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Car Insurance Terms You Must Know...

10 May 2016, 03:19 PM

Most vehicle owners & users are aware that it is mandatory to have a valid car insurance in India. Yet many simply sign away the cheque at the time of purchase or renewal without the slightest trace of a second thought over what exactly it is that the coverage involves. In most instances, they get away with their ignorance as few owners truly need their insurance safety net. But Murphy is known to strike when least expected and there’s nothing better than being prepared for the unexpected.

If you’ve ever looked closely at the insurance certificate, there’ll be a bunch of acronyms and words that may leave you stumped. Here’s a closer look then at some of the key car insurance terms you must know:

★ IDV: This is your Insured Declared Value aka, the market rate of your vehicle. In the unfortunate event where the damage to the vehicle is extensive, the insurer sometimes writes the vehicle off and it is the IDV that decides the payout. Even in the case of regular claims, insurers refer to the IDV when processing them.

★ TPI: Third Party Insurance is the compulsory coverage that one refers to under the Motor Vehicles Act. It covers the damages caused to the opposite person (s) and their property due to the acts of the driver behind the wheel of the vehicle.

★ Own Damage: Often referred to as first party insurance, it covers damages caused to one's own vehicle due to the actions of the driver, while also covering the damages to passengers subject to limitations of the clauses in the contract & the IDV.

★ No Claim Bonus: This is one of the most important of car insurance terms you must know. It is the rebate passed on in terms of lowered premiums to those owners who haven’t made a claim on their vehicles in the previous year. NCB is also transferrable from an older car to a new one, and many owners are beginning to leverage this to offset the heavy premiums when buying a new set of wheels.

★ Depreciation: The IDV or the market value of a vehicle reduces with each passing year. Insurers often calculate this based on the rate of depreciation that varies from vehicle to vehicle.

★ Zero-Depreciation Cover: This type of coverage is typically offered for the first three years of a new car. It covers the owner from the miscellaneous charges towards replaced parts that they would have to pay in the event of a claim being made.

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