Driving an uninsured car is illegal and is subject to penalties. As per The Motor Cars Act of 1988, all cars must have active car insurance coverage. People sometimes struggle when choosing which insurance to buy since there are various insurance terminologies. It may be complex and difficult to interpret the coverage that is offered. As a result, choosing insurance can be challenging.
Understanding insurance terminology and the technical language used by insurers affect people seeking to buy insurance. Despite the terminology’s apparent complexity, most of the keywords may be understood by reading up on them online. Learn some popular words and terminology you should be familiar with while purchasing a car insurance policy.
15 Important Car Insurance Terminologies
One of the major things you should always have with you while driving is vehicle insurance. However, for the majority of us, we lack a fundamental understanding of the terminology related to insurance policy. Below is a list of terms related to automobile insurance that will help you make informed decisions:
The term “policyholder” refers to either the individual or the organisation who has purchased a car insurance policy in their name. The primary insurance policy beneficiary is often the policyholder. The policyholder may also be a company or other kind of organisation. You should be aware that the policy involves two parties: the policyholder and the insurer, or insurance company.
2. Own Damage Coverage
It assists the owner in protecting himself or herself against damages that may be sustained due to unforeseen incidents. With this kind of car insurance, you can secure financial protection and get reimbursement for your injuries. This does not cover third-party obligations such as those involving death, injury, property damage, etc.
3. Comprehensive Car Insurance
This serves as protection against unintentional damage brought on by many unforeseeable circumstances, such as riots, natural disasters, theft, mishaps, self-ignition, and strikes. Owning comprehensive auto insurance, which covers a lot of damage, is crucial. In addition, to own damage cover, it also provide third-party liability cover.
4. Third-Party Insurance
It offers damage coverage to the suffered third party, handling their loss expenditures, which include medical bills, repairing expenses, and property damage. Third-party liabilities, including those involving death, injuries, and damage to property, are covered under this. In India, purchasing third-party liability insurance is compulsory; failing to do so is against the law.
5. Zero Depreciation Cover
Zero Depreciation coverage is an added protection option that the policyholder purchases in addition to comprehensive car insurance. Additionally, it offers protection against depreciation throughout the long-term use of the vehicle and its components. A payment above and above the cost of vehicle insurance must be paid to obtain a zero depreciation add-on. Unlike other automobile insurance plans, it covers typical wear and tear accrued over time and offers assurance regardless of the age of the vehicle.
A claim is an official demand for payment from the insured person to the insurance provider for complete loss or covered losses. A policyholder won’t be covered by the insurance unless they file a claim. The insurance company will employ a surveyor to examine the validity of the claim.
7. Insured Declared Value (IDV)
The IDV is the highest amount of insurance coverage you may request from an insurance provider in the event of theft or unintentional damage. When considering car insurance online policies, the terminology insured declared value, or IDV, is frequently used. The present market value of the vehicle along with depreciation is used to determine the IDV. The insured is required to pay a lesser premium if the IDV is lower.
-8. No Claim Bonus
This discount is offered to those who do not file a compensation claim for a certain period. One benefit is that their insurance rates will go down as a result. As the name implies, you may get this bonus if you don’t submit a claim. Your policy documents already state the NCB %, and this incentive rises the longer you go without making an insurance claim. For most insurance, the NCB typically ranges from 20 to 25 per cent.
By selecting this, you may lower their premiums since they can contribute to a part of their claim, which discourages the filing of irrational claims. While certain Deductibles are optional, others are mandatory.
Both the insurance policy documentation and the registration certificate must reflect any modifications you make to your vehicle. An endorsement is a process of having them mentioned where it is necessary. The upgrades may range from bass tubes to an additional CNG system.
11. Break in Insurance
Missed the deadline for renewing your insurance coverage? Your vehicle is now included in the group of cars having a “break in insurance.” Though only a few hours have passed since the time you were due to renew your insurance, you must have your vehicle examined by the insurance provider before paying the necessary payment.
12. Legal Liability
If a third party sustains losses or damages as a result of a car accident, you are held financially responsible. This policy will assist in meeting the obligation to compensate third-party damages under the law.
13. Additional Covers
Add-on covers are another name for extra covers or riders. Policyholders may choose from a variety of policies to supplement their insurance coverage. This is available by paying an additional fee.
14. Roadside Assistance (RSA)
In the eventuality that your car breaks down or has a problem, roadside assistance provides emergency electrical and mechanical services. Roadside assistance is a benefit under certain insurance plans, allowing you to request assistance from your provider. Depending on your insurance, the RSA service may cover a variety of tasks including organising alternative transportation, towing, booking hotel rooms, arranging for medical services, or replacing a flat tyre. It can also unlock your vehicle if you unintentionally lock your keys inside.
15. Network Garages
The policyholder has the option to submit a claim when a covered vehicle has to be repaired. Some insurance providers provide a cashless claim procedure in which they pay the garage immediately. If you desire a cashless claim procedure, you may visit a network garage since insurance providers only provide this service in a select few garages recognised as “network garages.”
A person needs to understand all of the terms associated with car insurance before deciding which ones to opt for. This enables a person to make thoughtful choices while purchasing insurance. The list of terms presented here is not exhaustive and there are many more insurance-related terminologies that you must know before getting an insurance policy. Now, all information related to the insurance plan can be found on the sites of insurance companies.
Disclaimer: The above information is for illustrative purposes only. For more details, please refer to policy wordings and prospectus before concluding the sales.