Have you ever experienced that feeling while reading your motor insurance documents that you’ve entered a world of jargons? It’s like reading a new language with similar words but meaning unknown. Well, it’s time to take control. Take a look at the following list of important vehicle insurance terms to understand the nitty-grittes of your policy documents.Insured Declared Value (IDV)
of a vehicle is defined as the maximum sum that the insurer pays in case of theft or total loss of that vehicle. IDV is usually the current market value of a vehicle and comes into picture during insurance claims.
For example, at the start of your car insurance policy
, your vehicle’s market value is fixed at Rs. 5 lakhs. So, in this case, at the time of an insurance claim, your insurance company will compensate you with the maximum amount of Rs. 5 lakhs.
Please note that insurance premiums are directly proportional to the IDV.
No Claim Bonus (NCB)
We all love incentives, don’t we? Be it in the form of cashback, discounts or reward points. Similarly, in the world of insurance, the No claim bonus is a discount that a policyholder gets from the insurer for making zero claims during the policy term.
NCB is applied on policy renewal thereby reducing the insurance premium amount considerably. It varies between 20% for the 2nd year and up to 50% for the 6th year, so it is advisable to not claim for minor damages, instead reap the benefits of the NCB.
You are allowed to transfer the NCB from one insurance company to the other. Also remember that if you are renewing your policy, the NCB can be retained on the new policy within 90 days of expiry of your previous policy.
Zero Depreciation Cover
When a claim is filed following a car collision, insurance companies employ a formula that factors in depreciation to ascertain the payable amount. As a matter of fact, cars do depreciate, which could leave you paying a hefty fraction of the overall expense even in case you have a comprehensive coverage.
However, if you opt for a Zero Depreciation cover
, insurance providers waive off depreciation and you get a higher claim amount. This also means that you will need to pay a substantially higher premium to ensure that during claim settlement you don’t have any out-of-pocket expenses.
Third Party Liability Cover
A Third Party Liability Cover protects the vehicle owner against any financial liability caused as a result of death, physical injury or damage to a third party i.e someone other than the vehicle owner and the insurance company. As per the Indian Motor Act, third party cover is a mandatory Insurance requirement to drive a vehicle legally on Indian roads.
Deductibles were introduced in comprehensive coverage policies with a view to lower claim incidents. Voluntary deductible is the limit chosen by a policyholder to meet a part of the claim from his own pocket. This amount depends on the policyholder who factors in his affordability and risk; however voluntary deductible is not mandatory. Remember, higher the voluntary deductible, lower the premium.
You will definitely come across these terms when buying or renewing motor insurance. And with this glossary of vehicle insurance terms you’ll be in a better position to understand the policy you’ve opted for.