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CAR INSURANCE

5 Interesting Facts You Must Know About Car Insurance

Sumit Asrani Sumit Asrani 03 February 2017

Is Car Insurance a headache for you? And you wish to live a worry free life. Before your half knowledge leads you into a no-entry zone, read these facts, now.

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Car insurance could be troublesome if you didn't know these lesser known facts.

Skipping something important about "car insurance"may get you into trouble.

Imagine if you can save tonnes of money. Yes, you read it right – tonnes of money. Whether you are about to buy a new car or you own one, there are a few things that even your insurance agent / dealer might miss on telling you.

So here are the five interesting facts you must know about car insurance:

What are those?

  1. Types of Car Insurance
  2. The hidden secret to “insure” your car when something goes wrong
  3. The key to save money on premiums – Every year
  4. What does the Insured Declared Value (IDV) mean?
  5. Who decides the premium of the insurance you purchase?

Are you short on time? Watch this video

Still here?

Let’s dive in.

Did you know there are two major types of car insurance?

Fact #1 Two Types of Car Insurance:

  1. Third Party Insurance
  2. Comprehensive Insurance

Let's keep it simple. I am going to explain each term below.

Fact #2 The hidden secret to “insure” your car when something goes wrong:

First thing first, whenever one speaks of insurance, generally, involves two parties. The one who buys insurance (Insured) and the other who is providing insurance (Insurer).

Now the question arises – What does Third Party Insurance mean?

Or

What is Third Party Car Insurance?

Understanding of this term is as important as getting insurance for your car. Since you bought a car you are the insured and the company that is providing you the insurance is the insurer.

Yes, I know, you want to know about the third party.

So, whenever you buy a car insurance you get only Third Party Liability Insurance”. It only covers death/injury/damage to the Third Party.

Third Party can be:

  • Pedestrians walking on the road
  • People in another car
  • Damage to third person's property

Few things to keep in mind about the Third Party Liability Insurance is –

  1. It is MANDATORY – Mandatory, yes it is. Mandatory as per the Insurance Regulatory Development Authority of India (IRDAI)
  2. It only covers the loss or the damage done to the third party. It also provides personal accident cover to the owner driver in case of an accident.
  3. And it does not cover any loss or damage happen to your car!

So it brings us to another question. How do I insure my car under any unlikely conditions when something goes wrong?

The exact thing you must know about getting your car insured is to opt for a Comprehensive Car Insurance.

What is Comprehensive Car Insurance?

Good question.

And I am going to answer you now.

Whenever you are insuring your car, make sure you opt for a Comprehensive Car Insurance. The importance of this plan is twofold:

  1. It covers your Third Party Liability Insurance, which is mandatory as per IRDAI
  2. The most important aspect of your interest is that it covers loss or damage or theft incurred to your car.

Example: Let’s say, today I bought a car and agreed to pay the premium for Third Party Car Insurance, only. In an unlikely condition, I bump into someones property. Sadly, only the damage happened to the other person's property will be covered.

However, loss or damage induced to my car will not be covered. Oops!

If I buy a Comprehensive Car Insurance, it would cover damages to my vehicle and third-party. Hence, make sure you buy a comprehensive car insurance only.

Fact #3 The key to save money on premiums – Every year:

Not a secret, though. Most of the time you keep hearing the term, "No Claim Bonus (NCB)", and yet you are unaware of the benefits offered.

What exactly is No Claim Bonus or NCB?

It means that if there is No Claim, throughout a year, you will get a discount on the premium amount for the next year. And the best part, it keeps increasing every year, when there are no car insurance claims.

For example, if you make no claim for a year, you will get a 20% discount on the premium amount for the second year. Likewise, if there is no claim in the 2nd year also, you will get a 25% discount on the premium amount for the third year!

It can go up to 50% for 5 claim-free years.

Isn’t it interesting? Of course, yes.

Hold on! What if you make a claim in the third year? The NCB falls back to ZERO.

(Got any queries? Read here or talk to our team on the toll-free number - 1800 209 9930)

Fact #4 What does the Insured Declared Value (IDV) mean?

If I put it out in a simple way, all it means is the current market value of your car.

It is the amount your insurance company reimburses you, in case of theft or damages beyond repair.

Remember this: Every year the value of your car depreciates. That implies your IDV also decreases with every year. Don’t forget that.

Fact #5 Who decides the premium of the insurance you purchase?

The question that makes you scratch your head - Who determines the premium of your Insurance?

IRDAI pre-decides the Third Party Liability Insurance premium.

But what about the Comprehensive Car Insurance that includes Own Damage premium?

Based on certain factors (like, IDV, NCB, Discounts, etc.) premium may vary for Insurance Companies.

Won’t you like to get the best premium quote for your car?

Feel free to ask questions by leaving a comment in the comment section and we would be more than happy to help you.

Happy Driving!

Sumit Asrani
Written by Sumit Asrani
He's a writer. His blood cells are woven with Hypergraphia, as he breathes in books, he exhales words and sneezes poetry. Captivated by the web-of-words he's trying to escape miraculously as a content writer at Coverfox.com.