The Government of India has ruled that all motor vehicle owners are required to get their motor vehicles insured. This is to ensure you, as well as others on the road are safe and protected in all situations. Sometimes buying a motor insurance cover can get overwhelming with all the new terms and information that you need to be aware of.
You should ensure that you fully understand the cover you choose to purchase since it is one of the most important decisions you have to take regarding your motor vehicle. Motor insurance cover is a safety net that helps you cover any financial expenses that you have to incur to keep your vehicle up and running. Read on to know the terms you should know before buying the policy.
1. Third-Party Insurance
Third-party insurance cover is mandatory for all motor vehicles under the Motor Vehicle Act. Under this policy, a third party is insured by the insurance company. The policyholder pays premiums to protect himself against any liability that may arise to third parties. It covers damage caused to third parties.
2. No Claim Bonus
A No Claim Bonus is a mechanism by which the insurance company gives some sort of discount to the policyholder if no claim has been filed for that year. This is why you are advised against filing claims for expenses that are small and affordable. If you haven’t filed a claim for the 1st year, you are eligible for a discount of up to 20%, and for the second year it’s 25%. This percentage keeps increasing as the years of no claim increases.
3. Compulsory Deduction
These deductions are the amount that the policyholder has to pay every time he/she files for a claim. This is done to ensure that people do not file claims that are fake or wrong. It prevents frauds. This amount is a minimal amount from the claim amount.
4. IDV- Insured Declared Value
Insured Declared Value is considered to be the sum insured for motor insurance covers. It is the market value of the car. This is the maximum amount the insurance company will pay you if your car is totally damaged with no scope of repairs. IDV is calculated by reducing the amount of depreciation from the manufacturer’s selling price keeping in mind the age of the vehicle. The depreciation percentage is calculated based on how old the vehicle is.
5. Zero Depreciation
The motor insurance term you should know is Zero Depreciation. This is generally an add on to your existing motor insurance cover. Typically, whenever you file a claim, the amount is calculated after reducing the depreciation amount. But under this, the amount of depreciation is included in the final amount. Here the depreciation is calculated differently for different parts of the car.
6. Comprehensive Cover
A comprehensive cover is a 360 degrees protection cover for your vehicle. This type of cover protects you and your vehicle from third party damage as well as damages that may be caused by natural forces like floods, earthquake, or theft. The premiums for this cover is generally higher than those of the third-party cover.
Now that you know some of the important terms related to Motor insurance, you can be a smarter policy holder equipped with the knowledge to make an informed decision. You should ensure that you have properly researched the various policy options and are choosing a plan that’s right for you and your vehicle.