5 Terms to know before Filing a Car Insurance

Motor insurance is a long term investment made to safeguard vehicle owners from unfortunate incidents like theft or damage. However, complex insurance words can puzzle a few at the time of claim. Here are 5 Motor insurance terms you need to know before you make that claim.

• Take an NCB retention cover which allows you to file claims and still retain the NCB discount in the following year.
• Opt for a long-term policy which allows you still retain a part of the NCB discount even after filing a claim during the tenure period.

• Damages caused by an act of war, such as terror attacks, war, nuclear attacks, invasion, etc.
• Damages caused due to the negligence of the driver, such as not following traffic rules, etc.
• Damages caused intentionally by the owner or the driver of the vehicle.
• Damages classified as ‘consequential losses’ such as engine loss due to cranking the car during a flood.

• S(He) already has an external PA Policy of Rs 15 Lakhs or More
• S(He) already has a valid PA cover on another vehicle.

1. Insured Declared Value (IDV) It is the maximum amount payable by the insurer in cases of theft or total damage to the vehicle. The value of a vehicle declines/depreciates each year, and hence IDV is calculated based on selling price listed by manufacturer minus the depreciation. As per (Insurance Regulatory Development Authority of India) IRDAI, a specific rate of depreciation is to be applied to the listed price of the car depending on how old the car is.When settling claims, the insurance company either pays according to the IDV set by you or as per the depreciated value of the car as per the table above, whichever is lower.Thus, while buying a policy, it is best advised to set the IDV true to its value for rightful claims in the future. Declaring lower IDV could fetch lower premiums but also lead to lesser compensation in times of need. Similarly keeping your IDV more than what it should be could get your claims rejected.
2. No Claim Bonus (NCB) No claim bonus is a reward given to the policyholder at the time of renewal for making zero claims during the policy term. The insurer rewards the policyholder with discounted own-damage premiums varying between 20%-50% based on the number of zero claim years.However, no matter the number of claim-free years, the NCB will come to zero if you file a claim in a year. Thus, it is advised not to file a claim for minor damages, especially when the damage cost is less than the NCB impact in the following year.However, you can also avoid letting go off the NCB by opting for the below options when renewing your policy;
3. Own Damage Cover Own Damage Cover offers protection against the losses to your vehicle in case of man-made accidents like fire, strikes, riots, etc., or natural calamities like floods, hailstorms, etc. The own-damage premium is determined based on the pre-declared Insured Declared value, which is the current market value and several factors like make, type and year of purchase, cubic capacity of vehicle and geographical zone.While it covers you against a wide range of damages, certain damages are not covered. Some of these are;
4. Third-Party Cover Under the Indian Motor Vehicles Act, Third-party Cover is mandatory for the use of vehicles on Indian roads. This cover has no liability limit for death & injury, however, has a limit of 7.5 lakhs maximum compensation in case of third party property damage. Any amount higher than the maximum limit is needed to be paid from policyholder's pocket. The claim for this is not filed by the policyholder but by the third-party.
5. Personal Accident Cover Personal Accident (PA) Cover provides financial compensation in case of injuries, total/partial disability or death of the policyholder in the event of a minor or major road accident. The policyholder should have a mandatory personal accident cover up to Rs 15 lakh.However, a policyholder can choose not to take the PA cover if;
6. This motor insurance claim can only be filed in case of partial/full permanent disability or death of the policyholder. The compensation would depend on the extent of permanent disability.The claim amount is compensated to the policyholder. However, in case of death or total disability, the compensation amount is paid to the nominee of the policyholder.

A happy insurance claim experience is easier than ever when you know the most common terms used in motor insurance policy papers. Now that you know, go ahead and make your informed decision to claim, renew or simply research various motor insurance policies.

The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.