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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 safeguard yourself by reading these facts, now.

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Car insurance could be troublesome if you don’t know these lesser known facts.

Do you wonder what facts you must know about car insurance?

And for obvious reasons you don’t want to skip something which would give you a peaceful sleep at night without worrying about "car insurance".

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, here are a few handy tips to keep in mind before you insure your car, the one which you bought with your hard-earned saved money.

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 speak of insurance, generally, two parties are involved, unless said otherwise and there’s a contract between these two parties. Who are these two parties? The one who is taking insurance (insured) and the other who is providing insurance (insurer) to the insured.

Now the question comes, especially, when it comes to the Car Insurance is – What does Third Party Insurance mean?

Or

What is Third Party Car Insurance?

Understanding of this term is as important as getting insurance of your car. As said above, there are two parties whenever the insurance is spoken about, since you have purchased a car you are the first party of the two – the insured and the second is the company that is providing you with the insurance – the insurer.

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

So, whenever you buy the insurance for your car, unless stated otherwise, you are buying – “The Third Party Liability Insurance” which only covers the damages done to the Third Party by your vehicle.

Third Party can be:

  • Pedestrians walking on the road
  • People in another car
  • Or the damaged vehicles

The most important thing 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 (IRDA)
  2. It only covers the loss or the damage done to the third party
  3. And it does not cover any loss or damage happen to you or your car!

So that brings us to another question – How do I make sure my car is insured and my damages are covered under any unlikely conditions when something goes wrong.

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

What is Comprehensive Insurance?

Good question. I am going to answer you now.

Whenever you are insuring your car, make sure you buy a Comprehensive Insurance. The importance of this Comprehensive Insurance is two-fold:

  1. It covers your Third Party Liability Insurance, which is mandatory as per IRDA
  2. The most important aspect that is of your interest is that it covers the loss and the damage may happen to your car.

This is where it gets interesting, you opt for Comprehensive Insurance, and you make sure that both, Third Party Liability and loss or damage to your car is covered.

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

And no loss or damage of my car will be covered. Oops!

If I had purchased and paid premium for Comprehensive Insurance, it would have covered both the other car damage and mine too. It does make sense to go for Comprehensive Insurance, always. So, make sure whenever you are buying a Car Insurance, you buy comprehensive insurance one.

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 are unaware of the benefits you can get from this simple term.

What exactly is No Claim Bonus or NCB?

It just means, that if you make – No Claim for Car Insurance for a year, you will get a discount on the premium amount for the next year. And the best part, it keeps increasing every year, as you make no car insurance claims.

For example, if you make no claim for a year, you will get 20% discount on the premium amount of the second year, likewise, if there is no claim in the second year also, you will end up getting 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) means?

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

It is the maximum amount of money your insurance company reimbursed you, in case if your car gets stolen or in the worst case scenario, the car damaged beyond repair.

Remember this: Every year the value of the 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?

The Insurance Regulatory Development of India (IRDA) pre-decides the Third Party Liability Insurance premium.

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

It is decided by each Insurance company individually and may vary.

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