Top Car Insurance Jargons That You Must Know
The pain of dealing with any damage to your car insurance is immeasurable and all the paperwork, legal jargon and fine print can make this process all the more difficult. Therefore, in order to make this an easier process for oneself, there is a need to truly understand the conditions, offerings and exclusions of the policy.
Top car insurance jargons that you must know:
- Third-party insurance: An act only cover is mandatory liability insurance purchased by the insured, for protection against the claims of another party. Policy covers are usually of two kinds namely, liability coverage policy and property damage policy.
- Comprehensive insurance: It is a wide-ranging, inclusive cover that offers the insured protection for the damages caused to the car as well as covers for third party liabilities. A comprehensive policy offers coverage for eventualities such as theft, damage caused by third parties, riot damage, arson or vandalism, natural disasters, etc.
- Own damage premium: A personal accident policy or first-party insurance, which is a non-mandatory cover, is designed to protect the insured and the vehicle from damages and losses caused due to unforeseen circumstances. The premium amount that is paid for this policy is known as the own damage premium.
- Deductibles: Deductibles are part of the claim amount that are not covered by the car insurance company. The presence of deductibles will lower the incidence of claims. The insured needs to pay this agreed amount before the policy kicks in itself. There are two main kinds of deductibles – compulsory and voluntary deductibles.
- NCB protection: A No claim Bonus is a discount in premium offered by insurance companies if a vehicle owner has not made a single claim during the term of the motor insurance policy. An NCB protection is to safeguard the earned NCB.
- Insured declared value: The Insured Declared Value is the maximum amount that the insurance company will pay as a claim amount in case of damage, theft or total loss of the insured’s vehicle. It consists of the value of the car including the accessories fitted but does not cover the cost of registration or insurance of the vehicle. The IDV value is directly proportional to the premium amount that one has to pay – the higher the IDV of the car, the higher the premium.
- Anti-theft device: It is a device that decreases the chances of the vehicle being stolen or vandalized/ increases the chance of recovering a stolen car. For example, GPS, local alarm, etc.
- Legal liability: It is a legally enforceable obligation or responsibility that the insured carries for the damage, loss or injury suffered by another person by virtue of the car. Typically, the insurer indemnifies the insured against this.
- Cashless garage: It is a garage/service centre that is recognised by the insurer as an affiliate and getting one’s car repaired in the said facility will allow the insured to make cashless claims under the insurance policy.
- Proof of loss: A Proof of Loss is an official, notarised document that is filled out by the policyholder when property damage occurs resulting in an insurance claim.
- Break-in insurance: Break-in insurance occurs when a policyholder does not renew his or her vehicle insurance on time leading to its lapsing. This can lead to some legal repercussions if the car is driven around without a valid, subsisting insurance cover.
- Add-on covers: Additional options or add-ons are basically extended coverage offered by the insurer in the insurance policy. Choosing the right add-on can help save a lot of money for the insured.
- Return to invoice cover: This additional option closes the gap that exists between the IDV and the invoice value. The entire cost of the vehicle including the on-road taxes can be recovered at the time of total loss or total constructive loss of the car by the insured in circumstances that the car was lost, stolen or damaged.
- Passenger cover: This add-on safeguards the interests of the passengers in the vehicle by providing for the cost of medical treatment, disability liability and financial assistance in case of death during an accident. The scale of compensation depends on the nature of the injury.
- Key replacement cover: This add-on cover is to pay for the replacement of the car key or lockset (especially Frequency Operated Buttons/FOBs) when it is stolen, damaged or lost. It is not a standalone cover and concerns the security aspect of the car.
- Engine protection cover: The ‘engine secure’ add-on provides compensation for upkeeps/ repairs in the engine that are caused due to an accident, water ingress, leakage of oil, etc.
- Roadside assistance cover: The road assistance cover is an add-on that guarantees services at the site of the accident or car trouble through such as emergency services, towing, refuelling, resolving technical issues, change of flat tyres, etc., round the clock.
- Zero Depreciation Cover: This add-on entitles the insured to claim the entire cost of replacing the damaged parts of the car. It ensures that the wear and tear costs are not deducted while making the final settlement. There exists a maximum limit of two claims for the policy period.
- Underwriting: Insurance underwriting is the process of evaluating a company's risk in insuring one’s car. Based on this will the insurance company decide if it is a profitable business to insure one’s car.
- Exclusions: They are those consumables that the policy will not cover under the insurance claim.
- Expiry date: A motor insurance policy generally has a validity period of one year after which it expires, unless it is a multi-year policy.
- Endorsement: Endorsement in insurance refers to an addendum in one’s existing policy incorporated due to change, modifications in the policy. It is written evidence of an agreed change, modification to the policy.
Knowing these insurance jargons will go a long way in helping one understand the policy, undertake the right decisions and make proper claims. Leverage this knowledge intelligently.