In the world of car insurance, one of the most common issues faced by the customers is the difficulty to understand some specific terms used by the insurers. While they may seem a little confusing at first, they are not as difficult when you understand them. It is important to understand these terminologies as they will help you to make the right decision and ease your car insurance buying process. Here are some of the most important terms that you should be familiar with car insurance.
Third-party insurance cover is basic car insurance that is mandatory by law. This covers third-party - vehicle, person or property damages. But, this does not provide cover to own damages of the insured. Own damages have to be borne by the insured out of his/her pocket.
Comprehensive insurance cover includes third-party cover as well as the own-damage cover. Any loss or damage arising out of man-made disasters and/or natural calamities will be covered under comprehensive insurance.
Add-ons are additional covers to enhance your comprehensive insurance policy. They can be bought by paying an additional amount on the premium. Zero-depreciation cover, return to invoice cover, hydrostatic lock cover are some of the popular add-ons available in the market.
In insurance terms, a claim is a formal request made by the policyholder to the insurer for compensation for covered damage or a total loss. The insurance company assigns a surveyor to assess the loss and genuineness of the claim and approves the claim.
Depreciation refers to the loss of the actual value of the car with time. Due to constant wear and tear, the value of the car diminishes year on year. Depreciation is calculated when the insured vehicle has suffered a total loss or theft. Factors like the age of the car, the number of kilometers and the overall condition of the car will be considered while calculating depreciation.
Insured Declared Value
Insured Declared Value or IDV is the sum insured under the car insurance. IDV is calculated based on the manufacturer’s listed selling price of the car factoring the age and depreciation. In most cases, the insurer and the policyholder mutually agree upon the IDV.
During a claim, the policyholder is expected to bear a small part of the loss or damage and this is termed as compulsory deductibles. This is done to prevent car owners from making small claims. The value of the deductible depends on the cubic capacity of the vehicle.
Apart from compulsory deductibles, a policyholder has the option to opt for voluntary excess. Here the policyholder can co-pay a part of the final claim over and above the compulsory deductibles. Choosing voluntary excess will reduce the premium of your comprehensive insurance policy.
If you haven’t made a claim in a policy year, your insurance company offers a discount on the premium in the form of a no-claim bonus. NCB is applicable only to a comprehensive insurance policy. The discount offered ranges between 20% to 50% depending upon the claim-free record of the policyholder.
Car insurance companies have tie-ups with many car service centers across the country to ease the repair work for their policyholders. Such service centers are called network garages. The repair expenses are directly reimbursed by the insurance company to the network garages offering the convenience of cashless repair facilities to the policyholders. Hence they are also known as cashless garages.
We hope this glossary style blog helped you to gain more knowledge about car insurance terminologies. Understanding these terms will give you more clarity and enable you to make an informed decision while buying car insurance. For more details on car insurance policies visit Cholamandalam car insurance.