India's 1st IRDAI Approved Insurance Web Aggregator

Things your car insurance company won't tell you

The information mentioned in the motor insurance policy document about your vehicle should match with the details in your RC book including clearance certificate, model type, fuel type – Diesel, CNG or petrol, seating capacity

By: MIC Newsdesk | 
Read Time: 4 minutes, 17 seconds | 
Last Updated: 18-01-2022
Things your car insurance company won't tell you
Anybody who owns a car is aware that car insurance is not only useful but also mandated by law as a must-have for vehicle owners. A motor insurance not only saves great financial trauma in case of an accident, but also guarantees peace of mind with respect to liability, if an unfortunate third person were to be a victim in an accident involving your car. But there is often confusion regarding what motor insurance entail and careless assumptions lead to much problems for policy holders at the time of claim settlement. Read on for a complete checklist before going for a motor insurance.

What consists of motor insurance?

There are two types of motor insurance:
  • Liability only policy or third party insurance is  mandatory under law
  • Comprehensive policy or package policy (includes Third Party and/or Own Damage or O.D Cover)
Damage to your vehicle will not be covered in case of only Liability Policy or Third Party Policy. While, Own Damage (O.D) covers the cost of repairing damages or replacing the vehicle

What is covered in Motor Insurance Covers:
  • Fire, Explosion, Self- Ignition, Lightning
  • Burglary/Housebreaking / Theft
  • Riot & Strike
  • Earthquake
  • Flood, Storm, Cyclone, Hurricane, tempest, inundation, hailstorm, frost
  • Accidental external means
  • Malicious Act
  • Terrorism acts
  • While in Transit by Rail/ Road, Inland waterways, Lift, Elevator or Air
  • Land slide / Rock slide
What is not covered?
  • Not having a valid Driving License
  • Under Influence of intoxicating liquor/ drugs
  • Accident taking place beyond Geographical limits
  • While Vehicle is used for unlawful purposes
  • Electrical/Mechanical Breakdowns
How is sum assured calculated?
The sum insured in a motor insurance policy reflects the value of the vehicle which is calculated on Insured's Declared Value (IDV).  IDV is arrived based on present value of the vehicle and the age of the vehicle (depreciation).
For Third Party:  The Motor Vehicles Act, 1988 governs the coverage under this policy. Compulsory personal accident cover for owner-driver is also included. Policy can also be extended to cover various other risks like personal accident to occupants of vehicle, workmen's compensation to driver, etc over and above the cover available to him under statute.
Who is an ideal car insurer?
  • An ideal company should have a huge network of service stations for cashless service
  • An insurer that provides best rate without any access above it
  • Fast claim settlement ratio and process
The information mentioned in the motor insurance policy document about your vehicle should match with the details in your RC book including clearance certificate, model type, fuel type – Diesel, CNG or petrol, seating capacity –which is considered very important.

Factors that change your premium from company to company?  

The premium to be paid for motor insurance differ from company to company. The factors which determine this are discounts offered, personal accident cover, different IDV.

The premium for PA Cover or personal accident cover is more or less similar across companies and is based on the amount one opts to be covered for. This is availed as add-on or optional cover and may not come built-in a policy.
Insurers try to reduce your IDV which also decreases your premium. This might seem lucrative in the short-term but please be advised lower IDV will also lower the sum assured at the time of claim, as it lowers the estimated cost of your car which is the basis of calculation of the sum assured.  Keeping IDV on the higher side helps during claims and the time of selling your car.

When you renew your policy
  • Premium is lesser than last year if no claim in made
  • If applicable, current year’s NCB or No-claim bonus should exceed that of the last year
  • Insured’s declared value or IDV is reduced by a minimum of 10 percent from last year (to account for depreciation)
  • Vehicle registration number matches
Other factors to remember
Depreciation of metal parts is taken into account while calculating IDV and thereby sum assured. Following chart is indicative of how depreciation is calculated  
Excess: This is the amount deducted by the insurance company from sum assured at the time of claim settlement. There are two types of excesses, one that is mandatory and the second is a voluntary option given to the insured to reduce their premium burden. The second option is best left untouched since it’s voluntary and will only reduce the final settlement amount paid by the insurance company to the insured.
In what cases can the insurance not pay full IDV?
  • If car value is increased without a valid reason
  • If car value is not reduced every year by 10 percent from last year’s IDV
It is to be noted that in-case of an accident where cost of repairing is more than 75 percent then the insurance company will pay the entire IDV to you. There is no liability on part of the driver who is at fault and all damages paid to the third party are covered under the premium paid by the driver (assuming same as insurance holder) to the insurer. 

MIC Newsdesk
MIC Newsdesk aggregates news on anything related to insurance in India. Keeps you updated.

Leave a Comment

Important: Insurance is the subject matter of solicitation | © 2009-2022