Car Insurance – Everything You Must Know

Car insurance is also known as Motor or Auto Insurance. It is the coverage that the insurance companies provide to the car owners against monetary losses. The policy applies to car theft/damage or if the owner dies/suffers bodily injury. In case of death, the family receives compensation. All insurance policies are risk-sharing policies where various policyholders distribute the costs. Similarly, the risk is borne by many in the car insurance or four-wheeler insurance policies also. Several car owners, as well as other domestic four-wheeler vehicle owners, pool in their risks and premiums. A huge amount accumulates from premiums of various car insurance and four-wheeler insurance holders. When someone suffers a mishap, the insurance amount is funded from this corpus.

What is Car Insurance and How it Works?

Car insurance is a policy in which the policyholder shall pay premiums to the insurance provider. It is the premium amount against which s/he can claim an insurance amount. The insurance amount is usually a larger amount than the total cost of premium payments. It is applicable in cases of damage or robbery/theft of the car or a domestic four-wheeler. The payment of premium depends on the amount of insurance coverage provided. The higher the coverage, the more is the premium. The insurance provider decides the insurance cover amount based on the market value of the car and its depreciation cost. The insured can negotiate to increase or decrease the Insured Declared Value (IDV).

The fund generated through the premium collection helps insurance providers in many ways. They run the company, earn profit and pay the insurance claim when there is any.

Features of Car Insurance

The features of car insurance include the types of coverages provided, the exclusions, and other specific characteristics such as:

  • Car insurance covers three types of damages and injuries as follows:
  1. When the policyholder meets with death
  2. If there are bodily injuries to the insured
  3. When the insured vehicle or car is damaged
  4. If the car is stolen or robbed

Death and injuries are considered medical insurance in car insurance. Similarly, coverage for the damage to the vehicle is property insurance. It is liability/third-party insurance for the damage through a third party or third person(s). It also depends on the type of car insurance policy as to what it shall is covered. For example, a third-party liability insurance policy does not cover the damage that is caused by the drivers/owners themselves.

  • Car insurance is of many types (which we will discuss further) out of which third-party insurance is mandatory
  • Car insurance/four-wheeler insurance premiums depend on the IDV of the vehicle. IDV is based on the make and model of the vehicle as well as the date of registration. It also depends on the geographical location as the market value and IDV differs from one region to another

Exclusions

The car insurance policies have certain exclusions and clauses in which the claim is not applicable such as:

  • Car insurance/four-wheeler insurance does not cover damage due to natural calamities, war, and nuclear attacks
  • If the driver meets with an accident or collision under influence of drugs or alcoholic drinks. Any type of auto insurance policy including Car insurance/four-wheeler insurance is not applicable in such a case
  • Car insurance/four-wheeler insurance is not applicable in the case of underage drivers or those without a license
  • When there is damage due to regular wear and tear, mechanical/electrical breakdown, or the low maintenance of the four-wheelers. Car insurance/four-wheeler insurance is nullified in such cases

Terms Associated with Car Insurance

There are certain terminologies relevant to car insurance/four-wheeler insurance that every policyholder must know. It is important in order to understand the policy terms and conditions to get the right policy and insurance estimate. These are:

1. IDV – Insured Declared Value

As mentioned earlier, IDV in a car insurance/four-wheeler insurance stands for Insured Declared Value of the vehicle. IDV is calculated on the market price of the vehicle after deducting the depreciation costs of the vehicle. The market vehicle declines as the vehicle gets older and depreciation value rises due to wear and tear.

2. NCB – No Claim Bonus

This is a carry-forward benefit if the policyholder hasn’t made any claim earlier. It is applicable only on the renewal policy when if there’s no insurance claim previously. Then, there’s a discount on the premium amount on the new policy of car insurance or four-wheeler insurance.

3. Zero Depreciation Policy

This is an add-on insurance policy that the insured can take. It is to minimize the depreciation value in the IDV and hence, make the maximum insurance cover possible. This may not be applicable in car insurance/four-wheeler insurance after 5 years of the purchase/registration of the car/four-wheeler.

4. Voluntary Deductible

This is an important clause in any car insurance/four-wheeler insurance policy. It stands for the amount that you have to pay before making an insurance claim. The insurance cover requires the insured to pay a certain amount as a premium. Some policyholders switch for lower premium payments. But they pay a lump sum at the time of the accident to make a claim. The advantage is that you will pay a low premium. However, the disadvantage is that you may have to pay a hefty amount at the time of claim. This shall prove to be a burden on the pocket.

Benefits of Car Insurance

Car insurance or four-wheeler insurance cover saves you from monetary loss. You can escape a financial burden due to damage repair or total loss of the car or four-wheeler. It covers for damages such as:

  • Accidents caused by the owners themselves by colliding against an object or another vehicle
  • Accidents due to no fault of the owners themselves but due to third parties
  • Due to theft, robbery, fire, and other unforeseen risks
  • Car insurance or four-wheeler insurance covers not only the damage to the vehicle but the driver as well
  • Car insurance provides compensation to the family in case of the death of the driver

Types of Car Insurance or Four-wheeler Insurance Policies:

Different kinds of policies cover up for different kinds of damages. Below are the various types of car insurance and four-wheeler insurance policies:

1. Own Damage Insurance

‘Own Damage Policy’ in car insurance and four-wheeler insurance refers to damage that owners do themselves. It is for the damage repair of vehicles or their parts. This cover will be provided when the owners cause accidents, collisions, or any such damage themselves. This policy will not cover accidents caused by another person’s fault. It shall provide coverage for the loss due to theft (theft of the vehicle or parts of the vehicle). Theft counts as your loss and damage, done to yourself. It is not on accidental damage caused by any third party. Also, it does not cover natural causes like fire, weather conditions, etc., and man-made problems like vandalism, riots, etc. It can also cover up the loss of belongings in case of such accidents.

2. Third-Party Insurance

This type of car insurance and four-wheeler insurance policy is mandated by law. Hence, every vehicle owner must be insured. This covers the costs of damages done by third parties. The premium of a third-party vehicle insurance policy is usually lower than others.

3. Comprehensive Damage Insurance

As the name implies, it is inclusive of both types of insurance covers as mentioned above. A comprehensive policy in car insurance or four-wheeler insurance provides insurance against both the third party and own damage. Thereby, it also has a higher premium.

4. Additional Coverages

Apart from the three major types of insurance mentioned above, there are other types of additional insurance covers such as:

  • Glass Insurance in car insurance & four-wheeler insurance covers the costs of damage to the glass of rear/side windows and sunroofs
  • As mentioned earlier, the Zero Depreciation Policy is insurance to cover the depreciation costs. Similarly, there is a Gap Insurance Policy. It covers the gap between the actual cost of the car and the current market value at the time of the claim
  • Consumable Cover in car insurance/four-wheeler insurance policy covers consumable items like washers, AC gas, bearings, engine oil, fuel filter, etc.
  • Engine Protector Cover is for covering the costs of repair of the engine. For example water ingression or oil/lubricant leakage
  • Other than OD (Own Damage) Policy, there is Collision Insurance as well. It covers for the damage occurring due to collision with a stationary object. It is for damage like that from potholes or the rolling of the vehicles

How to Apply for Car Insurance Online with Paytm?

You can now easily get car insurance online or its renewal in a hassle-free way through the Paytm app. Follow the below steps for the same:

  • Go to ‘All Services’ and then scroll down to the ‘Insurance’ section
  • Among various insurance products, tap on the ‘Car Insurance’
  • Now add the car number to get the right quotes for car insurance. You can check the terms and conditions, coverage amount as well the premium amount
  • If the car is already insured within an existing policy, its details are mentioned. For instance, details like policy type, current insurer, and policy expiry date are available
  • You can also switch from one policy to another by buying a new one
  • Paytm offers a simple purchase experience of car insurance online. It provides a wide range of options, no calls/spam, and 24×7 claim support. There are 12+ insurers and more than 10 add-on policies for car insurance and four-wheeler insurance policy

Wrapping it up:

The expenses incurred on the repair & replacement of the car or its parts can dig a hole in our pockets. It will be a great loss if the vehicle is stolen or completely damaged leading to a total loss. In such times, car insurance/four-wheeler insurance policies can be a great financial aid that will cover up the costs. There is an advantageous feature with these policies. The insurance covers not only the vehicle but also the driver against bodily injuries and death. Also, it complies with the law.

FAQs
How to make a car insurance or four-wheeler insurance claim?
You can make car insurance or four-wheeler insurance by reaching out to the insurance provider as soon as possible after the accident, theft, or any damage. Also, lodge an FIR in the nearest police station. Submit all the relevant documents and take note of the claim number.
Can the car insurance or four-wheeler insurance be transferred to another person?
  • Yes, the car insurance or four-wheeler insurance can be transferred to another person and it must be transferred to the new owner whenever there is a sale/purchase of the second-hand car/four-wheeler. It protects from future liabilities
  • If the previous owner holds the policy then s/he is also responsible for third-party liabilities despite not owning the car. Similarly, if you are the new owner without having the policy transferred, you cannot claim the car insurance or four-wheeler insurance
Will the security device installation in my vehicle reduce my car insurance or four-wheeler insurance premium?
Yes, the installed security devices in vehicles not only add extra protection but can also reduce the car insurance or four-wheeler insurance premiums to a limit. Safety devices include alarms, airbags, etc.
Should I make claims in car insurance or four-wheeler insurance policies for small repairs?
Ideally, you should not make claims in car insurance or four-wheeler insurance policies for small repairs so as to claim NCB in the next policy as well as claim the full amount in case of heavy damage.
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