Insurance is based on a “use it or lose it” policy. If you want to benefit from your Car Insurance, you will need to pay an annual premium for the insurance coverage. If you don’t find a reason to claim the insurance in any policy year, you stand to lose the premium amount that you had paid for the insurance coverage.
What’s a No-Claim Bonus?
If you don’t make an insurance claim during a policy year, the insurance provider offers you a No-Claim Bonus, which is simply a benefit given to the insured vehicle’s owner for not making the insurer incur expenses that result from a Car Insurance claim.
The No-Claim Bonus, popularly known as NCB, is usually a rather sizable sum of money, starting from 20% of the insurance premium in the first year and increasing to 50% by the sixth year.
Now, do you really think it wise to claim insurance for those scratches on your car’s bonnet? Seems quite minor, doesn’t it?
Additional Reading: When NOT To Claim That Car Insurance
What are the factors that decide Car Insurance premium in India?
There’s no question of NOT getting Car Insurance for your vehicle. It’s an absolute necessity. While you’re trying to decide which insurer to buy a Car Insurance policy from, let us tell you how your Car Insurance premium is decided.
Model of the vehicle
The premium amount that you pay is primarily dependent on the Insured Declared Value. Remember, the more expensive your car is, the higher your insurance premium will be. The premium is also generally higher for diesel vehicles.
While determining the premium amount of your Car Insurance policy, the insurance provider will also consider the year of manufacture and the vehicle’s registration date.
In case your vehicle includes rare or expensive spare parts, you can expect an increase in the insurance premium.
Additional Reading: Your Guide To A Car Insurance Premium Calculator
Purpose of the vehicle
What are you going to use the vehicle for? Car Insurance is available for both personal and commercial vehicles. If you are planning to use the vehicle for commercial purposes, the insurance provider will probably charge you a higher premium for the policy.
Why a higher premium for a commercial vehicle, you ask? That’s because the vehicle is a source of income.
Most modern cars in the market are fitted with an array of features to ensure the safety of all passengers in the vehicle. These safety features include airbags, enhanced braking systems, enhanced locking mechanisms and anti-theft devices.
A few insurance providers will quote increased premiums for cars that are more prone to damage or theft.
Here’s good news! You can bag a discount of up to 2.5% on the insurance premium of your car if you have safety devices installed that are certified by the Automobile Research Association of India (ARAI).
What are Insurance zones?
Your area of residence and the location in which your car is registered also affects the Car Insurance premium payable for your vehicle. For instance, vehicles registered in urban areas will have a higher premium, while those registered in rural areas pay relatively lower insurance premiums.
What is Insured Declared Value (IDV)?
You must know that the value of your insurance policy is based on the Insured Declared Value (IDV).
Insured Declared Value is understood as the maximum sum that the insurance provider agrees to pay you in case of total damage to your vehicle.
Getting your new car insured? In that case, the Insured Declared Value is calculated on the showroom’s listed price.
Remember this: The Insured Declared Value of your vehicle does not remain constant. It changes every year with every renewal of your insurance policy.
Why does the Insured Declared Value decrease?
On renewal of your Car Insurance policy after one year, the Insured Declared Value will decrease due to the rate of depreciation that is applicable to vehicles between one and two years old.
More to remember: It is not a good idea to quote a figure that is less than the actual market value. This will result in a decreased sum that you can claim for damages.
BB Tip: Don’t forget to renew your Car Insurance policy within the 90-day grace period after the lapse of the policy so as to avoid incurring heavy penalties.
Additional Reading: How To Switch Car Insurance Providers & Manage A Lapsed Policy
What’s a comprehensive Car Insurance policy?
Let us tell you what a Car Insurance policy covers, shall we?
- Loss or damage as a result of natural calamities
A Car Insurance policy covers your vehicle against damage due to events that are not in your control. These include earthquakes, floods, hurricanes, lightning, storms, cyclones, landslides and tsunamis, among other natural disasters.
- Loss or damage due to man-made calamities
Car Insurance also comes to your aid in the event of man-made disasters such as burglary, theft, terrorist attacks and damage caused by road accidents.
- Personal Accident cover
A personal accident cover is an important addition to your Car Insurance policy. This will secure your family’s future in case you suffer temporary, permanent disability or death in a motor accident.
You can avail coverage up to a sum of Rs. 2 lakhs for any damage caused to the driver of the vehicle while travelling, mounting or dismounting from the vehicle. Some insurers also provide optional accidental cover for co-passengers.
- Third Party cover
Third party cover in a Car Insurance policy is a mandatory inclusion by law. This protects the vehicle owner from legal liabilities as a result of accidental damages that have caused permanent injury or death of a third party.
What ISN’T covered under a Car Insurance policy?
- Driving under influence
Driving home after a party where you’ve had one too many drinks? Beware! Your Car Insurance policy will not cover you if you are driving the vehicle under the influence of alcohol or drugs.
- Intentional loss or damage to the vehicle
Did you intentionally bang up your car? Sorry, buddy! The Car Insurance policy will not cover you for this.
- Damage from war or nuclear risk
A Car Insurance policy will not cover damages caused by war or nuclear accidents.
The last word
It is always a good idea to compare different Car Insurance policies based on the extent of cover, features and additional riders offered by insurance providers.
Additional Reading: Car Insurance Terms You Must Know
Need more information?