Jargons complicate things for the common man. But some jargons are necessary to imply the legality of it and are necessary. Such jargons are often stumbled upon in the case of car insurance policies. While selecting a policy is often confusing owing to such terminologies, understanding them helps to get a thorough knowledge of all the clauses mentioned in your car insurance policy. So, when you buy car insurance online or offline, keep in mind the following list of jargons that make it simpler for you to decide upon which policy to choose.
Third-party car insurance
A third-party car insurance is one of the two types of car insurance policies that can be bought. The coverage of a third-party policy includes protection from legal liabilities that may arise due to an accident injuring a third person. This policy is the bare minimum that your need to purchase as specified by the Motor Vehicles Act of 1988. A third party car insurance policy not only covers injuries to third persons, but also includes coverage for such third-party property damages to the tune of ₹7.5 lakhs.
Comprehensive car insurance
Comprehensive policies are an alternative to third-party policies. Due to the limited coverage offered by third-party covers, this policy is preferred by many. A comprehensive policy has three components – third-party cover, own-damage cover, and personal accident cover. The own-damage cover, as the name suggests provides compensation for damages to your car and personal accident cover protect the owner driver. The third-party cover remains the same as described above in third-party car insurance.
Insured Declared Value (IDV)
Insured Declared Value or popularly known as IDV is the maximum amount that the insurance company pays in the event of total loss. It is also an approximate amount of the current valuation of your car. This amount of IDV needs to be decided by you, the policyholder within a specified range at the purchase as well as car insurance renewal. Further, adjusting the IDV can help to increase or decrease the premium. However, it is not advisable to lower the IDV since it lowers the amount that will be paid in case your car is damaged beyond repair.
Total loss is the event where the vehicle insured under the policy scope is damaged beyond repair. This can either be due to a natural calamity or a major accident. Constructive total loss is also an event where the damages are of such value that exceed 75% of the IDV where salvaging such vehicle is a better alternative. Apart from natural calamity and accident, theft is another event where it is considered as a total loss.
A deductible is that amount which you need pay at the time of the claim. There are two types of deductibles – mandatory and voluntary. As the name suggest, a mandatory deductible is the applicable for all car insurance policies whereas a voluntary deductible can help to lower the incidence of premium.
No-Claim Bonus (NCB)
Not always car insurance claim is made. NCB or no-claim bonus is a concession in your renewal premium offered by your insurance company. This amount lowers the premium at time of car insurance renewal and starts at 20% and goes all the way up to 50% for every consecutive claim-free policy tenure.
With these jargons explained, making a choice of car insurance policy is no longer confusing. Make smart use of the above terminologies explained to ensure a comprehensive insurance coverage. Insurance is the subject matter of solicitation. For more details on benefits, exclusions, limitations, terms and conditions, please read sales brochure/policy wording carefully before concluding a sale.