Car insurance is one of the few things that you need to remember when buying a car. Whether it is a new car or a pre-owned, the law makes it mandatory to have a car insurance policy.
You can purchase car insurance online or offline, but it is necessary to have one. A cursory reading of your policy may seem perplexing with the various jargons used. You must be familiar with these terms before you purchase one. Let us look at some essential terminologies that you should know of when buying one –
Third-party car insurance
It is one of the two types of car insurance that you can buy. A third-party car insurance is the minimum requirement as per the Motor Vehicles Act, 1988. Further, third-party policy insures the policyholder against any damages to other person, which may be caused due to an accident. Thus, it pays the damages and injuries to third-party, along with protecting the policyholder from any legal liabilities. You can purchase third party car insurance to save time and compare with other plans at the convenience of your home.
Own damage cover
As the name specifies, an own damage cover protects the policyholder against damages caused to their vehicle.
Comprehensive car insurance
To overcome the shortcoming of third-party insurance policy, you can purchase comprehensive policies. These plans offer extensive coverage that provides for third-party liabilities along with protection for own damage. Moreover, comprehensive car insurance ensures your vehicle has all-round protection from natural as well as man-made perils. Apart from these perils, its scope includes protection against theft and vandalism too. Buying a comprehensive policy gives you the freedom to enhance the scope of your policy based on specific requirements.
Claim
Intimidation to the insurance company about a specific event to avail compensation is termed as a claim. The insurance company investigates the incident when you make an application for the claim.
Insured Declared Value
Insured Declared Value (IDV) is the approximate market value of your car. This IDV is declared by you, the policyholder, within a specified range at purchase or/and renewal date. In the event of a total loss or damage beyond repair, it is the maximum amount the insurance company pays as the claim.
Deductibles
The deductible is the amount which you need to pay from your own pocket at the time of claim. There are two types of deductibles – compulsory and voluntary deductible. While compulsory deductible is mandatory for all car insurance plans, a voluntary deductible can be opted to lower your premium. It is important to note that deductibles have a direct impact on your policy premium. Thus, it is essential to balance the deductible and the premium.
No-claim bonus
NCB or no-claim bonus is the concession awarded at the renewal of your insurance policy. This amount of NCB starts at 20% for a claim-free policy year. For every consecutive claim-free policy period, the amount increases up to 50%. The concession in amount is limited to own-damage component of your policy.
These are some jargons that will simplify your buying process. Moreover, you can also make use of a car insurance premium calculator to compare the different plans and select a suitable policy as per need.
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