Understanding the Important Details of Car Insurance Policy Documents

While often seeming complicated, car insurance policy documents explain the essential details regarding your financial security in the event of unforeseen incidents. Hence, as a responsible car owner, you must understand them in detail to make an informed choice while buying or renewing your four-wheeler policy. This article explores some common terminologies in car insurance that you must know.

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Important Car Insurance Terms You Need To Know

Here are some essential car insurance terminologies you should understand before signing the contract with the insurance company:

1. Insurer and Insured

   A car insurance is a legal contract between the insurer and the insured. Here, the insurer refers to the car insurance company offering insurance, while the insured is the person who buys the said car insurance policy. Insured can also refer to the four-wheeler that has been insured under the policy.

2. Acts of God/Nature

   Acts of God/Nature refer to natural disasters caused without human intervention. These include earthquakes, cyclones, floods or hurricanes. Any damage to the insured vehicle caused by these natural disasters is covered by a four-wheeler insurance policy.

3. Deductible

   Deductibles can be of two types: compulsory and voluntary deductibles.
   A compulsory deductible is the mandatory amount that a policyholder is required to pay as a part of the claim. According to the IRDAI, the compulsory deductible is Rs. 1,000 for cars with an engine cubic capacity (cc) of no more than 1,500 cc and Rs. 2,000 for cars with more than 1,500 cc.
   A voluntary deductible is that part of the claim that a policyholder voluntarily agrees to pay at the settlement time. The rest of the claim amount is paid by the insurer. Opting for a voluntary deductible is a great way to reduce your car insurance premium as here you agree to pay some part of the claim amount and the rest is paid by the insurer.

4. Own Damage Cover

   The own damage component basically implies accidental damage to one's own (insured) car. It is a type of car insurance that provides coverage for damages sustained by the insured car caused by accidents, natural disasters, theft, fire, manmade acts, etc.
   The own damage component basically implies accidental damage to one's own (insured) car.

5. Insured Declared Value/Sum Insured

   The Insured Declared Value or IDV in car insurance is the maximum compensation you can receive in case of vehicle theft, total loss in an accident, or when the damage is beyond repair. It is equal to the current market value of a car minus the depreciation.
   The amount of IDV also impacts car insurance premiums. Choosing a lower IDV leads to a lower premium and vice-versa. So, you must set an IDV that best matches your car's current market value.

6. Liability to Third Parties

   Liability to third parties refers to damages or injuries caused to any third party due to the insured car. In third-party insurance, the insurer compensates for the damages to the third party due to an accident.
   Third-Party liability includes:

   • Death, disability or bodily injury of a third person
   • Damage to the property of the third party.

7. Personal Accident Cover for Owner-Driver

   A compulsory personal accident cover is a compulsory add-on that a car owner should opt for when buying a car insurance policy. This cover can be purchased for a nominal additional premium.
   It offers compensation of up to Rs. 15 Lakh in case the owner/driver of the insured car suffers a disability or dies in an accident.

8. Premium

   Premium is the amount that an insured/policyholder pays to the insurer in return for purchasing a car insurance policy. The final amount of the premium is calculated based on various factors like make, model, variant, fuel type, coverage opted, add-ons, etc.

9. Endorsements

   Endorsements refer to the process of making modifications to an existing car insurance policy document. If you find any mistake or error in your policy document related to your personal information, policy expiration date, policy number, etc, make sure to rectify it via an endorsement.
   Endorsement can be financial (under which the insurer charges a nominal fee) or non-financial (no fees are charged for making modifications) in nature.

   You May Also Read: Know Everything About Endorsements in Car Insurance Policy

10. No Claim Bonus

    No Claim Bonus or NCB in car insurance refers to the discount given by the insurer to the policyholder for not raising a claim during a policy year. This discount is applicable on car insurance renewal premium.

11. Personal Accident to Co-Passengers

    By paying an additional premium, you can also purchase a PA cover for the co-passengers. This cover provides compensation for bodily injuries/death/disability sustained by the passenger present in the car at the time of accident.

12. Break-in Insurance

    A break-in insurance is the time duration between two policies. In the situation of break-in, your car insurance policy lapses and you are required to get your car inspected for renewing the insurance policy.
    Moreover, if this break-in period exceeds 90 days, you also lose your accumulated No Claim Bonus reward.

13. First Notification of Loss (FNOL)

    First Notification of Loss (FNOL) in car insurance refers to the first time you notify your insurance provider about the damage sustained by the insured vehicle. To avoid any claim rejection, make sure to initiate FNOL within 48 hours of meeting an accident.

Wrapping Up!

Understanding these terms and jargon used in car insurance policy documents is essential for ensuring you have the right coverage to protect yourself and your vehicle. By familiarizing yourself with these terms, you can make an informed decision when you buy or renew car insurance and avoid any claim rejections.