In India, it is mandatory for all vehicle owners to buy vehicle insurance. Insurance regulatory and development authority (IRDA) is the apex body to supervise and monitor the insurance business in India. It issued a circular regarding the vehicles sold after 1st September 2018. It stated that general insurers should “offer only 3 years motor insurance third-party covers for new cars and 5 years motor third party insurance policies for new two-wheeler.” It further said that the insured should be given two options. Long term package covering both Motor Third party insurance and own damage insurance for three years or five years as the case may be or a bundled cover with 3/5 year term third party component and one year term for own damage.
Like any other kind of insurance, motor insurance is like a safety net for your vehicle in the event of damage or theft of the vehicle. But the motor insurance also covers the damage to the third party vehicles or property that could be resulted due to an accident.
Now let us examine the important aspects while buying a new insurance cover for your vehicle. They are mainly categorized as under.
- Insured declared value (IDV):- Insured declared value is the current market value of your vehicle. It refers to the highest sum payable by the insurer. It is the maximum amount you can claim in case of the total loss of your vehicle either due to theft or damages beyond repair. Therefore it is advised that you must not quote IDV lower than the actual market value of your cal, however, it might attract lower premium but could result in receiving inadequate compensation.
- Own damage premium(ODP): – Own damage premium is the premium that you pay to avail an insurance cover equal to the IDV and forms the major part of the total premium. It ensures that your vehicle is protected against losses caused by any event beyond your control. These events include natural disasters like earthquakes or tornadoes as well as man-made calamities like fire or explosions. Own damage premium differs according to the model of the car, engine capacity, geographical zones of the location of residence.
- Zero depreciation cover (ZDC):- While filing the claim, the standard insurance policies deduct depreciation on replaced parts. However, if you opt for zero depreciation cover, insurance companies wave off depreciation on such replaced parts, which means that you receive a higher claim amount.
- Third party cover:- This cover protects the vehicle owner against any financial liability as a result of death, physical inquiry or damage to the property of a third party. According to the Indian Law, third party cover is mandatory when you are buying a car, so make sure that it is a part of the contract with your insurer.
- No Claim Bonus (NCB):- It the discount you become eligible for, in case you have not made any claims in the previous year. It can be taken as a reward for prudent use of your vehicle. This amount is deducted from the next due premium since the NCB can be quite large- 2% for 2nd year to up to 50% in the 6th year. It is worth avoiding the claim for minor damages.
- Personal accident cover:- This cover financially safeguards you against unforeseen events causing bodily harm like death due to accident or permanent total disability due to a road accident.
Over 135000 people are killed in road accidents in 2013 alone. India holds the dubious distinction of most number of road accidents annually.
As personal accident cover is not available in every motor insurance policy, so make sure to include this cover which purchasing the motor insurance policy for your vehicle.