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Car insurance provides financial protection in case of involvement in an accident. Everyone makes errors in life and the accident could be either due to your own mistake or some other person’s error and it can cost you plenty of money paying the damages. This is the reason why it becomes important to have car insurance. Car insurance provides cover for damage to your car from accidents or losses due to unavoidable circumstances and you don’t have to worry about repairs and legal costs as they are covered by the company on the basis of the insurance you have taken.
The value of car insurance is based on the IDV (Insured declared value) of the vehicle and the maximum claim the insurer will pay you if your car is stolen or damaged beyond repairs. It is near to the market value of your vehicle. When you purchase a new car the IDV is calculated based on the showroom price and the value of your car begins depreciating from the moment you purchase it. When you renew your policy the IDV will decrease due to the rate of depreciation that is applied.
The insurance premium is directly proportional to the IDV of the car. Every year as the car becomes older the IDV will also reduce. The factors on which the IDV depends are-
- Manufacturer, make, and model of the car.
- City registration details.
- Age of the car.
- The car is private or owned by a company.
- Cubic capacity and ex-showroom price of the car.
Always remember that a high IDV means a higher premium; but you also get higher compensation due to an accident or if a car is stolen, and a low IDV means a low premium but can result in a big loss for you at the time of loss or theft of your car. So when you are choosing a car insurance policy take note of the IDV also and not just the premium.
Types of Car insurance in India-
Following are the types of car insurance coverage available-
When there is an accident and it is established it was due to your negligence then the third party insurance comes into play and covers injury or death of third party or property. It does not cover the damage to the owner or insured vehicle. It is mandatory for Indian vehicles to have third-party insurance coverage.
The benefit of third-party insurance is that it is cost-effective in terms of premium, provides financial support to the third party in an accident, and ensures you peace of mind during such a traumatic incident.
The comprehensive car insurance has the third party liability cover that provides insurance coverage for bodily injury or damage to a third party and also has features of own damage plan where your car is covered for damage due to natural calamities like earthquakes, floods, tsunamis, or human calamities like riots, arson, civil unrest. It is advisable for the car owners to avail of the comprehensive insurance at the time of purchasing a new car even though the premium is slightly higher.
Comprehensive car insurance is the superior protection for your car as against third party insurance that provides cover to the third party only, whereas this covers your own vehicle too. It covers lawsuits including the legal fees brought against you due to an accident and provides you with peace of mind knowing that you have financial protection.
There are certain things that are excluded from a comprehensive car insurance including depreciation, wear and tear of a vehicle, electrical or mechanical breakdown, damage caused due to drunken driving and driving under influence of drugs, damage to the car by war, mutiny, or nuclear risk.
The collision coverage covers your vehicle only in case of an accident and will pay for the repairs of the car. The collision could be with another vehicle or collision with an object such as a tree or an accident that involves rolling or falling over. As the value depreciates in a much older car it may not be worth having collision coverage while a new or expensive car can have this coverage as it will help you in getting the value that was there before the collision.
Personal Injury Protection-
The personal injury cover protects the owner-driver and the passengers when there is an accident. The costs associated with an accident can be heavy on the budget of a person and the medical bills along with that of passengers are paid under this coverage not considering whose fault it was in the accident. The premium you pay is dependent on your occupation and age. Accidents are common on Indian roads and this cover provides you with financial protection.
Uninsured Motorist Protection-
The uninsured motorist protection insurance is useful when you are hit by an at-fault driver who has no car insurance to cover your repair damages. When you are in an accident with an uninsured motorist and do not have this coverage you will not receive payments even when the other person is at fault. You would have to pay from your own pockets and the uninsured motorist protection can cover your expenses under such circumstances.
Car Insurance Add-ons Covers-
The car insurance add-on is an additional cover that can be opted with a comprehensive car insurance policy and this can add to the protection provided by the car insurance policy. There are many add-ons that can be to a car insurance policy-
Zero depreciation cover-
The market value of your car depreciates and drops from the time of its purchase. The amount of depreciation applicable to your car is deducted by the insurer from the claim amount. The zero depreciation cover bears the depreciation cost of the vehicle thereby increasing the settlement amount.
Engine Protection Cover-
The engine protection cover add-on provides coverage in case of repair or replacement of the internal part of the engine, gearbox, transmission, and differential assembly and also covers the labor cost incurred for the overhaul of the same.
The exclusions to this are expenses incurred towards improvements or extra fittings, the claims related to damage due to wear and tear, and also the cost related to engine oil and consumables in case of flushing of engines.
Roadside Assistance Cover-
The roadside assistance cover comes in use when your car is stranded on a road due to mechanical or electrical failure or low fuel. The insurance company has tie-ups with various service centers and helps you in this time of need.
The insurance company will tow your car to the nearest service center or garage if your car is involved in an accident and cannot be repaired on the spot. Many times on the spot repair facility can also be provided in case of electrical parts or components malfunctioning, battery discharges, changing of a flat tire, or sending fuel to the location where you are stuck with no fuel pump nearby.
The consumable cover provides insurance for the consumables that get used due to continuous use and this cover provides insurance coverage for items like nuts, bolts, screws, washers, all types of lubricants, brake oil, engine oil, grease etc. When the policyholder opts for consumable cover with the comprehensive car insurance policy the insurance company provides compensation for consumable expenses.
Return to invoice cover-
The return to invoice allows the customer to get the ex-showroom price of the car as compensation in case it has been stolen or damaged beyond repair. In-car insurance the maximum amount of claim that you can make is the insured declared value (IDV) and the IDV is less than the invoice value due to depreciation over the years. The return to invoice option helps you to get an on-road price for the car and doesn’t account for any depreciation.
Under normal circumstances, the car insurance companies do not cover the passengers and offer the passengers’ insurance cover as an add-on which increases the premium by a small amount. When you drive a car the passengers in your car are not covered for an accident and would have to spend money from their pocket in case of injury from an accident. When this cover is included in the car insurance policy it provides protection to passengers also who ride in your car.
The types of car insurance covers and the add-on available have been covered that will provide you financial assistance in the event of an accident. They can be selected according to the cover you require and the additional premium you have to pay. The insurance policy gives you peace of mind when you know that you are covered for any damage to your car.