If you are planning to buy your first car soon, it is also advisable that you brush up on your knowledge of car insurance. As per the Motor Vehicles Act, 1988, it is compulsory for all car owners to at least have a basic third-party insurance for their vehicle before driving out on the roads. But what does third-party insurance mean? Let’s find out. Here is a look at some common car insurance terms that you need to be aware of.
- Third-party (TP) insurance
Third-party insurance covers the policyholder for liabilities towards the third-party for damages to their property or third-party death/disability in an accident.
- Comprehensive cover
Comprehensive car insurance is not mandatory by law in the country, but it provides holistic coverage for your vehicle. It includes coverage for third-parties liability, own damages sustained in an accident, losses due to natural calamities (floods, landslides, tsunamis, cyclone, etc.) and man-made calamities (theft, vandalism, strike, etc.)
- Own damage (OD)
The own damage cover is a part of your comprehensive car insurance plan that covers the damages sustained by the insured vehicle in an accident within the limits of the policy.
- Insured declared value (IDV)
The IDV is the entire sum insured in your car insurance. It is calculated as the manufacturer’s selling price of your vehicle minus any depreciation. The IDV for any accessories that were not fitted by the manufacturer will be calculated separately. The IDV is generally paid out in case your vehicle:
- suffers total damage in an accident
- is stolen
- No claims bonus (NCB)
The no-claims bonus is a discount offered on your car insurance premium for every claim-free year. This discount is given upon policy renewal and increases in value each year you do not raise a claim.
- Compulsory deductible
The compulsory deductible is an amount that the policyholder has to pay from their own pocket for a claim – the rest of the claim is borne by the insurer. The compulsory deductible helps prevent people from unnecessarily filing claims.
- Voluntary deductible
The voluntary deductible is an amount that the policyholder can opt to bear over the compulsory deductible on the claim value. Opting in for a higher voluntary deductible will see you pay a lower premium.
Add-ons are extra covers that you can include in your car insurance policy at an additional cost in your premium. These add-ons serve to supplement your coverage. They can only be included with a comprehensive car insurance policy. Common add-ons include roadside assistance, engine protective cover, NCB protection, consumables cover, return to invoice cover, cover for key loss, and zero depreciation cover.
- Network garage
Network garages are garages that are enlisted with the insurer as part of their network. The policyholder can generally avail of cashless repair at these garages, subject to claim approval.
Hope that this article has helped you gain a better understanding of common terminologies used in car insurance.
Remember to buckle up and drive safely.