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Dummies' guide to car insurance

September 23, 2009 13:53 IST

All of us having motor vehicles have to go through the yearly ritual of buying insurance on our car. This article attempts to demystify the jargons of motor insurance and processes involved.

The basic jargon:

Insured: Owner of the private car

Insurer: The insurance company

Under the provision of the Motor Vehicles Act all vehicles -- owned by individuals -- should be covered by an insurance policy. The car insurance policy can be either

Third party car insurance policy covers only the inter-alia accountability of the vehicle owner for loss or damage to life or property of the third parties.

Whereas comprehensive car insurance policy covers in addition to third party accountability, loss or damage to the vehicle itself by way of accident, theft, etc. and other specified dangers.

Motor insurance policy covers

Section 1 - Loss of or damage to the vehicle insured

The company will reimburse the insured against the loss or damage to the vehicle insured for the following:

Cost of protection to the nearest car repair service - Rs 1500.

Vehicle valuation

The car is neither to be insured for reinstatement value nor for depreciated value. It is to be insured for second-hand value in the local market for a similar type of car for a similar model. In the event of loss, the liability of insurance company is the maximum compared to the market value or the amount of insurance whichever is less.

Factors determining premium of a car

What does company pay in case of claim for comprehensive cover?

In case of an accident, the insurance company pays for cost of damaged parts which are to be replaced and the labour cost to repair the vehicle.

Will I be eligible for complete reimbursement?

No, it is all subject to a deduction or depreciation at the rates mentioned below in respect of parts replaced

1

For all rubber/nylon/plastic parts

50%

2

For fiber glass components

30%

3

For all parts made of glass

Nil

For all other parts depreciation will be as below

Age of the vehicle

% of Depreciation

Below 6 months

Nil

6-12 months

5%

1-2 Years

10%

2-3 Years

15%

3-4 Years

25%

4-5 Years

35%

5-10 Years

40%

Exceeding 10 Years

50%

The insurance company will not be liable to make any payment in respect of:

Section II - Liability to third parties

Section III - Personal accident cover for owner diver

Due to bodily injury/death sustained by the owner-driver of the vehicle by violent accidental external and visible means which independent of any other cause shall within six calendar months of such injury results in

Sl. No

Nature of injury

Scale of Compensation

1

Death

100%

2

Loss of two limbs or sight of two eyes or one limb & sight of one eye

100%

3

Loss of one limb or sight of one eye

50%

4

Permanent total disablement from injuries other than named above

100%

Apart from the above covers the private car insurance policy can include the following endorsements at discounts and payment of additional premium:

Deductibles

It means the minimum amount which cannot be claimed:


The sample insurance policy detailed above is the traditional insurance policy still operated in India. Few insurance companies like Cholamandalam, TATA AIG have launched new motor insurance policies which cover even depreciation, loss of driving license, daily allowance whilst at the garage.
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