Buying a car insurance plan is not enough. You also need to know how the plan works to use it properly. There are some important terms associated with car insurance that help you decode the policy and understand the logistics before you make a claim. In this article we list the key car insurance terms that you must know before you make a claim. Take a look.
Key car insurance terms
- Cashless garage: Every insurance provider gives you a list of network garages where you can get your car repaired. A cashless garage is basically a garage that has a tie up with the insurance company. Here, you need not shell out money for repairs. All you need to do is inform the insurer and the payment is done to the mechanic on your behalf. So, this process becomes cashless for you subsequently. When you buy a car insurance policy, you are given a list of the network of cashless garages. Try to take your car to any such garage whenever you need to get it checked or repaired.
- Insured declared value (IDV): The value of your car depreciates as the vehicle ages. The insured declared value or the IDV is the current value of the car. It is calculated after taking the age of the car as well as the current selling price of the car into account. The IDV is the maximum amount the insurance provider will pay at the time of a claim if your vehicle is stolen or is damaged beyond repairs. A lower IDV also results in a lesser premium for the car insurance plan and vice-versa. It is advisable to declare the right IDV of your car to your insurer.
- Third party liability: This is a very common car insurance term that you must be aware about. At the time of a road mishap, you are considered to be the first party and the insurance provider is the second party. Third party refers to the person who is injured or dead or whose property is damaged due to the accident involving your vehicle. If a third party is involved in an accident, you are liable to compensate the financial losses incurred by the third party. This is known as the third party liability in car insurance. Your basic car insurance plan covers third party liability.
- Comprehensive cover: A third party car insurance plan is compulsory in India. These plans only cover the damages sustained by a third party, and not the losses you or your vehicle undergo. If you want a cover for your own vehicle, you have to opt for a comprehensive car insurance policy. This type of a cover will pay for the third party costs as well as your own damages. It is more comprehensive and offers a larger umbrella of cover. The comprehensive cover is more expensive than a third party cover.
- No claim bonus (NCB): This is another important term that you must be aware of. If you do not make a claim in a particular policy year, the insurance provider will offer you a discount on the premium of the following year. This discount is the NCB and it accumulates for every claim-free policy term. Remember the NCB when making a claim and check the value of the claim. If it is a small amount, it may make sense for you to pay it from your own pocket and preserve your NCB for a profit in the long run.
- Deductible: This is a very important car insurance term that you must know about at the time of a claim. Every car insurance plan has the deductible component. This means that the policyholder has to pay a part of the expenses at the time of the claim and the insurer will pay the remaining amount. As the policyholder, you can choose your deductible at the time of buying the plan. If you opt for a higher deductible, your premium will be lower, but at the time of a claim, you have to bear a higher cost too
- Zero depreciation cover: The zero depreciation cover is an add-on cover (or a standalone cover in some cases) that negates the wear and tear of the vehicle. It is also known as Nil Depreciation or Bumper to Bumper car insurance policy. In short if your car meets with an accident or a collision, the insurer offers you the entire cost of the repairs without subtracting the depreciation cost. This add-on cover offers 100% coverage for metal parts, fibre and rubber. Depreciation doesn’t come into picture here.
Conclusion
These are some of the most important car insurance terms that you must be aware of. As a policyholder, it is your duty to be well-versed about the insurance plan as only then will you be able to make the most out of the policy. So keep these terms in mind and you will be able to make a correct estimate about the claim amount you can receive from your insurance provider. Make an appropriate claim thereafter and get the maximum benefits out of the car insurance plan.